Govt policy ‘will kill’ SA coal’s future: Baxter

[miningmx.com] – TALK of strategic minerals and export restrictions kills the investment model for coal mining investment, said Chamber of Mines of South Africa COO, Roger Baxter.

Addressing a conference on electricity held in Johannesburg yesterday by the Fossil Fuel Foundation, Baxter said: “If you decide to restrict coal exports as a short-term stop gap measure, it will kill investment in the sector and – if you don’t get the investment – then you don’t have (coal) supply security five or ten years down the road.”

“Over the next decade South Africa needs about another 80 million tonnes annually (mtpy) to 100 mtpy in coal production which will cost about R100bn in capital investment and the only way it’s going to happen is through private sector investment.

“If you want R100bn in capital investment, you have to talk about the synergistic relationship between the export of the better quality coals which earn vital foreign currency for the country and the sale of the lower grade coals which are required by Eskom for power generation purposes.”

Said Baxter: “Probably 90% of the coal that we are exporting cannot be burnt in Eskom power stations.

“If you put some of the 27 megajoule (export) coal into some of Eskom’s power stations which burn 22 megajoule coal it would be interesting to see what the resulting explosion would be, unless that coal is blended to a much lower quality.”

“It is critically important to stabilise Eskom and provide the utility with sufficient space to catch up. We have always played our role.

“Whenever Eskom has requested the mining industry to ramp up production, like it did in 2008 to replenish stockpiles, the industry has responded positively.”

“But the longer-term strategy needs to be finalised. In our engagements with [the South African] government, we have been talking about the need for a partnership approach”.

Asked where he believed the mining industry currently stood in its long-running attempt to establish a workable, collaborative partnership with government, Baxter replied, “… necessity is the mother of invention.

“When you find yourself in a situation like we are now, the stakeholders have realised more than ever before they all have a role to play in the process. By necessity, we are starting to work more closely with government and other stakeholders.

“It’s only over the last six months that the rest of South African society has been exposed to what the large industrial power customers have been bearing for the last seven years.”

Baxter said the mining industry had so far made major power savings through collaboration with Eskom, but had now reached a point where it could do no more.

He commented: “The industry has shifted some 450MW of demand during peak demand times and has saved a further 500MW compared to what it would have used through programmes instituted with Eskom to reduce demand. We are talking big numbers here.

“But the industry now has no more room to reduce demand. Taking more demand off peak will simply kill production,” he said.