Black economic-empowerment holding company, Merafe Resources, in a 50:50 joint venture (JV) with mining company Sentula, is set to start three opencast coal-mining projects in Mpumalanga by the middle of 2009. The three projects, Schoongezicht, Bankfontein and Driefontein, are to supply coal to Eskom. Merafe’s financial director, Stuart Elliot, said the feasibility studies for the three projects are still in progress, but should be completed before the end of the year.
Further, a Miranda Minerals subsidiary, Sesikhona, recently announced that its application to convert its prospecting permit to a mining right was accepted by the Department of Minerals and Energy (DME). If granted, this award will enable Sesikhona and its JV partner, Ihlosi Mining, to mine the coal and anthracite deposits on a colliery situated near Dannhauser, in KwaZulu-Natal. “The mines’ lifetime is about 20 years, which equates to about R2,5-million a month in net annuity for Miranda,” says Miranda’s CEO Alan Thompson.
The permit to mine is expected to generate about 22-million tons of high-grade coal and anthracite, of which at least 40% can be mined on the surface. In total, the DME has granted Miranda six prospecting rights for coal in KwaZulu-Natal in the recent past.
It is evident that mining companies in South Africa are ensuring that they do not miss out on the opportunity presented by dramatically raised coal prices. The commodity’s demand has experienced a serious spike, and with most coal mining operations being opencast, bad weather conditions over the last year have directly affected these mines’ ability to gain access to and transport their material. Flooded pits, waterlogged soil and muddy roads, caused by abnormal rainfalls in Southern Africa as well as in China, Indonesia and Australia (one of the world’s largest coal producers), have contributed to a global coal shortage.
Coal is still the primary energy source globally. It contributes to about 90% of South Africa’s energy needs and one-third of what the country produces is exported to help feed power plants in Germany, Spain and East Asia. With worldwide coal reserves expected to last for about another 150 years, it seems that it might outlast uranium- based energy.
Uranium-mining company UraMin’s group metallurgist Elias Pobe says that all the known global uranium deposits could be exhausted by around 2020.
The ever-increasing energy consumption levels in developing countries, like China and India, are ensuring that the rise in demand for coal is nothing short of exponential. This shortage has led to more than a 50% increase in global coal prices, with high-grade export coal prices rising from about $55/t to about $120/t.
On average, a coal power station will burn between 10-million and 12-million tons of unwashed coal every year. Currently, Eskom is building two new coal-fired power plants and in order to accommodate South Africa’s dire energy needs, further hiking up the local coal demand.
Eskom’s bid to buy 45-million tons of unwashed midgrade coal from all local coal producers within the next two years has intensified matters locally, providing another incentive to capitalise. “For small coal producers, it is a godsend to be able to send unwashed coal to Eskom for a high price because some don’t have the facilities to wash the coal themselves for export-ing,” says coal industry research company Wood Mackenzie senior coal analyst, Xavier Prevost.
Coal washing is expensive and is usually only employed if the mine can export the resultant low-ash coal profitably. In many cases, it involves hidden costs in terms of transport, shipping, tolls and levies that can outstrip potential profits.
South Africa has the world’s sixth-largest recoverable coal reserves, constituting about 5% of the world total. Even though this contribution is small in comparison with that of countries like Australia, the impact of the coal industry on South Africa’s environment and economy is important.
Prevost, Pobe and mineral research company Mintek’s resource economist, Nicola King, recognise that opencast mines are potentially more damaging to their immediate physical surface land environments than their underground counterparts. They take up more surface space and fundamentally alter the naturally occurring biodiversity and landscapes found in that particular area. The Environmental Conservation Act of 1989 and the National Environmental Management Act of 1998 stipulate certain regulations that have been put in place to manage these environmental impacts as much as possible.
In most cases, since the passing of the Acts, the areas under mining are to be rehabilitated to acceptable levels when operations cease. Nevertheless, scars still exist on the country’s landscape in the form of abandoned opencast mines (coal and otherwise). Hundreds of mines that were closed before the new Acts were passed have been absolved from the strict rehabilitation responsibilities incurred on mines today.
These derelict and ownerless mines and their accompanying dumps have subsequently become a national liability. Licences are available for enterprises that wish to remine the dumps, but the process is costly and often not profitable, especially since it can involve taking on the existing and new liabilities relating to post-closure rehabilitation.
While the DME is currently preoccupied with clearing detrimental asbestos dumps in the north, coal dumps remain in abundance in Mpumalanga, says Prevost. These dumps are not only an eyesore but they can be highly unstable and dangerous. The material in coal dumps still contains about 10% to 20% carbon, too little in most cases for commercial prospects.
However, enough carbon remains for it to become oxidised over time and spontaneously combust, actively polluting the air and the groundwater below. Over one-billion tons of unwashed, low-grade coal is lying in dumps around the country, either burning itself away or waiting to be removed. With tourism being one of South Africa’s biggest exports, a concern put forward by King is simply how this all looks from an aesthetic point of view.
“Eskom has its eye on all the coal dumps and has plans to use them at some point,” says Prevost. “The DME wants the old dumps removed to clear the land for prime agri- cultural uses.”
King acknowledges that the rehabilitation of old mines as well as proper management of existing mines is necessary, particularly if the land was previously used for agricultural purposes. She further indicates that ground water pollution and the impact it has on rivers and wetlands downstream are of critical concern. The nature of the pollution is particularly disconcerting because it is difficult to define the exact source and to assign responsibility, while being costly and time-consuming to rehabilitate.
Although South Africa has 19 official coalfields, 70% of the recoverable reserves lie in just three: the Highveld, Witbank and Ermelo. This mainstay of the South African coal industry relies on water supplies from three main catchments, namely the Olifants, the Upper Vaal and the Usuthu to Mhlatuze area.
In the National Water Resource Strategy for South Africa issued by the Department of Water Affairs and Forestry in 2004, it was forecast that by 2025, only the Usuthu to Mhlatuze water managment area would have a water surplus. “Water security for the mining sector needs to be a key priority especially if you consider that the coal industry is very water-intensive,” says King.
She explains that a better understanding of the demands of eco- nomic growth and mining development, within the context of environmental thresholds, is needed. One approach to improved planning and decision-making is to develop prudent integrated scenarios, taking into account both developmental and environmental changes. “In that way, we can be ready for a wide variety of possible outcomes and, hopefully, avoid the worst ones.”