Black-controlled Exxaro may export lower-grade coal to India

18th January 2008 By: Matthew Hill

South Africa’s biggest supplier of coal to State-owned Eskom’s power stations, Exxaro Resources, may start exporting a lower grade of coal normally sold domestically to customers in India by the end of the year.

The move will allow the JSE-listed company to achieve financial yields greater than those obtainable in South Africa.

The black-controlled miner is undertak- ing prefeasibility work to determine from which mines it will be geographically possible to export grades of coal that are not normally exported.

Exxaro Coal executive GM Ernst Venter tells Mining Weekly that the firm currently exports two grades of coal, mainly in Europe. These RB 1 and RB 2 grades have ash contents from 15% to 16%.

The grade Exxaro is looking to export has ash contents from 17% to a maximum of 21%.

Global energy consultancy firm Wood Mackenzie analyst Xavier Prevost says, however, that logistics costs preclude the economic export of coal with ash contents of between 20% and 25%, as transporting the ash would eat away at margins.

Exxaro, however, intends washing the coal to reduce ash levels below ash contents of 28% to 35% supplied to Eskom power stations. Venter concedes that lower-grade exports to countries like India are likely to drive up domestic prices.

Eskom increasingly has to buy coal on short-term contracts.