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Eskom coal reserves dwindle

Posted: Fri, 25 Jan 2008

[miningmx.com] -- ESKOM’s action in halting power to the mining industry follows on three days of speculation the utility was running short of coal to feed its power stations.

Eskom GM Andrew Etzinger, quoted by local daily paper Business Report earlier this week, said the recent heavy rains had affected deliveries to Eskom “but not to a significant degree.”

Miningmx has attempted to reach Etzinger without success for the past two days to try and get him to qualify that statement.

An AngloGold Ashanti statement said: “According to Eskom, the current situation arises from reduced generating capacity aggravated by problems associated with coal supplies to power stations caused by unusually heavy rainfall. Eskom has not yet indicated how long the present situation will continue but the company is in contact with the electricity supply body.”

Speculation amongst coal industry sources this week was that Eskom’s power stations were down to as low as a five day reserve of coal that it could burn.

Possible reasons for this development include the impact of the rain and the facts that Eskom has been running its plants flat out while the utility has been buying a lot more of the coal it burns on the spot market.
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Eskom has traditionally bought the bulk of its coal through long-term supply contracts with the collieries contractually “tied-in” to supply the various power stations.

Buying on the spot market has exposed Eskom to a greater degree of competition with the export market where prices have soared from around $40/t fob Richards Bay two years ago to around $100/t currently.

Export coal is generally higher grade than the coal burnt by Eskom but it seems soaring demand and prices have encouraged coal companies to upgrade more of their product for export.