Policy, political innuendo can make SA coal unattractive to investors – Exxaro exec

It is important to be aware of the policy environment and political innuendos which can make SA seem unattractive for investors in the coal industry, Dr Nombasa Tsengwa, executive head of coal operations at Exxaro Resources, said during Mining Indaba 2019, which took place last week.

"Eskom will still require coal for some time," she said during a panel discussion on how coal miners can compete with renewables. It formed part of Mining Indaba 2019.

In Tsengwa's view, SA is well positioned to supply coal to the many new power stations being built in South-East Asia, thus earning valuable foreign currency for the country.

"We cooperate with the Minerals Council to ensure regulations work for the coal industry and are investor-friendly.

"The coal mining space is becoming tougher and tougher regarding funding. Certain institutions have even stopped funding coal projects," she said.

"Eskom is our main customer and Eskom's rating by ratings agencies also impacts our rating. We have to, therefore, diversify our exposure to Eskom as it impacts us from a ratings point of view." July Ndlovu, CEO of Anglo American Coal South Africa, said as part of the panel that the role of government is crucial for the coal mining industry.

"Eskom is a key engine for SA's economic growth and it must be ensured that Eskom can provide for SA's energy needs.

"I understand the transition from coal to renewables is necessary, but coal remains significant," he said.

"Government's role is, therefore, to continue to secure resources so that we can supply coal and export it to earn forex. Government must ensure Eskom is successful in the future."

In his view, in the medium term, coal will remain part of the energy mix in SA, with renewables playing a bigger and bigger role. "The hurdle for renewables is that we have not yet figured out how to store it effectively and one would need energy to extract it from where it has been stored," said Ndlovu.

Mike Meeser's, global head of power and infrastructure finance at Investec, said that, with the costs of renewable energy technologies decreasing, as renewable energy as an energy source becomes more mainstream, mining houses should be considering self-generation from renewable sources to complement other generation technologies, including onsite diesel fired generation.

"Mines, by their very nature, have extensive land rights, so the installation of solar solutions, perhaps combined with battery storage would enable mines to be completely off grid for their energy needs and at the same time make a meaningful contribution towards a reduction in the current rate of global warming," said Meeser.

Investec recently secured a mandate to fund a solar plant with a capacity in excess of 50Mw for a mining house with tariffs that are competitive with the alternative supply from the national grid.

"Mining houses should be alert to alternatives with respect to energy generation and should consider outsourcing this to companies with expertise rather than undertaking it as an add on to their core business which is mining," said Meeser.