Exxaro’s Thabametsi constrained by TFR

[miningmx.com] – ESKOM’s search for new coal production to feed its expanding fleet of power stations, Medupi and Kusile, isn’t being assisted by fellow state-owned company, Transnet.

According to JSE-listed Exxaro Resources, it won’t significantly build out Thabametsi, its latest coal mining development, until there’s more information about rail capacity and tariffs.

Thabametsi is situated in the Limpopo province, home to the coal-rich Waterberg. The proposed mine was scoped at anywhere between three million tonnes/year (mtpa) to 30mtpa, but in an announcement on July 15, Exxaro said it would only build the mine to 3.8mtpa.

This is just enough to feed a proposed 300MW installation that Exxaro will build with French company, GDF SUEZ.

Asked if Exxaro would consider rapid expansion, Mzila Mthenjane, executive head of strategy and corporate affairs, said: “The current constraint is transporting the coal from the Waterberg’. He acknowledged that Transnet needed to set a competitive tariff for transporting coal from the region.

The power station venture with GDF SUEZ, which is part of Government’s Renewable Energy Independent Power Producers Procurement Programme, can be doubled to 1,200MW which would require an increase in Thabametsi’s coal output, but this is still a far cry from the R9.5bn investment the mine initially shaped up to be.

Current expectations is that Thabametsi will cost between R900m to R1bn to build.

It’s an interesting development that Exxaro Resources has chosen to pursue an integrated “mine mouth’ power option since the company has been forced to delay capital on several occasions at Grootegeluk owing to delays at Eskom’s 4,750MW Medupi, the power station Exxaro is under contract to supply.

There’s no escaping Eskom, however, in the South African energy stakes owing to the fact it is, somewhat controversially, the generator and buyer of power. Mthenjane says Exxaro is waiting for a power purchase agreement from Eskom that will help the miner establish the full “commercialities’ of the project.

Until this is settled, there’s no knowing how profitable Exxaro’s attempt at vertical integrated in the power space will be.

In the Republic of Congo (RoC), however, Exxaro has more visibility of access to rail on its Moyoko-Lekoumou iron ore project. The railway that links the venture to RoC’s Pointe Noire some 465km away, has 5mtpa of capacity but it requires refurbishment.

Happily, there’s prospects of joining forces with Equatorial Resources, an Australian-listed firm that is development an adjacent iron ore mine called Moyoko-Moussandji.

Says John Welborne, MD and CEO of Equatorial Resources: “Being alongside Exxaro and developing a similar scale project is an enormous advantage due to the massive investments being made in infrastructure, in the development of a mining culture in the region, and in exploring synergies between the two projects. Exxaro is a strong believer in the benefits of “clustering” iron ore projects.