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Shifting the furniture for coal production?

‘To take mines from the company and give them to somebody else doesn’t make any difference to the environment,’ quotes Xavier Prévost from XMP Consulting.

SIMON BROWN: I’m chatting now with Xavier Prévost, who is from XMP Consulting. Xavier is a coal guru in every sense of the word. Xavier, morning. I appreciate your time.

News came out from Anglo American yesterday that they’re going to be spinning out their coal assets into a separate listing on the JSE and the LSE. From a purely market perspective, it’s great to have another coal asset on the JSE. And, from accounts from digging I’ve been able to do, it (Thungela Resources) is an exporter, a low-cost producer. My sense is it’s going to be a decent-looking asset for our local market.

Read:
Thungela Resources to acquire some of SA’s best quality coal assets
Anglo American announces voting arrangements for coal demerger

XAVIER PRÉVOST: Yes, good morning, Simon. I actually was looking at the whole spectrum of what you ask and what you want to know and yes, the reserves. Well, Anglo has always been one of the top producers and one of the top companies in South Africa in coal. And of course it hasn’t stopped being that.

They’ve got rid of their mines that were serving Eskom. But, as far as exports are concerned, if you look at what the RBCT (Richards Bay Coal Terminal) does, Anglo is the second-biggest exporter of coal, with about 20% to 22%, almost, of the total RBCT exports going from Anglo to overseas clients. So it’s not a small little fry, it’s one of the largest. Whether we would keep that or we give it to somebody else is similar to saying, if you look at the potential of the mines, the mines have huge, huge reserves and resources. The reserves alone are about 150 million tonnes, and that means coal that is mineable now, not in 10 years, not in five years, just now.

As I say, it’s all very interesting. I thought these mines were going to be sold, but it looks like Anglo is going to somehow keep them as a different company, a different entity…. One of the items [for discussion] this morning that were sent to me, is whether Anglo is going really clean and saying they’re not going to produce any more CO2, or not disturbing the environment. This is just the same story.

What the Glencore chairperson said not long ago is that to take mines from the company and give them to somebody else doesn’t make any difference to the environment. And that’s true.

SIMON BROWN: It’s still going to be out there.

XAVIER PRÉVOST: It’s the same thing, a different name, but there is the same impact. I’m not into impacts, because one of the last parts of the questions sent to me yesterday was whether we actually go for this story of the transition from fossil fuels to clean technologies or clean sources of energy. I don’t know, maybe I’m biased, maybe it’s because of what I do – but I believe that the story of changing coal  for other things, especially in South Africa and Africa in general, is not on, simply.

We can’t do it. We can’t afford it. And not only that, but it makes very little sense environmentally-wise. A couple of years ago you would say if you don’t get rid of the fossil fuels, the world will end soon, and we will have totally destroyed ourselves. But it’s not the case. As science has proved recently, the burning of coal and reducing our CO2 might be more beneficial than damaging. So that’s my point and the point of many people.

So on that issue I would say, although Anglo’s keeping the mines and it’s actually using them for the future, I think it’s a good idea for Anglo – although many people would say: “No, but Anglo is not cleaning the environment.”

SIMON BROWN: I take your point there. We’re not going to get a clean environment….as an investor for me it’s attractive. We can crunch the numbers, we can determine, but I like the idea. We are losing stocks in our market, and it’s great to bring a new one in.  And coal – we can debate where it goes, but ultimately coal is how we power our planet at the moment.

We’ll leave that there.I really appreciate the early morning, Xavier Prévost. He  is a senior coal analyst at XMP Consulting. As I said, an absolute coal guru. I appreciate the early morning.

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But if the indigent want to continue its coal use — let them live with the consequences !!

Maybe casper but it is a lot about how you do it. If you insist on burning the coal in a taxi type build and maintained power station it is going to pollute for sure. But I think there is room for BMW 1 series; well designed and maintained stations with well controlled emissions (in the ideal world; not Africa). Ditto for the other uses of coal; steel, calcium carbide etc.

Also I am hearing that wind and solar can have very negative effects on the environment that have largely been ignored. Particularly bird life. These issues are not able to be mitigated.

End of comments.

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