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Coal is far from dead

The launch of Sibambene Coal as a new player in the sector proves there’s still life in coal.

The launch of Sibambene Coal this week puts paid to the idea that coal is a sunset industry.

Sibambene is a 51% black-empowered company, the first to be fully compliant with the Mining Charter III, and plans on investing exclusively in SA coal mining assets.

While several of the majors have divested themselves of their coal mining assets, particularly as Eskom comes under pressure to decommission its coal-fired power stations and replace coal with green energy, Sibambene sees opportunity.

Dr Sakhile Ngcobo, a director of Sibambene, says the company is on the hunt for coal assets in SA, and is speaking to mining majors looking to offload coal assets, as well as junior miners with a view to possible consolidation of assets.

Fellow director Vuslat Bayoglu, who also heads up mining investment company Menar, says despite a worldwide move to greener energies, there is a global shortage of coal amounting to more than 70 million tons a year.

South Africa has 30.8 billions tons of coal reserves, sufficient to last another 118 years, and is the world’s sixth-largest source of reserves. Current national production amounts to 260 million tons a year, of which 72 million tons are exported. Richards Bay Coal Terminal (RBCT) has an annual capacity of 91 million tons.

Richards Bay Coal Terminal allocation (for coal exports)

The RBCT allocation is closely guarded by the major mining and commodity trading houses, but there are some openings here for a new entrant, says Bayoglu. Some 4% of the allocation is owned by Quattro, with nearly half of this unallocated and available to new players. Add this to the unused allocations through Maputo in Mozambique and two smaller facilities in Richards Bay, and SA is capable of exporting up to 101 million tons a year.

Some 75% of coal export allocation is controlled by just four companies – Glencore, Anglo American, South32 and Exxaro. “This is a high level of concentration, so there is need for additional players to come in,” says Bayoglu. “In addition, about 68% of total coal to be supplied to Eskom in 2019 will come from four companies.

“We are excited that the government has committed itself to dealing with over-concentration in the economy in general. We think it’s important that we see it as one of the ways to create an environment for new investments in the coal sector and for job creation.”

Ngcobo says Sibambene had looked at acquiring the Optimum coal mine, but decided against it. It has also been in discussion with Anglo American. “Whether it’s an existing operation or a new project that needs capital investment, we are ready to do an evaluation. We will invest where we think we can create value.”

‘No conflict’ with renewables

In response to questions about the environmental issues surrounding coal in Mpumalanga, and the high incidence of lung illness surrounding coal mines, Ngcobo sees no conflict with the government’s push for renewable energy, and that coal will continue to have a strong future in SA for the foreseeable future. He sees no competition between the two sources of energy, but is “biased to the one that creates more jobs for our people”.

Many of the health issues surrounding coal mines are related to legacy issues and, in some cases, failed mining projects where the owners walked away from their environmental responsibilities.

Sibambene is 49% owned by coal mining group Menar and commodity trading house Mercuria, 26% by black-owned Kalyana Resources, 10% by black-owned mining services and investment group Mirospan Mining and 5% each by employees, communities, and women-owned Inkhanyeti Group.

This mix of shareholders gives Sibambene the operational, financial and technical skills needed to run large and complex coal mining operations. Alan Gillespie of Mercuria says the global energy group will continue to fund investments in SA and supports President Cyril Ramaphosa’s investment drive.

Far from being a dying industry, Ngcobo points out that there are 1 600 new coal plants in 62 countries currently being fired into production. These will expand the world’s coal-fired power capacity by 43%. Some 700 gigawatts of coal-fired power has been commissioned in the last decade, predominantly in Asia. World demand for coal will continue to rise until about 2020, then level off for the next 20 years, with nuclear, renewable, and petroleum and other liquids filling the demand for energy, according to the USA Energy Information Association.

Which suggests Sibambene has a long future ahead of it.

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Quite correct, COAL is certainly far from dead.

In fact, what will DIE are the people that inhale soot/sulfur dioxide/nitrogen oxides,etc.

Not to mention poisoning from mercury, thorium and other heavy metals in flue gas emissions, and destruction of waterways and farmlands by acid mine drainage.

Michael, very true point but if coal extraction ceased, the spin off’s like chemicals, some used in pharma would cease

…and of course the rural folk would chop all the trees down to cook and heat homes

No win??

This, article focuses of combustion of thermal coal. Other applications are not mentioned. These include vast industries such as global organic chemicals, including all “plastics” most pharmaceuticals, and the massive use of metallurgical coal: without coal, manufacture of steel is not possible. In these industrial applications, coal is not burned.

@Tim. Valid point sir!

….am ‘guilty’ in that I’ll continue to happily trade in my EXXARO shares for example, and eventually die happily (with a cough) *lol* 😉

Just because someone is spending money on something doesn’t mean its relevant, just go and ask the software developers over at Bing

Agreed that supply may be economically foolish, but look at the demand.

The frustrating this is that a lot of people have drunk the Koolaid. it is fashionable to be anti coal and that is your right. There is a belief out there that coal can easily be replaced with solar and wind the only impediment to this lies with the regime or Eskom / some other obstructive bureaucracy who have obviously been bought by mining interests.

The fact is no industrialised economy currently relies on solar and wind (extensive hydro being a non starter in SA). Places such as Germany, Denmark and South Australia have gone a way down the path and ended up with the most expensive electricity in the world and some of the most unreliable electricity is found in South Australia where the grid falls over regularly. CSP was an absolute disaster cum money sink in Australia. Most of the above jurisdictions import power from their neighbours when the going gets tough. SA does not have this luxury.

