Opencast mining of various mini-pit areas at the New Largo thermal coal project, in Mpumalanga, should start in mid-2020, as part of the phased approach to the mine’s development, says black-owned coal mining company Seriti Resources.
A revised feasibility study on the New Largo main mine project – which is being undertaken by a reputable international mining consultancy firm – is expected to be concluded early next year.
Seriti expects the study to generate a positive outcome, whereafter it will start negotiations with State-owned power utility Eskom for the sale of New Largo coal to the Kusile power station, adjacent to the project.
“Such a coal contract is the final prerequisite for the bankability of the project and will serve to underpin the raising of the necessary capital to develop the main New Largo mine.”
All funding options – including listing, project financing and equipment financing – remain under consideration.
The results of the feasibility study will inform the metrics to develop the main New Largo orebody into a large-scale, opencast mine. Dragline and truck-and-shovel mining methods will be employed to deliver an estimated 12-million tons of thermal coal a year to the Kusile power station for 50 years or more.
“We believe that the development of New Largo will be strongly supported by the local communities in Witbank, given the incremental, long-term opportunities associated with the mine,” says Seriti.
The company emphasises its continued engagement with the communities surrounding New Largo to understand their needs and ensure that the project is fully aligned with the local development requirements stipulated under Mining Charter III.
A New Largo community trust – established for the benefit of local community beneficiaries – will own an unencumbered 5% in New Largo mine.
Moreover, local communities will stand to benefit from specific job and procurement opportunities during the development and operation of the mine in accordance with Mining Charter III requirements.
“We recognise the social importance of a long-life mining project such as New Largo and the positive impact that such a project can have on the sustainability and growth of its affected area. The project will provide a much-needed, incremental growth opportunity in support of a range of developmental objectives,” says Seriti.
South Africa Energy Coal
In line with Seriti’s strategy to grow organically and by acquisition, the company has concluded an acquisition through which it will gain Australian mining and metals company South32’s 91.8% shareholding in South Africa Energy Coal (SAEC).
The acquisition, which has yet to be concluded, as it remains subject to outstanding conditions, is a significant milestone towards Seriti realising its goal of becoming a black-owned coal mining champion.
“The acquisition will enable us to offer further secured, long-term coal supply solutions to Eskom as a demonstrable commitment to sustainably support South Africa’s energy needs. The combination of our energy coal businesses will realise further operational and technical efficiencies, enabling us to better service our customers by offering competitive energy solutions,” highlights Seriti.
In terms of receiving permission from Eskom, the Department of Mineral Resources and Energy, and the Richards Bay Coal Terminal (RBCT), in KwaZulu-Natal, Seriti believes that the transaction represents a significant turning point for all stakeholders in improving security of coal supply to South Africa.
“It also represents a step-change in the level of transformation of the South African coal sector, which is a strategic imperative for each of these key parties and, so, we believe that all will be working towards similar goals.”
Regarding approval from competition authorities, Seriti says neither party would be pursuing the transaction if they were not confident of its successful conclusion, adding that there is limited overlap between the current activities of Seriti and those of South32’s mines.
SAEC’s operations include the Khutala and Klipspruit collieries, as well as the Wolvekrans-Middelburg Complex (WMC), in Mpumalanga, and would provide Seriti with an “excellent opportunity” to increase its domestic sales through mines which supply coal to Eskom.
“SAEC’s cost-plus Khutala mine has been an excellent performer for many years and is capable of continuing to supply baseload coal to the Kendal power station into the mid-2030s,” highlights Seriti.
The acquisition will also provide Seriti with the opportunity to obtain a valuable allocation of export entitlement through the RBCT, enabling it to enjoy some of the benefits of exposure to the export market, while retaining its domestic focus.
SAEC’s Klipspruit export mine has recently been recapitalised and now has 25 years of extended economic life, enabling it to continue to cost effectively export coal.
In addition, the WMC has embedded potential which could be further unlocked, while the SAEC project portfolio provides for important commercial optionality to complement its high-quality operating assets.
“We are experienced in the acquisition of large-scale coal businesses and such businesses come with various operational and cultural challenges. Seriti will address any transaction-related challenges as and when they arise in a fit and proper manner,” concludes the company.