SA coal giant’s proposal to supply Indian power industry not feasible - analyst

10th January 2008 By: Matthew Hill

A South African coal major's hopes to export lower-grade coal to Indian power stations might not be feasible, a well-known local expert on the fuel said on Thursday.

Global energy consultancy firm Wood MacKenzie coal analyst Xavier Prevost said that an official at the country's biggest black-controlled mining company, Exxaro Resources, had outlined a proposal to export higher-ash coal to power stations - particularly in India - from its local mines.

Exxaro Coal executive GM Ernst Venter did not immediately return a call from Mining Weekly Online.

Until now, miners in what is one of the world's most minerals-rich countries, only had State-owned power producer Eskom as a customer for their higher-ash content coal.

Last year, coal junior Keaton Energy CEO Paul Miller noted that the "large number" of coal-fired power stations that India was building on its western seaboard burned the same lower-grade coal as Eskom's power stations, and that a major local producer was apparently considering exporting this fuel to India.

However, Prevost said that companies would not be able to turn significant profits by exporting high-ash coal, because of the logistics involved.

He argued in a telephone interview that the mining firm would have to pay the shipping charges to transport the contained ash, as customers would not be willing to fork out for it.

This would only allow such exports to turn only a marginal profit.

"It's a very contentious thought and idea," Prevost conceded.

Coal washing

He went on to say that one way in which companies could mitigate the ash content problem, was through washing the coal.

The coal that Exxaro was hoping to export had an ash content of from 20% to 25%, and it would make more sense if the firm "washed the coal properly to 15% ash levels".

This would mean that more money would be going into transporting actual coal, and not ash.

Local prices

However, domestic prices for coal had shown dramatic rises over recent months, and the South African market had a strong appetite for the fuel.

Prevost said that local prices would come close to international coal prices, and that suppliers might be better off selling their high-ash coal at home, instead of shipping it abroad.

Eskom's yearly coal consumption had grown to in excess of 100-million tons as it recommissioned mothballed power stations and undertook building new ones to cope with the country's growing power demand.

Prevost had previously served the Department of Minerals and Energy as chief economist.