Where high-quality coal was favoured by international markets in the past, the emergence of low-grade coal in international markets has become an evident trend, owing to high-grade resources being mined out.

This has increased the competitiveness of the global coal market, allowing India and Indonesia to trade as low-grade coal suppliers and increase profitability, global advisory and audit firm KPMG director of energy and natural resources Bavhana Sooku tells Mining Weekly.

Sooku points out that a disadvantage of trading low-grade coal on international markets is the effect it has on the environment. “Low-grade coal has a higher ash content than higher-grade coal; therefore, increased focus is placed on dealing with the environmental issues of mine dumps and carbon dioxide emissions.”

She adds that Africa’s accelerated demand for coal has led to an increase in international coal prices.

The needs of State-owned power utility Eskom are also expanding, however, and South Africa has to balance coal exports with the utility’s demands. “In 2012, the run-of-mine coal tonnage produced in South Africa was about 250-million, of which 70% to 75% was used for local electricity generation,” Sooku highlights.

South Africa’s power stations are coal intensive, with one nuclear power station; this makes the country’s dependence on coal certain for a long time to come.

“At the recent Mining Indaba, held in Cape Town, government proposed that coal be classified as a ‘scarce resource’, which leads the industry to conclude that not much coal will be exported in the near future if this happens. However, should South Africa start restricting exports, it will also deter foreign direct investment in the country,” Sooku warns.

She adds that South Africa’s mine reserves are also becoming more difficult to mine. “The well-known coal basin, in Mpumalanga, has been well mined out and South Africa is focusing on the Waterberg area, which is a very difficult area to mine, owing to a lack of rail and port access.

“The Waterberg has enough reserves to sustain South Africa for 100 to 200 years, but inadequate infrastructure currently makes it difficult for exploitation,” Sooku points out.

Government needs to do more to help the private sector establish infrastructure in the Waterberg area. “The relationship between the private and public sector needs to improve to deal with infrastructure challenges.”

“The public sector has left these solutions to the private sector and has only recently woken up and realised that it needs to support the coal industry in terms of these needs and start putting solutions in place,” states Sooku.

She adds that, currently, South Africa does not have a coal shortage and is safe in terms of coal supply for the short to medium term. “Our power stations burn very low-quality coal and the ash content is really high. This is advantageous, as South Africa has low-grade coal readily available to burn.”

However, South Africa is not competitive with regard to cleaner energy sources and solutions for environmental challenges, Sooku warns.

Currently, South Africa has 60 to 100 years of coal resources left, without taking into account the Waterberg reserves, she states, but warns that every resource is depleted eventually and South Africa could be without coal in the next 200 years.