A lot of people claim that new solar/ wind is cheaper than new coal. What they conveniently omit is the cost of the backup which is invariably required when the sun don’t shine and the wind don’t blow as well as the need for multi million dollar batteries to stabilise the grid. The also conveniently omit the cost of existing coal power.

The only other option for base load power in SA is nuclear.

The cost of new renewables plus the cost of back up generation is cheaper than the cost of new coal fired generation in SA. The lowest cost supply mix can be seen in the IRP.

Well if one looks at these items in isolation as you should do then the following becomes clear:

– There is obviously a place for coal in not only energy generation but also fuel for other industries like steel or cement manufacturing.

– global warming, air quality around coal plants, general site rehab and acid mine water are real issues. I suspect we are past ignoring these impacts.

– New coal tech has shown that emissions can be cut drastically, the issue is cost and when you are comparing with other tech then it makes it quite difficult to compete relative to solar/wind on a LCOE basis. Eskom’s existing coal fleet is falling apart and are some of the worst polluters in the world. I will explain why I don’t agree with your comment on base load later on.

“Places such as Germany, Denmark and South Australia have gone a way down the path and ended up with the most expensive electricity in the world and some of the most unreliable electricity is found in South Australia where the grid falls over regularly. ”

– I have seen these arguments before and have done some research into them. Just a cursory desktop study shows that these arguments are false. Germany, Denmark etc have always had the high energy tariffs (look at their petrol price), the reason for that has been and is because of the taxes added to the base energy prices. The early adoption of renewable energy did not help the price as they guaranteed high tariffs but that subsidy has been consistently coming down as RE prices have decreased. Those subsidies are not unique to renewable, there used to be coal mine subsidies to keep them open as well in Germany. 70% of Denmarks energy tariff is taxes as well. So bottom line, it is false to say RE have made these countries tariffs the highest in the world, the main driver is tax.

– On South Australia, there is still ongoing studies as to the causes for the blackouts they had but many reports have stated that it was solely due to the transmission line to Victoria being taken out by a storm leaving them without sufficient capacity. Whether that capacity was wind or coal is almost irrelevant and the wind plants seemed to have performed quite well in those conditions. The pricing discussion is similar to the above, a lot of taxes and it’s an expensive place to operate in general.

“A lot of people claim that new solar/ wind is cheaper than new coal. What they conveniently omit is the cost of the backup which is invariably required when the sun don’t shine and the wind don’t blow as well as the need for multi million dollar batteries to stabilise the grid.”

Firstly, coal plants and other base coal providers get a capacity charge which is a tariff they get regardless of whether the produce a single kW of energy or not. RE plants do not get that as they are intermitten power (assuming batteries are not built in, battery prices as a side note have halved in the last 2 years).

Secondly, no energy analyst worth his salt would look at the energy picture based on one plant in isolation. When people consider the cost of RE/coal or anything else it is in conjunction with what is needed to reliably meet forecast demand. RE & Gas are often put together as a scenario vs coal. SA recently discovered large gas reserves off the coast and that could be a game changer along with battery tech.

Lastly, on grid stability, a lot of this is theoretical but many grids have already surpassed what was deemed challenging RE penetration levels with no issues or even improved performance. In fact, there have been many studies that show that RE plants are better at achieving grid stability than coal due to the amount of control they have over the energy they generate, it can be regulated down to half seconds vs a coal plants which take much much longer to wind down or up (which is why there were peaker plants far before RE was introduced).

To end off, I agree that being blindly anti-coal or any tech is not useful to agreeing the most efficient new build strategy but many of the points you raised on RE are incorrect based on the information I have come across.

This type of attitude is typical of greed. It is an easy way of making money at the expense of the environment and the receiving communities. The numbers look great when you don’t take the long-term permanent destruction of the environment into account. What is the cost of losing high potential arable land forever, loosing food security for future generations, loosing wetlands and vast clean water catchment areas and replacing these with pits of acid mine drainage that continue to pollute forever? What are the health costs suffered by the communities forced to live in these areas? What is the cost of losing food security forever? Those that support this are only in it for their personal greed and are not truly pioneers of change and making a real difference in how we as humans treat the environment. The opting for Jobs statement is a cheap shot at exploiting the desperate needs of the poor. Why not be a little more innovative, sustainable and future thinking in your approach?
Another fatal flaw in the system is that there is not a single Environmental Assessment Practitioner that is truly independent they are paid by the mining companies to deliver the answers they want. Why does the government not employ the environmental practitioners themselves in order to get a more unbiased view and impact assessment?
We have first-hand experience of how these mining companies destroy the environment and not a single mine has been issued with a closure certificate. This is testimony to the disastrous track record of this industry.

I struggle to take anything this author says very seriously. Same guy/lady who is backing NECSA management vs the AG/minister/health and safety officials. Also the same guy who said there was a witch hunt for Matshelo Koko.

Pretty clear that this is a bought and paid for opinion.

I must say it is very surprising that despite the fact that you have absolutely no idea who I am you make assumptions and even go so far as to make a false statements around this (assuming of course you are referring to my comment).
Perhaps when you put forward a more balanced opinion and cost analysis inculcating the social and long term environmental damage and permanent loss of vital areas into your argument, then perhaps we can have a meaningful discussion regarding the role that coal should play.

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