Anglo model for water treatment

Anglo’s Emalahleni treatment plant takes water pumped from old underground coal workings and purifies it for human consumption. ANGLO American was the first company to transform waste water from its coal mines into something 80 000 people drink. Now it is seen as a model.

Purifying contaminated water from three sites in South Africa has proved so successful that Anglo’s plant in Witbank is doubling in size and being replicated elsewhere in the country by BHP Billiton and Glencore Xstrata.

While the $130 million (R1.3 billion) plant will not upend the $600bn world water industry, Anglo’s treatment centre provides as much as 12 percent of the area’s municipal drinking supply and serves as a template for how the industry could treat waste in the future. It also shows how companies and municipalities are finding new ways to confront an increasingly waterstressed planet.

Mines often treat waste water to some extent. But until the Emalahleni water reclamation plant, none of the water was of drinking quality.

This plant “is a model”, said Marius Keet, the acting head of the Department of Water Affairs in Gauteng. “It’s a good example of how it should be done.”

That said, the technology is not cheap and the company must still store a leftover brine from the treatment process, a residue that can be toxic. 2011, increasing carbon emissions.

The 30 million litre-a-day reverse osmosis plant recovers 99.5 percent of the mine’s waste water, which will increase to 100 percent after the expansion is completed this year.

Seawater desalination plants had recovery rates of between 60 percent and 70 percent, said Thubendran Naidu, the hydrology manager at Anglo’s Emalahleni plant.

Cleaning mine waste water to a higher quality allows companies to continue producing coal, keep their water licences and reduce the acidity that corrodes equipment.

“The company would have to treat the mining waste water before draining it into rivers or land anyway so this way they also did something good,” said Adrian Viljoen, formerly an engineer at Keyplan, now Aveng, which built the facility.

“The only extra cost was the pipework to deliver the water to the municipality.”

Much of Anglo and other miners’ efforts has been driven by government regulation. Mines are required to secure water licences and part of the approval includes a watertreatment plan after the mine closes as well as proper handling of the concentrated brine.

While Anglo had no immediate plans to build similar plants in its thermal coal business, it was considering water treatment operations in its platinum and copper businesses, according to water manager Richard Garner.

Glencore is building a water treatment plant in the Middelburg coal-mining area to improve the mine waste water to an approved level so it can flow into waterways. The plant would be commissioned later this year with a capacity of 20 million litres of water a day, it said. BHP is investing in the Middelburg water plant.

Glencore owns a watertreatment plant similar to Anglo’s that began operations in 2010 with a 15 million litre-aday capacity. It supplies about 20 percent of the drinking water to Hendrina residents. VODACOM, South Africa’s largest wireless network operator by subscribers, may hurt its profitability in the short term with a new 79c per minute prepaid call rate but it is smaller rival Cell C that could find itself caught between a rock and hard place over the next few weeks and months, according to analysts on Friday.

Cell C, once the protagonist by sparking competitive reductions in retail voice tariffs in 2012, may be unable to respond to rate cuts, which its competitors have introduced recently, by matching or reducing its prepaid flat rate tariff from 99c.

Dobek Pater, director and analyst at Africa Analysis, forecast that Cell C might wait until July when Vodacom’s promotional offers expired but he added that Cell C had to respond sooner to avoid losing its price-sensitive subscribers, some of whom it had attracted from MTN and Vodacom over the past year.

But large debt, which matured early next year, and low share of revenue in the market had made privately held Cell C, which is also in the throes of a multimillion rand network upgrade project, less agile.

On Tuesday Cell C announced an expanded range of its Supacharge vouchers at low denominations but which can only be used between Cell C subscribers. But the offer paled in comparison to Vodacom, which also announced a promotional bundle offering 20 voice minutes for R10 to any network, anytime.

MTN led the price reductions when it announced a flat rate tariff of 79c per minute to any network, any time during mid-April.

It has applied to the industry regulator to convert the promotion into a permanent rate.

Pater said Telkom’s SimSonke remained the lowest prepaid plan in the market. It offered 29c per minute for calls between Telkom Mobile subscribers and charged 75c per minute for calls to other networks.

“I’m not sure we’re going to see a lot of price war. Effectively these may be the last decreases we see in a while,” Pater said.

The lack of a price war may please investors in Vodacom whose shares showed a decline of 6.7 percent last month, making it the second-worst performer among the nation’s largest stocks, according to Bloomberg which quoted analysts saying shares slid on talks of a price war.

Pater said Vodacom and MTN could comfortably sustain further tariff declines for six months to a year.

“79c is still profitable for Cell C on an operational profit level but Cell C is not yet profitable. It can’t really afford to sacrifice further revenue to a price war,” he said.

Even if Cell C were to drop its tariff to 79c there was not much more in the way of value that it could offer in competition with its rivals, Pater argued.

“For pre-paid services the transparency is probably there across all networks now.” Cell C’s challenge had been its lower quality of network and the delivery of services especially when it attracted more subscribers on to the network.

In July Cell C broke through the million gross connection barrier, boosting its subscriber base to more than 11.7 million. But chief executive Alan KnottCraig acknowledged that churn, the percentage of subscribers that discontinued their service over a certain period, was still high.

Daniel Isaacs, equity analyst at 36ONE Asset Management, said that the price cuts were no surprise as the market dynamics became more competitive. For Vodacom in the short term “it’s obviously negative. Price-cutting will affect profitability and isn’t necessarily offset with volume growth as SA is a mature market”.

Wireless network operators are focusing on improving consumer usage and spend on data products. Isaacs added that profit contribution of voice was far more significant than data, so growth rates in data would need to be significant to reduce that gap.

However, the industry giants were cash-generative and showing growth in earnings. Strong dividend yields also underpinned the stock prices.