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Developer aims to consolidate alliance with coal marketer

17th March 2017

By: Marleny Arnoldi

Deputy Editor Online

     

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Botswana-based energy development company Shumba Energy is pursuing the establishment of a more solid partnership with coal marketing and trading house HMS Bergbau Africa, a subsidiary of Germany-headquartered thermal coal supplier HMS Bergbau.

Having signed a memorandum of understanding (MoU) with the company in January, Shumba is looking to conclude a more substantive agreement with HMS Bergbau Africa within six months, says Shumba MD Mashale Phumaphi. The terms of this agreement have not been finalised yet.

“We have been in discussions with HMS about a partnership for over a year. Since our main focus is on producing coal and energy, it only makes sense to bring on a partner which specialises in the marketing and trading of coal,” says Phumaphi, adding that Shumba spoke to several potential partners before it teamed up with HMS.

Under the terms of the MoU, HMS will be responsible from 2019 for the exclusive marketing of all export product produced by Shumba, which has a resource of over two-billion tonnes of thermal coal at the Maropule South project, in Botswana.

Shumba also has two advanced-stage, coal-based independent power producer projects – Mabasekwa and Sechaba – totalling 900 MW, and two earlier-stage alternative energy assets – a solar energy project and the Lethlakeng underground coal gasification project – all spread across central Botswana.

HMS founder and CEO Heinz Schernikau said in January that the exclusive marketing agreement would result in the significant expansion of the company’s operating activities in Southern Africa. “The partnership will also improve our position in the international coal market.”

HMS plans to market and trade Shumba’s coal as extensively as possible. “We will target the Botswana domestic market, the regional market, including South Africa and the seaborne thermal coal market.”

This would benefit South Africa on multiple levels, said Schernikau: “The large majority of high-quality coal end-users are in South Africa, so they will benefit from a new source of low-cost high-quality coal. “A substantial amount of the equipment, goods and services for the mining operation will be sourced from South Africa and will, therefore, benefit the local economy and result in job creation.”

Phumaphi believes that Shumba’s partnership with HMS can inspire other mines in Southern Africa and make it more attractive to pursue similar partnerships.

“The partnership will be a welcome step towards exploring the export market. We look forward to developing a long-lasting relationship with HMS Bergbau.”

Meanwhile, Shumba has signed an option to acquire 75% of the Morupule South project, in the eastern district of Botswana, from coal mine developer Hodges Resources.

The project has a resource of 2.4-billion tonnes of coal, of which 1.2-billion tonnes is amenable to opencut mining and is Joint Ore Reserves Committee compliant.

“The Morupule South acquisition elevates Shumba Energy to be able to take advantage of the domestic and regional industrial market,” says Phumaphi.

The terms of the acquisition are that an immediate payment of $1.4-million be made to Hodges Resources and a further payment of $1-million be made one year after commercial production of the project.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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