While South Africa is welcoming investment interest from new entrants, there are many hurdles that need to be overcome to be able to accommodate new participants, including a scarcity of known reserves, access to capital, marketing, mining and beneficiation know-how and infrastructure for export.
At present, South Africa's coalfields, especially the Witbank-Highveld coalfields (the Central Basin) from which over 80% of saleable coal and the majority of export coal originates, are dominated by major international producers BHP Billiton, Anglo Coal and Xstrata.
Others, such as Sasol Mining, Kumba Resources, Eyesizwe and Total Exploration South Africa, also have their stake, leaving little space for new entrants.
At present, large mines (more than ten million tons a year) produce 53,6% of total saleable output, medium-sized mines (less than ten million tons a year, more than five million tons a year) produce 41,2% and small mines (less than a million tons a year) only 5,2%.
However, Department of Minerals and Energy (DME) chief mineral economist coal and hydrocarbons Xavier Prevost believes that, despite the area being densely populated by established companies, there is still space for newcomers and it is important that these newcomers are given the opportunity to enter the market, have access to these reserves and use them before coal-mining, as we know it, becomes a thing of the past.
"Under the new legislation on mining rights, South African mining companies with non-utilised or 'frozen' reserves will be given the option to use them or lose them, which will hopefully help to open the market to interested newcomers," Prevost observes.
It is, therefore, a mission of the DME, with the help of other parties, to create the mechanisms needed to make information about unused reserves available to the industry's new entrants.
At present there are 11 active empowerment companies in the local coal industry and more than 30 potential others. "New entrepreneurs are actively looking for reserves to open collieries, a few successfully, many others not so successfully.
"Existing reserves are not easily accessible because of the lack of information about them. "As a result, when interested parties approach the DME for available reserves to investigate, the department is unable to assist them," informs Prevost.
Looking at a map of current mining operations in the Central Basin, there is evidence of blocks that are currently not being mined, but whether they have been earmarked by the surrounding mines for expansion or other development is unknown.
At present, the department is recommending that interested parties approach the mining companies directly for leases or purchases of available land.
However, this is not a long-term solution.
In order to assist new entrants, and as a result of the country's expected dependence on coal for the foreseeable future, it has become evident that it is essential that the remainder of the country's coal resources and reserves be evaluated.
While the Minerals Bureau has attempted to estimate the current reserves at the present day, using the results of the FSJ de Jager report released in 1983 (reviewed by JH Bredell in 1987), these reserves relate to the entire coalfields and do not relate to a specific block or mine.
As a result, the DME cannot give new entrants an accurate account of where there are blocks for new mining operations and what the detailed reserves of the blocks are.
The DME has initiated a process, consisting of three phases, to re-evaluate the national coal resource/reserve status in South Africa and store it in a database.
In recent years, production of coal in South Africa has remained relatively static.
While the bigger companies are attempting to reduce their total reliance on their South African operations and expand into other areas where there are potentially more opportunities, such as Australia and South America, the smaller producers are notably increasing production levels.
Large producers have lost, on average, more than 1% of their output, while small mines have increased their production by some 600%.
One of the main reasons for the drop in production by these large producers is because of a global decline in the spot prices of thermal coal since the end of 2000 and, by limiting supply, these world players are attempting to control the price decreases and fluctuations.
Although these large companies may not have the same level of interest as they once had in increasing production in South Africa, there is no doubt that the demand for coal, to match local and export needs, is growing.
Prevost predicts that, in the next six to eight months, there will be a number of junior coal-mines opening, which he feels might increase production for the total South African market.
Another factor hampering the introduction of new entrants is the lack of infrastructure for exports.
Although the domestic market has always been seen as the most important, it is becoming increasingly important for companies to focus on the export market in order to optimise their operations.
Especially in difficult times, such as the current market situation, it is important that companies are able to generate revenue through exports, and small entrepreneurs are no exception.
However, South Africa's main coal terminal, Richards Bay Coal Terminal (RBCT), is owned by the main producers with little accommodation for smaller firms.
Despite six years of negotiations to develop an export terminal to accommodate independent mines, and to allow them access to the export market at an affordable cost, the South Dunes Coal Terminal has still not been given the go-ahead.
It is hoped that this terminal (also known as RBCT phase five), will be operational by 2004 because, until it is, there are no facilities to support newcomers.
"It is obvious that coal reserves of the better qualities that produce coal for export and also for some local users, are not as abundant as they once were, but the Central Basin still contains enough mineable coal to last for a long time.
"Future collieries in this area will probably not be the size of the present megamines, but with the careful husbandry of remaining reserves, many more successful operations could still be established," concludes Prevost.