Teke banks on base commodities to win Seriti a place at mining top table
● Seriti Resources, led by Mike Teke, hopes to become a successful addition to South Africa’s ranks of black diversified mining houses by building a diversified bulk and base commodities business.
The miner, which would like to play a bigger role in the energy space, already supplies about 24% of Eskom’s coal — second only to Exxaro.
Given South Africa’s depleted gold mines and the weak platinum price, which has been a drag on platinum miners for the past five years, Teke does not see precious metals as part of Seriti’s business’s strategy.
The focus is rather on bulk and base commodities.
“For me to move from coal to look at gold and platinum, I might experience some challenges, and to mix precious metals and bulks you need a different set of skills and we don’t want to find ourselves there,” Teke said.
Looking up to black mining veterans such as Sipho Nkosi, who founded and led Exxaro for 10 years before retirement, and mining billionaire and African Rainbow Minerals founder Patrice Motsepe, Teke said he hopes to see Seriti become like Anglo American and South32 in the next five years, with a diversified bulk and base portfolio.
Seriti Resources is an 84% black-owned coal mining business and owns seven coal mines, which it acquired from Anglo for R2.3-billion this year. It has three operational mines, New Vaal, Kriel and New Denmark, and four mines that are shuttered.
Seriti also has a 45% stake in the New Largo project, in which the Industrial Development Corporation and Coalzar each hold a 22.5% stake and the balance is held by minority shareholders.
New Largo, a coal mine project that is supposed to supply Kusile power station, has yet to be developed.
Eskom and Seriti haven’t yet discussed the details of the development of the mine because Seriti is still finalising regulatory hurdles with the Department of Mineral Resources.
Teke said the business was only beginning to talk about the nature and shape of the mine. Building a mine can cost as much as R20-billion and it can take up to five years to develop.
Kusile’s first unit is already running at full capacity, but Teke said they will catch up and will not fall behind when the rest of Kusile gets developed.
“We are in the process of planning how we are going to mine it in phases and it depends on when Kusile demands coal from us,” he said.
Eskom has been vocal in the past year about wanting to exit from cost-plus mines, which have become a financial burden for the utility specifically when these so-called tied mines need to be expanded to continue to supply the adjacent or nearby power stations.
Eskom said last week it was running short of coal at Arnot, Camden, Hendrina, Majuba, Tutuka and Komati power stations. Seriti’s New Denmark coal mine supplies coal to Tutuka.
Teke said Seriti was looking into expansion plans at its Kriel mine, which supplies Eskom’s Kriel power station with five million tons of coal a year.
He said New Vaal had an opportunity to make sure that the partnership with Eskom’s Lethabo power station was taken to the next level and to ensure that it delivers.
Other coal assets which stand to be put on the market are the Gupta-linked Tegeta Resources assets, which are under business rescue.
Seriti Resources, which hopes to get into the coal export market, is eyeing the Optimum colliery package, which comes with two mines and an export entitlement of eight million tons at the Richards Bay Coal Terminal.
Optimum comes with an allocation of 6.5 million tons, while Koornfontein has the right to export 1.5 million tons a year.
Teke, along with business partners, bought Optimum from BHP Billiton in 2007 and listed the business on the JSE in 2010. He sold his interest to Glencore in 2012, after his business partners sold to the company, leaving Teke as a minority shareholder.
He said his history with Optimum runs deep and getting the export allocation that come with the mines would create a balanced portfolio for Seriti, enabling it to enter the coal export market.
“I don’t want 100% shareholding of Optimum. I’d like to see if there is still an opportunity for me to resuscitate some of the mines in the area,” Teke said.
We are planning how we are going to mine New Largo Mike Teke CEO of Seriti Resources