HomeEnergy MineralsHuge investment needed for coal expansion

Huge investment needed for coal expansion

Coal – vital for future
domestic and export
Cape Town, South Africa — MININGREVIEW.COM — 17 April 2009 – An investment of between R90 billion and R110 billion will be crucial to develop 40 new coal mines to meet the projected growth in domestic and export demand for coal over the next decade in South Africa.

Making this prediction here, Frost & Sullivan – an international growth partnership company and leader in providing disciplined research and functional best practices – said this investment would be crucial to ensure that the country’s energy needs were met.

“South Africa’s energy intensive economy is overwhelmingly dependent on coal,” explains Frost & Sullivan metals and mining analyst Wonder Nyanjowa. “This fossil fuel provides about 75% of the country’s primary energy needs, supports 90% of the electricity generated and provides feedstock for the country’s synthetic fuels manufacturing plants.”

Coal is also used directly as a fuel in the steel, cement and brick manufacturing industries. “The limited availability of alternative energy sources, and the apparent indecision regarding nuclear energy, point towards coal’s continued domination of the country’s energy mix,” he added.

“However, the production and consumption of coal in South Africa have remained fairly unbalanced, with rising coal demand in one hand and constrained supply sources on the other,” Nyanjowa pointed out. “This necessitates additional investment.”

Eskom is expanding its power generation capacity by building new power stations and returning into service three power plants that will increase its coal consumption needs by an additional 50 million tonnes per annum. The expansion of Sasol’s synthetic fuels manufacturing capacity would also see its coal consumption rising by an additional 25 million tonnes per annum.

“In other words, the domestic demand for coal is set to increase by 75 million tonnes per year over the next decade,” Nyanjowa notes. “Export demand for coal from China, India and the European Union is also forecast to remain strong.”

Existing coal production capacity of the country has remained stagnant at levels around 240 million tonnes a year, only posting small incremental changes at best.  Depleted coal mines in the Witbank, Ermelo and Highveld coalfields in the Mpumalanga province – together with the operational and technological constraints that coal miners have been facing – account for this stagnation. Industry sources indicate that most of the existing coal mines in the Mpumalanga province will be exhausted by 2020, whilst two collieries in KwaZulu-Natal have already closed.

“Frost & Sullivan forecasts that coal supply will remain flat in the short to medium term, owing to long lead periods between exploration and commissioning of new mines,” Nyanjowa continued. “The Waterberg coalfield in the Limpopo Province hosts about 50% of the country’s coal reserves and it has one colliery operated by Exxaro Resources. Other coal miners such as Anglo Coal and BHP Billiton Energy are still prospecting in the area,” he said.

“The Waterberg coalfield already has two coal-fired power stations attached to it, and it represents the future of coal mining and electricity generation in the country. However,” Nyanjowa concluded, “further developments will be needed to ensure that the drive to meet the country’s energy requirements is not constrained by an insufficient coal supply.”