Exxaro says there’s value yet in holding the rights to export coal through RBCT

Richards Bay Coal Terminal

EXXARO Resources insisted there was significant future value in holding coal export entitlement through Richards Bay Coal Terminal (RBCT), the 91 million tons a year (Mt/y) coal export handling facility situated in South Africa’s KwaZulu-Natal province.

“We are by rail exporting 75 million tons of coal from South Africa this year. We shouldn’t lose track amid all the pressure and noise we hear,” said Sakkie Swanepoel, group manager of marketing and logistics at Exxaro Resources.

“There is a lot of value in export entitlement. As we go forward, the price of that entitlement will be under pressure in terms of whether exporters will fill it or not. But for now, we still have value.”

Developing economies are forecast to require significant amounts of coal-fired energy in the medium term. According to the South African government’s Integrated Resource Plan (IRP) a roadmap document aimed at setting out how the country’s energy will be supplied by 2030, thermal coal will be 59% of the energy pie by 2030 down from over 85% today.

But globally investment is turning its back on the fuel in favour of less carbon intensive energy technologies such as renewables. Standard Bank Group said in a new policy paper this month that it expected to reduce its financing of thermal coal projects “over time”.

Glencore, Anglo American and South32 have said they will exit the South African coal market over the next 10 to 15 years. This means much of the ‘balance sheet’ that once financed large coal mines will vanish at a time just as finance is hard to muster.

The net effect is to raise doubts as to whether there’s the finance, demand and political will to sufficiently keep export volumes at current levels.

Exxaro’s Swanepoel commented on the matter because an analyst at the group’s annual results presentation asked if in selling its ECC and Leeupan mines – as Exxaro announced it would do earlier this year – it would also part with export entitlement through RBCT.

Nombasa Tsengwa, head of Exxaro’s coal division, said even if ECC and Leeupan were not sold (no deals have been reached yet), the coal from the mines was likely to be re-directed to Eskom from the export markets.

“The two operations were destined to be in the Eskom market and are even more profitable in that context,” said Tsengwa. “But we don’t know what will come out of the [sale] negotiations so we are not saying 100% no [on whether export entitlement will be sold]. But we have to determine what might give us more value,” she said.