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Mmamabula’s potential

CIC Energy Corporation, a Tau Capital Group company listed on the Toronto and Botswana stock exchanges, is advancing its Mmamabula Energy Complex (MEC) in Botswana. This is a three billion tonne coal resource which could involve development costs of close to R120 billion.

In an interview with Mining Review Africa, CIC Energy (South Africa) COO – mining, Eddie Scholtz explains that the MEC consists of the Mmamabula energy project (MEP), the coal-tohydrocarbons project (CTH) and the export coal project (ECP).

“With its coal resources in the Mmamabula area, located about 120 kilometres north of Gaborone on the main highway to Francistown, the MEP will consist of a greenfields power station and integrated coal mine. It is planned to contribute towards the significant new base-load power generation capacity which will be required in Southern Africa in the years ahead,” Scholtz says. “We have been drilling in the area since 2005 and have done really well. The resource we have defined is enormous, and 98% of it is in the measured and indicated category – that is 98% of 2.93 billion tonnes.

We have been working for two years on the quality determination of the coal, potential market prospects, potential mining methods and extraction rates. Because the economics change – export coal prices go up and down, power requirements rise and fall, and fuel shortages come and go – we have defined three end uses.”

CIC Energy has calculated that, of the 2.93 billion tonne resource, it could physically extract up to 1.8 billion tonnes on a run-of-mine basis. “Looking at this against the background of both short and long-term markets,” Scholtz says, “we have calculated that: 

  • 880 million tonnes could go to local power generation (the MEP and follow-on power stations); 
  • 440 million tonnes is high grade, potential seaboardtraded export coal (the ECP); 
  • About 200 million tonnes is suitable for coal gasification for what we call the Coal-to- Hydrocarbon project (CTH), and we are assessing the viability of this project in the medium to longer term.”

Having its resource in a landlocked country far from any ports, as well as the fact that Southern Africa has an electricity shortfall, has made the MEP the first priority.

“Being the first project of the three, establishment of the MEP will involve provision of all the required infrastructure; electricity, water, roads, railway lines, labour, accommodation, health and educational facilities,” Scholtz says.

“As such, it will pave the way for additional power projects, as well as the coal export and coal-tohydrocarbons projects, meaning that they could be regarded as brownfields expansions – certainly from an infrastructure point of view,” he adds.

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Exploratory drilling in full swing
at the Mmamabula site

“We are very well progressed to start the construction of a 1,200 MW net power station within months. This would consist of two generating units designed for super-critical operating pressures. The power station would use the latest technology for environmental emissions, including fluidised gas desulphurisation systems. From an environmental point of view, these are more high-tech than any other power station in Southern Africa.

“We are aiming to get to financial close by the third quarter of 2009,” Scholtz says. “Then we can move ahead with some early works, temporary water and electricity supply, roads and camps. Our planning is to start with major construction in early 2010.

“We would like to commission the first set of generators (there are two 600 MW generating sets) within 36 months and the second set would be commissioned four months later.”

CIC Energy is targeting 75% of the power to go to Eskom, and the other 25% to Botswana Power Corporation. This will be regulated through 30-year power purchasing agreements with the two organisations.

The MEP is the most advanced independent power producer project aimed at meeting the urgent demand for new base load capacity in Southern Africa. It is expected to be the largest private sector infrastructure project being developed on the African continent.

The mine is not on a critical time path, and will slot in to be able to feed the power station when required. “By the middle of 2010 we will start with the mine development and the construction of the washing plant and the mine infrastructure,” Scholtz estimates.

“We have identified and opted for a particular block because it is the best suited coal for the power station, and it is opencast. With a greenfields project it is less risky to start with an opencast operation.

“We have the mining layout, the design for the mine infrastructure, the offices, the tipping points, the ramps, the initial spoil piles out of the box-cut, and the power block. Then we have ash dumps and waste dumps,” he adds. “We will also be building a village, an airstrip, roads, a railway line to bring in limestone, and there will be a washing plant and sub-stations. There will be a rail line that goes out to Botswana and South Africa. All of this work has been approved and designed. We are very close to being in the position to hit the button; all the approvals have either been obtained or are in the process of being signed off,” he assures.

