MENAR CEO Vuslat Bayoğlu remains optimistic about the future of the South African mining industry but there’s a certain caution compared with his attitude of some five years back, when he was totally “gung ho” on the country.
That’s not surprising given the events of the past few years but Bayoğlu says his group’s plans to invest up to R7bn in new coal mining capacity remain in place and he’s sizing up a potential new underground manganese mine that could add another R3bn on top of that.
That would follow on from his initial diversification into manganese through subsidiary Sitatunga Resources, which started operations at the opencast East Manganese mine near Hotazel in the Northern Cape in September 2021.
But developments here rest on a technical reassessment of the underground mine to get the operating costs down because, according to Bayoğlu, the grade of the orebody is not as high as the “gem” quality grade underground mines operated by South32 and Samancor.
“The manganese price is generally flat so it is critical that you keep your costs low,” says Bayoğlu, who adds he does not believe consolidation of the numerous juniors in the manganese sector is necessary and Menar has no plans to get involved in such action.
Currently Menar is producing 30,000 tons a month of manganese ore but the new project – if it goes ahead – would add 150,000t/month to this.
Until then Menar’s fortunes will remain with coal – specifically the export market to which the group supplies 4.5 million tons annually – because the group does not sell to Eskom.
“We offered coal to Eskom back in the days of the Zuma era. We have yet to hear back from them,” Bayoğlu comments, noting that right now Eskom does not need new coal supply.
That makes him particularly focused on the issues at Transnet Freight Rail (TFR) and he is not happy with the way the mining industry – as represented by the Minerals Council of which Menar is not a member – has approached Transnet so far.
He says Menar is pushing to develop a major new colliery in the Springs area which would increase the group’s total coal production from 8Mt run-of-mine (ROM) annually to 20Mt annually.
In particular, he is annoyed by the Mineral Council’s action in calling for the removal of Transnet CEO Portia Derby and TFR CEO Sizakela Mzimela. “We have to work with Portia Derby. What did they achieve by calling for her removal? The Minerals Council was wrong on this one.
“The Transnet situation has to be fixed. We do not have an option here. It’s not like Eskom where if there’s no power you have alternative sources of supply if you have the money. It will cost you but you can do it.
“But with Transnet you cannot afford the alternatives. Trucking is unsustainable. It messes the roads up and it kills people. You can afford to truck maybe 5mt of coal annually but not the 26Mt of coal involved where Transnet dropped from railing 75mt of coal to 49mt annually. Whoever was mining that 26mt of coal – those people have lost their jobs.”
Bayoğlu adds: “The biggest problem at Transnet is not cable theft but the availability of locomotives. This happened before they [Derby and Mzimela] came into power and they inherited this problem. The chairman of Transnet cancelled the contract and their hands are tied.”
What Bayoğlu does hold Derby accountable for is the severance packages she offered to senior staff to make the Transnet management structure leaner. “They lost critical skills by doing that. Now they do not have enough skilled [executives] to run these lines properly. She should bring those people back.”
Bayoğlu reckons the big differences between Transnet and Eskom are that Transnet is communicating, it understands the problem and it is happy to work with the industry to find a solution.
He adds there is a tremendous amount of attention being paid to the issue of how private businesses can be involved in rail. “Transnet is serious about this but I understand why they are hesitant. It’s a strategic business and they do not want to lose control.
“The Richards Bay line is Transnet’s bread and butter. 52% of Transnet’s revenue comes from coal, so TFR is generating most of Transnet’s revenues. Given that situation, would you like to privatise that?”
He says privatisation of Transnet is not the way to go. “We need a different approach. We don’t need Transnet to be privatised but what we want is access to the rail tracks maybe through paying toll fees like you do on the state-owned highways.
“They are working on something like that at present – a rail access arrangement where Transnet retains ownership of the infrastructure, rather than a concession.”
While Bayoğlu does not supply coal to Eskom he is adamant that coal-fired power stations are the way to go and South Africa should build more of them. His attitude is that renewable energy is important but it is just complementary because it cannot provide base-load demand.
He believes former Eskom CEO André de Ruyter focused too much on alternative energy during his tenure. “De Ruyter pushed a green agenda but he did not do a good job in terms of delivering power. He did not deliver what he was supposed to deliver.
“He was proud of closing the Komati power station but he replaced it with a 100MW solar plant which will give you power eight hours a day so that’s 33MW replacing 1,000MW. That’s nothing you should be proud of.”
He also rejects international green pressure on South Africa to cut coal consumption and questions the motives of “foreign-funded non-governmental organisations (NGOs)” interfering with coal operations – including Menar’s ZAC colliery – in KwaZulu-Natal. “India and China are investing in coal-fired capacity, 14,700MW in the case of India. Are people going to tell India and China to stop using coal-fired energy? No!
“Why should we in South Africa look at bringing in three floating Karpowerships to give us emergency power? That’s rubbish. We have coal. They should build more coal-fired power stations using proper contractors on an EPCM (engineering, procurement and construction management) basis, which will deliver a station in five years. Government should not build its own power stations.”
Bayoğlu believes coal still has a future in South Africa because it is “indispensable”. He is happy to invest in new collieries because he can see a situation developing where coal will be in short supply as existing collieries get older and more expensive to operate and there is a crunch on new coal mine construction because funds for this have dried up.
“We have to deal with our CO2 emissions but what we are lacking is a clear government stance. I do not think the government is anti-coal mining but it cannot make a decision. Government needs to say we need to have cheap power to create jobs.”
Turning to NGOs, he says: “In KwaZulu-Natal they want to stop anthracite and coal mining. They managed to stop Tendele. That’s 2,000 jobs on the line but why? Who are you to do this? Who is supporting you?”
He adds that 95% of the community agreed with Tendele that they wanted the mine. “Who are these other 5%? Can we afford to carry on making more people jobless after what happened with the looting in KZN two years ago, which was largely carried out by unemployed people?
“This has to stop. The government has to do something about this. We did not allow Shell to drill for gas offshore. Why? In Mozambique and Tanzania they are producing gas from the same belt.”
This article first appeared in the The Mining Yearbook 2023 available here.