Shabangu makes coal exports threat

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[miningmx.com] — GOVERNMENT would not allow South African coal producers to cash in on the soaring international demand for the commodity to the detriment of power utility Eskom, Mines Minister Susan Shabangu said on Wednesday.

Speaking at the McCloskey Coal Conference in Cape Town on Wednesday, Shabangu stopped short of branding coal a strategic resource, but said the state would be monitoring exports closely given Eskom’s well-publicised difficulties in securing sufficient high-quality thermal coal.

“The lack of regulation of the coal mining industry resulted in a shift in the power balance away from the national interest to that of the shareholders of the mining companies,’ she said. “Eskom (has lost) some share of its historical market. This has also impacted on the quantity, quality and cost of coal supplied to Eskom.

“It is not government intention to enter the minefield of specifying all the processes, and it is our fervent hope that industry will recognise the particular challenge and work with us.’

Shabangu singled out India’s growing interest in securing coal from South Africa for its own energy needs. Pointing to the fact that the Asian country accounted for a third of coal exports in 2010, she said its interest in South Africa would be compounded by the drop in supply from Australia due to ongoing weather disruptions.

“Is this what South Africa needs?’ she asked. “What will the effect of this increase in export be on our local market? Yet, what is the effect on the general economy?

“Some will see an opportunity of making more money on the back of the Australian misfortunes. Unfortunately that opportunity may very well be a serious threat to our supplies for electricity generation and being part of the uptake of the economy following the recession.’

India’s state-controlled resources purchasing company, MMTC, opened a South African branch in January precisely with a view to increase coal exports.

As an illustration of the country’s demand Vikram Doraiswami, India’s consul general in Johannesburg, said the country would be taking 10 new coal-fired power stations into commission in the next five years – each of them the size of Eskom’s Medupi project. Its demand for heating coal imports is subsequently expected to rise 500% from 20 million tonnes in 2010 to 120m tonnes per year by 2015.

Eskom CEO Brian Dames has already hinted at a formula-based export quota for miners.

Shabangu pointed to the Waterberg coalfield in Limpopo – the region where junior miners like Resource Generation and Sekoko Coal are at various stages of exploration and development projects – as an untapped resource to be exploited.

“The major problem with the Waterberg is the geographical location with very poor infrastructure. There is a shortage of water, which is important in the beneficiation of coal, and transportation facilities are limited,’ she said. “Huge investment is critical.’

WINDOW DRESSING

In her speech, Shabangu once again hit out at the slow pace of transformation in the sector, threatening that government may act upon non-compliant companies.

“We have the means and the authority to force through changes but it would be more helpful if companies followed the stipulations of the charter,’ she said.

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