Eskom looking to buy billion tons coal from emerging black miners

10th December 2012

By: Martin Creamer

Creamer Media Editor


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JOHANNESBURG ( – The issuing of Eskom’s request for information (RFI) for coal supply from emerging black miners was imminent, the State utility said on Monday.

Public Enterprises Minister Malusi Gigaba kicked off the electricity generator’s strategy of integrating emerging miners – defined as those with a 50%-plus-one-share black ownership – into its supply base in order to take development and then transformation to a new level (also watch attached video).

There are currently 33 black economically-empowered (BEE) coal mines in South Africa, using the Department of Mineral Resources BEE definition of 26% black ownership.

If measured using the 50%-plus-one-share definition, the number is negligible.

Currently emerging miners in general - made up of both junior mining companies not owned by blacks and majority black-owned juniors - account for 17% of Eskom's total coal spend of R28-billion a year.

“The RFI will go out and we would want to see the plans being put in place in the first quarter of 2013,” Dames told Mining Weekly Online.

Eskom group executive commercial Dan Marokane said the utility was ready to move on a project-by-project basis without waiting for a finalised plan.

The intention of the RFIs, Marokane added, was to obtain up-to-date information on the status of the different coal assets, which would determine the extent of the financial support required.

Gigaba told Mining Weekly Online that the mining development fund being established would not rely solely on development finance institutions (DFIs) but would also welcome private-sector funding bodies that had already indicated a keenness to take part.

“We have a clear requirement of needing additional coal by 2018 and we have to get the exploration going,” Eskom CE Brian Dames said.

Eskom acting chairperson Collin Matjila said that Eskom was looking to procure “no less than a billion tons-plus” of coal from emerging black coal miners in the next 40 years.

Eskom currently buys 130-million tons of the 250-million tons of coal produced a year in South Africa for use in its 13 power stations.

Gigaba, who described the Eskom initiative as “game-changing”, said coal production was currently concentrated in large mines with eight mines currently supplying 61% of the output.

An estimated 500 delegates attended Eskom’s well-publicised direct interface with junior coal and limestone miners at which Gigaba outlined the five pillars on which Eskom would build its new procurement relationship with them.

Firstly, Eskom would look to partnering DFIs and private sector funders to support the creation of a mine development fund for investment by black emerging miners in the development of resources.

Secondly, coal trading would be used as a tool to develop black-owned companies in coal beneficiation and processing.

Thirdly, Eskom would use its purchasing power to empower black-owned suppliers and increase equity stakes to 50% plus one share.

Fourthly, commercially acceptable levers would be used to increase black ownership and participation in discussion with established industry players, as was done with the creation of the highly successful Eyesizwe by Anglo American and BHP Billiton, which eventually morphed into the JSE-listed Exxaro.

Fifthly, steps would be taken to consolidate smaller black-owned mining resources into larger entities.

Monday’s meeting followed an engagement with established coal producers, the Chamber of Mines of South Africa and the South African Mining Development Association, which Eskom said supported the direction of the strategy and would continue to work to unfold it.

“We seek to transform South Africa’s coal-mining industry at the same time as we ensure a secure supply of coal for domestic power supply,” Gigaba said, adding that Eskom’s long-term coal supply requirements of 4 070-million tons to 2051 created significant opportunities for emerging miners to ramp-up their participation in the industry.

Eskom said it had been working for the past few years to develop a long-term coal supply strategy which would ensure a secure supply of coal in the right volumes, at the right quality, and at costs that South Africa could afford.

The utility acknowledged the need for domestic security of coal supply to be accompanied by the need for the coal export industry to thrive.

Though Eskom had contracted out 80% of its coal supplies to 2018, it still needed to secure coal beyond that, which would require significant investment in coal mining.

The utility said that it was committed to ensuring that its procurement was accompanied by the emergence of black players into the industry.

In addition to coal, suppliers of inputs such as limestone would also be needed.

Edited by Creamer Media Reporter


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