South Africa’s buoyant coal mining sector, including booming exploitation in Mpumalanga over the last year, will make for interesting talking points at the 2013 Investing in African Mining Indaba, particularly as the country is moving towards greening its electricity sector.

However, with several projects still to come on line, such as parastatal Eskom’s Medupi and Kusile power stations, as well as the growing coal exports market, the industry still has potential.

Last year, McCloskey Group founder Gerard McCloskey warned that the market was running into the peril of oversupply when he spoke at the IHS McCloskey South African Exports Conference in Cape Town.

He said the price of metallurgical coal was poised to fall as a result and that he expected prices below $200/t in the next quarter.

In February 2012, McCloskey expected BHP Billiton’s greenfield growth alone to be 42-million tons in the next half of the decade. Although BHP’s brownfield growth was lower, it remained significant.

Non-BHP growth was 51-million tons of additional coking coal and Canadian coking coal exports could be 60-million tons by 2015 to 2020.

Toronto, Ontario-based Forbes & Manhattan Coal reported that labour unrest, which started during mid-October over wages, and resulted in the company suspending all operations at the Magdalena and Aviemore mines, in KwaZulu- Natal, as well as coal processing plants early in November, caused a 55% decline in coal production during the period, Mining Weekly’s November Coal Roundup reported.

Forbes Coal expects the run-of-mine (RoM) loss of production to be about 256 000 t for the third quarter, which is 55% lower than the expected 463 000 t. The company expects 94 000 t to be sold for the quarter, 63% lower than the forecast of 257 000 t.

As a result of the labour disruption, the RoM production target of 1.7-million tons for the 2013 financial year, ending February 28, 2013, was adjusted to 1.3-million tons.

The revised RoM production estimate for the year requires Aviemore to produce 387 000 t, Magdalena underground 658 000 t and Magdalena openpit 287 000 t. The company also expects its fourth- quarter sales to be lower as a result of weaker coal pricing globally.

In addition, the impact of a transport strike was illustrated when JSE-listed junior mining company WestCoal CEO Andre Boje stated, while delivering the company’s interim financial results, that the three-week transport workers strike, which ended on October 12, cost the company’s mining division R10-million in lost revenue and R3-million in profit.

Overall revenue in the mining division decreased by 3% to R143.1-million in the six months ended September, while earnings before interest, taxes, depreciation and amortisation were 11.5% down to R26.1-million.

However, overall financial performance for the period was still in line with the previous comparable period. The strike significantly delayed deliveries to its primary client, Eskom, and also led to operational challenges at the company’s mines, owing to delayed deliveries of diesel and explosives.

Mine closures and amalgamations of metallurgical coal assets were expected, said McCloskey, noting that prices were also bound by rising cash costs and flat steel prices.

The industry stalwart will provide an outlook and review of the coal industry at the Indaba, which will run from February 4 to 7 at the Cape Town International Convention Centre.