Mine could solve Kusile coal hurdle
• Klipspruit extension project set to produce enough coal to help supply Eskom’s new power station
South32’s $265m Klipspruit extension project, which has received the go-ahead from the Department of Mineral Resources, will unlock a large coal resource that can assist with the unresolved long-term supply needed for the Kusile power station.
South32’s $265m Klipspruit extension project, given the goahead by the Department of Mineral Resources, will unlock a large coal resource that can assist with the unresolved long-term supply challenges at the still incomplete Kusile power station.
Last week, Kusile’s first unit came into full commercial operation, adding 800MW to the grid. It will need about 16-million tonnes of coal a year when all six units are operating, which is expected by 2022.
Eskom and Anglo American, which owns the closest coal deposit at New Largo, have been locked in talks for at least four years over a supply contract without making any progress.
Anglo American will not plough billions of rand into developing a mine until it has an offtake agreement with Eskom, but New Largo does not have the 50% plus one empowerment that Eskom requires from its coal suppliers.
In April, Anglo announced an agreement to sell all its Eskomsupplying coal mines in SA to Seriti Resources, excluding the New Largo project.
In the short-term, Eskom is buying coal on the spot market for Kusile and diverting some from Exxaro’s Grootegeluk mine in the Waterberg, but this is costly and will not provide the volumes the station will need at full operation. It will need coal from several large suppliers.
Mike Fraser, South32’s vicepresident and chief operating officer for Africa, told media at a briefing on Wednesday that the group’s investment in Klipspruit Extension will unlock a large resource of about 600-million tonnes. This is intended to be an export coal mine, but there is flexibility to sell to Kusile. Eskom has asked for expressions of interest in a five-year supply agreement, with another fiveyear renewal, and South32 has participated in the first round.
Fraser said Eskom was running short of coal and margins on supplying to Eskom in future could become more attractive than exporting coal. “The most successful coal companies in SA will be those that can manage the arbitrage between domestic and export prices,” he said.
South32 was compelled to take the department to court earlier in 2017 to obtain permission under section 102 of the Mineral and Petroleum Resources Development Act to incorporate ground it already owned in the Klipspruit mining right.
It had faced two years of delays in obtaining this relatively minor bureaucratic stamp.
South32’s Klipspruit mine, which exports coal, will reach the end of its life in 2019, so it has become increasingly urgent to get permission to begin work on the extension project to protect investment and jobs, Fraser said. It was difficult to explain how the delay had arisen, he said.
SUCCESSFUL COAL FIRMS WILL BE ABLE TO MANAGE THE ARBITRAGE BETWEEN DOMESTIC AND EXPORT PRICES