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Map showing the proposed R58 billion coal export railway line from the Mmamabula site in Botswana to either Walvis Bay or Luderitz.

By January 2013 the mine will be in steady state. “It would have washed coal and built up 30 days of clean coal on the station stockpile,” Scholtz says. “Also, we will have put in the ramps and would have completed a 5.8 km box-cut. This means that we are going to have in excess of one million tonnes of coal exposed here, ready to be extracted, washed and delivered to the power plant as and when required.”

The power station will consume 4.4 million tonnes a year from a run-of-mine point of view, which will require CIC to mine 5.8 million tonnes a year.

The project capital and infrastructure costs will be some US$3 billion, but additional costs, like interest during construction, are not included in this figure.

Once the financing of the MEP has been completed, CIC Energy will look to advance its plans for its other two projects. The company’s export coal project envisions the seaborne export of A grade thermal coal from Mmamabula to various international markets. “It is a longer-term project, but we believe it is doable,” Scholtz says.

“Main three features of the project are: dedicated mines with multi-product beneficiation plants, as well as a rapid rail load-out; a railway line of up to 1,500 km, planned to be constructed by a transportation consortium that could include CIC Energy; and the upgrading of the selected port, including a tippler to offload the rail wagons and stockpiling capacity to accommodate sufficient coal to load large ocean going vessels.”

The major issue is the transport of the coal to the coast. “We have looked at the options of going east to link up with the Richards Bay coal terminal, a coal terminal at Maputo, or of going further into Mozambique via Beira; or going west to link up with the Sishen-Saldanha Bay iron ore route, or to go through Botswana and Namibia to either Walvis Bay or Luderitz on the Namibian coast,” Scholtz says. “Our current preference is for Walvis Bay, but we have not yet exhausted the options and preference negotiations and discussions with the Namibian and Botswana governments continue.

A project involving 1,500 km of railway line from Mmamabula to Walvis Bay, a terminal to house 20 to 40 million tonnes of coal at the port, and the deepening of the port, as well as equipping it to be able to rapidly load oceangoing vessels of up to 150,000 tonnes would be a huge one.

“Our next phase will entail a bankable feasibility study (BFS), for which we have got quotes. The estimated time to do that is about 15 to 18 months,” he says. “Thereafter construction will take about three to four years, so at best it’s a five year project. We will decide on starting the required BFS in this calendar year.

“It’s obviously far too early to predict costs accurately, but rail costs will be somewhere between US$2 million and US$4 million per kilometre. Then you have to develop the mine. That involves a cost of about between R500 and R1,000 per annual tonne, so simplistically a 20 million tonne mine will cost you R20 billion, while the coal terminal, port dredging and deepening operations will cost in the vicinity of US$1 billion,” Scholtz calculates. “Keep in mind that when you are in pre-feasibility, you have an accuracy level of about 30%.

“Looking at the magnitude of this massive coal export project, we have come to the conclusion that we are not going to manage to do this on our own. We will have to involve the governments concerned and other players.”

Then, in the longer term, there is the planned coal-tohydrocarbon (CTH) project.

“We are not losing sight of the fact that we have been experiencing the effects of a bad international economic downturn, but we also believe that in the near future Southern Africa is going to face a fuel crisis similar to last year’s power crisis,” Scholtz says. “We believe that our planned CTH project to convert coal from the Mmamabula coalfield to fuels and petrochemicals has great potential.

“We have approximately 200 million tonnes of coal that is suitable for this project, and we have a project director working on the process, together with some of the fuel and gasification companies. We also have a small project team plugging away, looking at various methodologies and processes for conversion of the coal to gasification, and then to fuels such as petrol, and petrochemicals such as methanol.

“Although the current world oil price has placed a bit of a damper on this project, we see that need for fuel in the future, and we see the project bouncing back in the longer term,” Scholtz forecasts.

“The Mmamabula Energy Complex is a truly exciting three-pronged undertaking on which we have been working hard for three years now. But what is even more exciting is the fact that this huge coal resource can support the provision of 40 million tonnes a year of coal for 40 years, enough to turn the Mmamabula energy complex into a potential operation the size of a Secunda. And we can also envisage potential phases two and three of the power station to contribute towards the provision of the additional generating capacity Southern Africa will require in the future,” he concludes.

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