Close

The number of junior coal mines in South Africa will continue increasing, and the tonnages of coal they ship will grow, Xavier Prevost, mining industry doyen, told a recent Junior Coal Mining Ventures conference held in Johannesburg.

Mixed messages about opportunities in the Waterberg

In his keynote address at the conference, organised by the Fossil Fuel Foundation, Prevost painted a positive picture for the junior mining sector’s future, which is currently in a growth and consolidation phase. Junior miners are looking for large blocks of coal and are likely to focus on better quality product to increase on sales to the metallurgical and other industries. At the same time, junior miners will have to contain costs to ensure that product is competitively priced. The sale of product to Eskom is likely to be curtailed in the future because of low prices.

Turning to the potential for junior mines in the emerging Waterberg fields, Prevost declared that only large scale mining houses will be able to run profitable mines in the region.

The major barrier of entry into the Waterberg for junior mines lies directly with the beneficiation of the raw coal to Eskom requirements. The capital required to establish such plants will rule out the entry of junior mines to the Waterberg deposits he continues.

“Waterberg coal is a highly complex product with ash contents of up to 60%. This requires a substantial investment in the washing process, which therefore limits entry to the large mining houses.”

This statement was in direct contrast with the view of Eskom’s Johann Bester, who told delegates that the energy parastatal sees opportunities for junior mines to supply Eskom with between 5 and 10 Mtpa from the Waterberg. Eskom is in negotiation with Transnet regarding the provision of rail infrastructure.

“The percentage of volatiles in coal sourced from the Waterberg is a lot higher and the washing of product to Eskom requirements is challenging. We are currently running trials in our power stations.”

Bester, who is the GM for fuel saving in the primary energy division at Eskom, says that 10 Mtpa of coal from the Waterberg has already been secured.

“Eskom requires 20 Mtpa of coal from the Waterberg for the next 40 years from 2018. Contracting principles for the Waterberg will include adhering to today’s best practice green mining principles, beyond legislative requirements with new parameters for coal quality management, including automated systems.”

Referring to junior mining development, Bester mentioned that Eskom is currently sourcing 30% of coal on medium-term contracts, the primary portion (about 35 Mtpa) of which is sourced from junior mines.

“The significant volumes of coal Eskom still needs to secure for the long-term provides an increasing opportunity for the junior mining coal sector to collaborate with each other as well as with Eskom to further develop the mining sector of South Africa and also improve the security of supply from Mpumalanga and the Waterberg.”

He stated that Eskom is committed to paying a price for coal that will enable mines to be sustainable.

Gas fracking is environmentally acceptable

“Gas fracking, as opposed to conventional fracking, presents the possibility of accessing quantities of gas in the Karoo in an environmentally acceptable fashion,” said Andrew Kinghorn of Shava Mining Enterprise.

Providing the conference with an energy update in which he examined the various energy product mix options, Kinghorn pointed out that an environmentally friendly fracking cocktail mix was already in use in the United States.

“If we go into fracking in the Karoo and we have cronyism and corruption, we will have contamination. If we go the right route we will get a good product with no problems.”

Kinghorn made the comment against the background of the current high energy costs of 50c/kWh being levied by Eskom, which is resulting in South Africa beginning to exceed international industrial prices, in particular prices in more energy intensive industries.

“South Africa’s electricity prices, even excluding carbon tax, are at the high end of prices in China and India. South Africa needs a transparent, affordable price.”

Juniors need a better Mining Charter

Paul Miller, outgoing MD of Keaton Energy, told delegates that while the company was a staunch supporter of the Mining Charter, three unintended consequences of the charter need to be addressed.

Not only do farmers have to be paid for underground rights, but for surface rights as well. Highlighting flaws within the Mineral and Petroleum Resources Protection Act (MPRPA), he said a ‘tie-breaking process that works’ is required to ensure that mining companies do not have to pay three or four times the value of agricultural land. In addition, the Act does not allow a mining right to be used as security to secure finance without specific contractual and legal requirements, one of which requires ministerial approval. ‘This limits the ability of entrants to the mining industry. I’m surprised banks haven’t lobbied the minister (concerning the anomaly).’

Miller also pointed out that mines are also required to hire illiterate people and have to educate them to a certain level – a cost burden that junior mines cannot afford to carry. “No credit is given in the charter for junior miners providing jobs for the unemployed.”

From junior explorer to junior producer and exporter

Continental Coal, with two operational mines, a third mine near Ermelo close to seam and the De Wittekrans mine expected to begin production in 2013, is also busy with exploration in Botswana.

Speaking on the subject of the rise from junior explorer to junior producer of export and domestic coal, CEO Don Turvey told delegates: “We have three exploration projects in Botswana just across the border from the Waterberg. We see a growth platform in South Africa and are looking further afield – the Americas, Australia and Indonesia. We want to build an international company.”

Barry Nel, chairman of Elitheni Coal, said the company has secured an export order and will start shipping through East London in November. “We are exporting our coal because local industry (in the Eastern Cape) can’t burn our product. We were hoping that there would be a (power) IPP we could fuel but the project was shelled.”

South Africa’s first stocks of coal were mined in the Eastern Cape in 1857. Mining stopped in 1915.

Sidebar: Sustainability

Julie Stacey, an independent consultant with Envaluation, company which focuses on sustainable development in the mining sector, says: “There is no excuse not to get the basics right. If we create pollution, we have to seek solutions. Pursue poor performers and point fingers at the mines not doing things right.”

ends

Captions

Xavier Prevost: “Only large scale mines will be able to run profitable mines in the Waterberg.”

Eskom’s Johann Bester

Paul Miller, outgoing MD of Keaton Energy – has identified unintended consequences of the Mining Charter

Don Turvey, Continental Coal

Barry Nel, chairman of Elitheni Coal, which will begin exporting coal from the Eastern Cape 97 years after coal production was abandoned in that province

Additional Reading?

Request Free Copy