State miner has oil-from-coal ambitions

[] — STATE-OWNED miner African Exploration Mining and Finance Corporation (AEMFC) on Saturday used the sod-turning ceremony of its Vlakfontein coal mine to lift the veil on some of its future projects, which would include an oil-from-coal operation.

AEMFC, currently part of the Central Energy Fund (CEF), was in November indicated by cabinet to become the nucleus of the state’s participation in the mining industry. It would in future operate as a stand-alone entity.

Speaking at the sod-turning ceremony, President Jacob Zuma said the state could no longer be confined to the role of a regulator.

“The state must actively participate in the mining industry to ensure that our national interest is protected and advanced,’ said Zuma. “Government policy on minerals and mining does not make provision for the nationalisation of mining assets, but it does not prevent the state from participating actively in mining, competing with other companies.’

The open pit Vlakfontein mine, located close to Ogies in Mpumalanga, would start operations in June. According to AEMFC CEO Sizwe Madondo, the group’s management is still engaged in coal supply negotiations with Eskom. The power utility’s Kendal station is within view from the mining premises.

Madondo said capital expenditure on the project would amount to R130m, financed by the CEF. Construction work has been outsourced to Concor, a subsidiary of Murray & Roberts.

The mine has total reserves of 33 million tonnes, and would initially produce 800,000 tonnes per year increasing to 1,6 million tonnes, depending on demand. The coal would have calorific values of between 19 and 22.

Between 150 and 200 people would be employed during the mine construction phase, and 120 once mining operations began.

“We’ve done all our work, we’ve got a mining right, we’ve appointed a contractor,’ said Madondo. “We’re ready to go ahead.’

Madondo said AEMFC’s second project would be a coal-to-oil operation close to Bethal, also in Mpumalanga. A feasibility study has already been completed, with an environmental management plan (EMP) submission to be made end-March.

The group would be looking for a joint venture partner to assist with the expected R2bn capex outlay, with production possible by the third quarter of 2013. According to Madondo, crude oil production of between 10,000 to 15,000 barrels per day would be possible.

AEMFC further had prospecting rights for several other coal projects elsewhere, as well as for uranium and limestone. Madondo said the group was also considering a foray into base and platinum group metals.

He was at pains to point out that AEMFC did not receive any preferential treatment from authorities.

“We do our applications just like any other company and stand in the same queues,’ he said. A prospecting right for Vlakfontein was granted in December 2006; after which an application for a mining right was lodged in August 2009.

The EMP and integrated water use license application were submitted early 2010. “The mining right was granted in August 2010 pending the EMP record of decision which was obtained towards the end of 2010,’ said Madondo.

Said Minister of Energy Dipuo Peters: “While we want to make sure we play on an equal field with all private sector players, it would also be wrong of us not to have any particular bias towards a state-owned mining company whose primary motive is to make sure we have energy resources.

“For the very same private sector, for them to be able to invest in mining they will need energy; so it is important that we have a platform to access security of supply.’