Already Eskom on the books hmmmmm is like an ace stuck under a...

Already Eskom on the books hmmmmm is like an ace stuck under a poker table.....

Having to mine majors' 'little mongrel dogs' a challenge for coal juniors
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By: Brindaveni Naidoo
Published on 21st September 2007
Access to good-quality coal reserves and the ability to grow the coal reserve base are some of the key factors that play a role in ensuring sustainability for black economically empowered junior coal-miners, says South African coal-miner HCI Khusela Coal MD Fleur Honeywill.

“Black economic-empowerment (BEE) junior coal-miners’ sustainability has focused primarily on access to allocation at the Richards Bay Coal Terminal. To some extent, this focus has been political and aimed at addressing historical imbalances,” Honeywill said at the sixth annual Coaltrans South Africa conference held this month.

However, she said that this focus has served its purpose and significant and measurable gains have been made. The challenge for BEE junior coal-miners’ sustainability, Honey-will explained, includes access to good-quality reserves and achieving economies of scale, a balanced portfolio of reserves and mines, environmental-management costs, social and labour plan costs and skills shortages.

Access to good-quality reserves and logistical costs associated with moving coal must be addressed. While selling coal is easy in the current market, and mining small and challenging deposits of coal is not easy, Honeywill said that a junior miner’s strength lies in its flexibility and low-cost structure.

“But we typically mine through contractors and the cost of mining has increased,” she said. Factors that need to be considered include the fact that there are difficult deposits that need to be of good quality to meet the costs of mining the deposit and to justify the costs of washing coal for export.

The costs to be considered in achieving economies of scale include the washing of coal reserves and the logistical management of coal. “All these costs are significant, and achieving economies of scale is what will make or break a project,” she added.

Ensuring sustainability to achieve economies of scale requires that there are a number of reserves and/or mines that result in a balanced portfolio, said Honeywill.

“There are very few ‘dripping roast’ coal reserves left for a junior to be able to pick up. There are a number of reserves in Mpumalanga that have large quantities of local power-station coal that can be economically mined but, in such situations, the margins are under pressure and, unless one is a very skilled negotiator [with Eskom], one will always live under the edge of profitability or bust,” she added.

Honeywill said that while some of the reserves juniors have are difficult to mine, majors are prepared to transact with their ‘little mongrel dogs’ because they cannot mine those reserves economically.

New entrants and major coal-miners are often faced with the environmental challenges that have been the result of past mismanagement of coal-miners. Environmental costs and environmental liabilities associated with mining are significant for a junior miner.

Coal-mining has negative impacts on the environment and the sustainability of land, said Honeywill, and there is a high cost associated with meeting the very stringent environmental requirements of new legislation that negatively impact on the sustainability of juniors.

Honeywill also reflected on the shortage of skilled personnel and competent and experienced mining and metallurgical engineers. She said the impact of such shortages on the sustainability of junior coal-miners has not been investigated or calculated.

“It is difficult for juniors to attract and retain experienced engineers who are willing to take the risk. Juniors do not have the resources to train large numbers of people and mistakes can have cost implications with long recovery periods,” she explained.

The Mineral and Petroleum Resources Development Act requires junior miners to have the services of environmental and human resource development specialists, Honeywill said, and this has a high cost implication.