In the stope
coal from South Africa for a long time. More
than half of the coal we mined at Hakhano
was sized product for the Turkish market.
At that time, we used Maputo to export our
coal. In fact, Canyon was the first company to
truck coal to the port of Maputo.
What was the logic behind trucking
coal to Maputo?
When we started mining at Hakhano we
realised logistics was a big problem. There
wasn’t enough rail capacity to Maputo and
the only other option was to truck the coal to
Maputo. We found a logistics company that
was able to clear our trucks very quickly at the
border. In fact, when the trucks left the mine,
they were pre-cleared and were never delayed.
A truck could leave the mine with a full load
and return from Maputo on the same day.
During that time, we managed to move close
to 50 000 tonnes of coal per month.
Do you still export coal to Turkey?
No. The Turkish government is buying more
coal from local mines and is importing a lot
of coal from countries like Columbia and
Russia, for example. Asia is now a big market
for South African coal, and for us, as is the
rest of Africa, especially East Africa. Kenya
and Tanzania are using South African coal,
as is Ethiopia and Djibouti while countries
like Pakistan, India, Bangladesh and Sri
Lanka have become important markets for
South Africa.
How much of Canyon’s coal is still
transported to Maputo?
We don’t use the port of Maputo any longer.
Through the Kangra acquisition, we are now
shareholders in the Richard Bay Coal Terminal
(RBCT), so when the rand weakened and
it became costly to export coal through the
port of Maputo, we diverted our product to
RBCT where we also make use of the dry bulk
terminal run by TPT. So, in Richards Bay we
use RBCT and the dry bulk terminal.
What is the secret of running a
successful coal mining company
in South Africa, and what advice
do you have for junior mining
companies looking to establish
operations in the country?
South Africa remains a top-class mining
destination. Although the country faces
many challenges, it has a relatively stable
government. If a company creates employment,
the government will support it. In addition,
there is rule of law and human skills are
available. Road and rail infrastructure are
first class, and Transnet is one of the better
state-owned entities. All these factors are
benefits not present in many other developing
countries. A lot of juniors are complaining that
finance is a challenge, but if it is not available
you have to be innovative. Nobody can teach
you how to be an entrepreneur.
If the geology is good, the operation will
be on the front foot from the start. It is
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imperative that the geology is favourable.
If it is not, and you want to operate an
underground mine where you achieve a 50%
yield for Eskom product, it is not going to
work. Don’t get overly excited about any
project in the Waterberg either. There has
been only one company that could make
it work, and that is Exxaro, and they made
huge investment to make it profitable. Don’t
go building a siding in Limpopo and say that
you have a mining investment.
If you have a deposit in Makhado with a
two to one strip ratio and a 80% yield, it will
work, but if you have a 20% yield and a five
to one strip ratio in the Waterberg, forget
it. The problem with many new projects
is that their products are only suitable for
Eskom, and because Eskom has a fixed price
arrangement with Exxaro, Eskom won’t buy
the coal. Therefore, Exxaro will continue
supplying coal to the Medupi and Matimba
power stations in the Waterberg at a
competitive price, so there is not really room
for new mining companies in the Waterberg.
There are still in excess of 10 billion tonnes
of coal available to be mined in Mpumalanga.
Junior miners are limited to opportunities in
KwaZulu-Natal, Gauteng and Mpumalanga.
KwaZulu-Natal’s geology is tough, and
Gauteng is far from the markets, but all three
of these provinces offer plenty of opportunities
to the investor.
At the moment all Canyon’s coal is
earmarked for the export market.
Is coal supply to Eskom part of your
future plans?
We’re hoping that we’ll be able to supply
coal to both Eskom and the export market.
Currently we are not supplying anything
to Eskom. However, they are aware of all
our coal resources and if they want to buy,
we’ll certainly give them priority. Eskom is
extremely important to the South African
economy, and I believe for them to succeed,
we need to provide them with affordable
supply, which is not happening right now.
What is the significance of
establishing Sibambene Coal in the
context of the current situation in
South Africa?
Globally, major mining companies are
exiting from coal, which has left a big gap in
the market. Worldwide there are 62 countries
building 1 600 coal-fired power stations.
South Africa is an emerging economy that
needs to create jobs. Therefore, it needs to
have a cheap and consistent power supply.
The country’s grid has to operate efficiently,
and coal is important because it generates
base load.
Anglo American is certainly not putting
more money into coal, they haven’t built a
new mine in the last 10 years, so where is
the investment going to come from? South
Africa needs coal, Eskom needs coal. The
reason why Eskom is short of coal is that
major mining companies didn’t invest in
coal because coal is unwanted. South Africa
needs 130 million tonnes for Eskom, and
20 million tonnes of coal for industrial use,
which means 150 million tonnes of saleable
coal. Where is this going to come from?
On top of that nobody is investing in new
mines.
Furthermore, RBCT can move 72 million
tonnes of export coal per annum, and Maputo
has a capacity of five to six million tonnes per
annum. There is also the dry bulk terminal
and the Navitrade Terminal at Richards Bay
which, between them can take another five
to six million tonnes. In total that is about 88
million tonnes per annum.
Between Eskom and export, it adds up to
more than 300 million tonnes of raw coal that
should be mined every year. There is also a 70
to 80 million tonne per annum shortfall of coal
in international markets. Indonesia increased
their production from 290 million ton per
annum to 550 million ton per annum in less
than 10 years. It means more jobs and foreign
currency for Indonesia; it’s massive. South
Africa has a world class port and infrastructure
at RBCT with a capacity of 100 million
tonnes, and it’s using only 72 million tonnes
per annum. There is obviously a shortfall, and
Sibambene believes it can fill that void.
You’ve been campaigning for Eskom
to adopt an index price for coal.
What is your reasoning, and what, in
your view, are the issues at Eskom?
There should be no special treatment for
certain suppliers at Eskom. All suppliers
are delivering the same service: why should
they get paid different rates? Because they
have superior negotiating power or are better
connected?
Eskom has to be consistent and pay
the same price, and that price should be
competitive. It should be a market-related rate
and it can only be achieved by establishing
an index price. In other words, if there is an
oversupply of coal one day, Eskom will not
pay a premium price. Conversely, if there is a
shortage, they would pay a high price. With an
index price, it is possible to avoid a repetition
of the Tegeta fiasco. Eskom has to be more
transparent.
This is one problem, but the big issue that
has sunk Eskom is the huge investment in
Medupi and Kusile, and it is a continuous
headache.
What is your outlook for the coal
mining industry in South Africa?
Eskom will continue burning coal. The South
African government has made significant
investments into coal-fired power stations
and the industrial use of coal in South Africa
continues growing as the economy grows.
As the economy expands, there will be more
foreign direct investment into other industries.
There are a lot of coal reserves in South Africa,
and there’s substantial capacity at RBCT.
The road and rail infrastructure are of a high
quality and the major companies are selling
their assets. There has never been so much
opportunity for new entrants to the coal
market in South Africa.
JUNE 2019 MINING MIRROR [37]