For­eign­ers pile into SA’s red-hot coal sec­tor

Des­per­ate de­mand and rock­et­ing prices trans­form­ing the in­dus­try

Finweek English Edition - - Companies & Markets - BREN­DAN RYAN

SOUTH AFRICA’S COAL SEC­TOR con­tin­ues to at­tract in­tense in­ter­est over­seas as com­pa­nies po­si­tion them­selves to sup­ply Eskom as well as pos­si­ble in­de­pen­dent power pro­duc­ers (IPPs). Aus­tralian Stock Ex­change­listed (ASX) Fire­stone En­ergy (Fire­stone) in­tends list­ing on the JSE af­ter agree­ing to spend around R110m to buy 30% of two coal projects in the Water­berg.

Fire­stone’s lo­cal part­ner is Sekoko Coal, and Fire­stone has agreed to spend an­other R50m on tak­ing the projects to the bank­able fea­si­bil­ity study stage, which will in­crease its stake to 55%. The mines will pro­duce ther­mal and met­al­lur­gi­cal coal for both the do­mes­tic and ex­port mar­kets.

On 1 Oc­to­ber, Toronto Stock Ex­change­listed Home­land En­ergy (Home­land) held the of­fi­cial open­ing of its Ken­dal col­liery, which be­gan pro­duc­tion in July and is cur­rently ramp­ing up to full run-of-mine pro­duc­tion of 1,8m t/year. The coal pro­duced is ther­mal coal, to be sold to do­mes­tic in­dus­trial cus­tomers, and Home­land says it’s con­tracted to de­liver 500 000t to cus­tomers by end-Septem­ber next year. Home­land may list on the JSE next year.

SNR is de­vel­op­ing the Elitheni coal mine at Indwe

in the East­ern Cape.

JSE- and ASX-listed Coal of Africa (CoAL) says it’s en­tered into sup­ply agree­ments with two sep­a­rate IPP op­er­a­tors for its Makhado and Vele coal projects in Lim­popo Prov­ince. Both mines are be­ing planned as pro­duc­ers of cok­ing coal but may need a con­sumer for their “mid­dling” prod­ucts of lower-grade ther­mal coal to en­sure eco­nomic vi­a­bil­ity.

CoAL MD Si­mon Far­rell de­clines to name the IPP op­er­a­tors but adds he’ll do so once Eskom pub­lishes its “short list” of IPP projects it’s con­sid­er­ing buy­ing power from.

An­other coal group set to sup­ply an IPP project is Lon­don AIM-listed Strate­gic Nat­u­ral Re­sources (SNR), which is de­vel­op­ing the Elitheni coal mine at Indwe in the East­ern Cape, 300km north-east of Port El­iz­a­beth. That’s a long way from SA’s tra­di­tional coal­fields in Mpumalanga, Lim­popo and KwaZulu-Natal prov­inces.

The spur for the de­vel­op­ment is the coal­fired power plant be­ing built at Indwe by IPSA Group (Ipsa), which is listed on Lon­don’s AIM as well as the JSE’s AltX.

SNR blasted the first coal at Elitheni early in Septem­ber and also pub­lished in­creased coal re­serves statis­tics for the mine. As a re­sult, Ipsa is looking at dou­bling the gen­er­at­ing ca­pac­ity of the power plants it in­tends build­ing in the Port El­iz­a­beth/East Lon­don re­gion from 500MW to 1 000MW (see story on page 35).

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