Some info in general on coal in SA.All looks good for the...

Some info in general on coal in SA.All looks good for the future.

JOHANNESBURG (miningweekly.com) – Coal remains vital to the South African economy and would not soon be replaced as the main energy source, delegates heard at the Coaltrans South Africa conference in Sandton on Thursday.

South Africa, which has an estimated 33.1-billion tons of coal reserves, would maintain its 93% dependence on coal for electricity generation in the foreseeable future, XMP Consulting senior coal analyst Xavier Prevost said.

“Government plans to replace coal with alternatives such as nuclear and renewable energy, but in my view, this will not happen.”

Prevost told Mining Weekly Online that coal had economics on its side, as the target of 19 GW of renewable energy to be included in South Africa’s energy mix by 2030, as set out by the Integrated Resource Plan (IRP), would be too expensive.

“The government has not considered the economic implications of renewable energy. Implementing the renewable energy as called by the IRP will shoot electricity prices to levels beyond anything experienced before,” he warned.

The IRP also stipulates that South Africa's power generation mix should include 13.4% nuclear or at least 9.6 GW nuclear capacity by 2030.

He said a shift towards nuclear energy would be well received by local coal producers, as South Africa was the fifth-largest exporter of coal in the world.

Coal generates the highest foreign exchange earnings in South Africa and is the second-largest mining commodity income earner, beating gold.

Export numbers in 2011 showed that 56.7% of South African coal was exported to the Far East, followed by the declining European market at 32.5%.

Prevost pointed out that the local industry was being neglected in terms of supply, with the electricity and synfuel sectors still being the largest consumers.

“There simply is not enough coal, but this local shortage could be alleviated when the Waterberg coalfields go into production,” he said.

Last year, 177.03-million tons of coal worth R37.23-billion was sold to the local steam market at R210/t.

Prevost said the Central basin, which includes the Witbank, Highveld and Ermelo coalfields, contained about 70% of South Africa’s total reserves and included bituminous, anthracite and coking coal.

The Limpopo province, which housed the upcoming Waterberg coalfields, accounted for 21% of local bituminous, soft coking, PCI, thermal and export reserves.

Further, the Free State contained 5%, boasting large coalfields, but a small reserve.

Also addressing delegates at the conference, South African Chamber of Mines (CoM) CEO Bheki Sibiya agreed that coal would remain the primary energy source in South Africa, despite excitement around alternative energy sources.

“Therefore, companies in the coal sector have to follow best practices, especially in finding ways of reducing their carbon emissions and benefiting communities who are affected by their operations,” he urged.

He said social responsibly was one of the main challenges faced by coal mining companies which were exposed to the external pressures associated with communities near their operations.

“To protect the underbelly of the industry, companies have to create excitement among communities about mining and how it could benefit them. To truly achieve the Mining Charter and all its aspects, especially the social and labour must be honoured and implemented,” Sibiya stated.

He added that such commitment should also be applied in terms of safety, as South Africa was struggling to keep mine fatalities at a low, with 39 people having suffered fatal injuries in the local mining industry this year.

Another challenge burdening the coal sector was the call for nationalisation.

“There is still a significant amount of pushing for nationalisation as it was originally proposed, but the chamber has concluded that it would not succeed in its current format, it would not be fundable and it would erode investor confidence,” Sibiya said.

He pointed out that the CoM was currently in discussion around the ruling African National Congress’ proposal of a 50% resources rent tax.

“A tax impact assessment is required, and we are engaging robustly with government and other partners to ensure this issue is dealt with appropriately.”

The impact and challenges associated with Section 54 stoppages have also been felt strongly in the local mining industry, bringing down production significantly in many cases.

However, Sibiya said the CoM believed that the stoppages were a legitimate instrument for government to ensure adherence to regulations.

“But Section 45 stoppages must be applied appropriately and sparingly. We believe that mining houses are getting closer to applying it fairly, consistently and defensively,” he assured.

Edited by: Mariaan Webb