Bots coal miner eyes regional market

Mpho Tebele

Gaborone – Coal producer, Minergy has set its sights on the regional market for its coal project at Masa Coal Project, about 50 kilometres from the capital Gaborone as demand for the product exceeds supply.

The company, which is listed on the Botswana Stock Exchange, said that with its mining license grant expected in the second quarter of 2018, production is expected by August 2018.

The company said, therefore, it is positioned to take advantage of the southern African coal market. Initial production is planned for 1,2 million tonnes of saleable coal per annum ramping up when required, as the project will have a capacity of two million tonnes per annum from first commissioning.

Minergy Chief Executive Officer Andre Boje told this publication in an interview on the sidelines of a press briefing that there is high demand for coal in Southern Africa region.

He said there is a significant price escalation, Boje and therefore called on the Botswana government to consider tax relief to coal exporters as has been done with power producers.

He explained that a lower tax rate of 15% on significant “profits is better than 22% on nil.”

“The government must also consider increasing diesel rebates for mining companies. We are positioned to supply quality coal across Southern Africa,” he said.

Reports indicated that the 2017 McCloskey Coal Reports, South African domestic prices are 51% higher than the same period in 2016 and there is strong demand from the cement, industrial and paper industries.

Reports indicate also show that this situation is driven by demand exceeding supply as producers are focused on fulfilling their take or pay export agreements together with the lack of investment in new projects or expansion of existing production facilities. The climate of under-investment in South Africa is blamed partly on political interference in the mining sector and the rise of resource nationalisation.

He said current regional pricing has never been seen before, even in the boom of 2007 when export coal reached $171 per tonne adding that this presents massive opportunity for Minergy to gain traction and market share.

According to Boje, his company intends to build an opencast coal mine within 16 to 18 months focusing on delivering coal to the regional market including Botswana and North Western and Northern Cape provinces of South Africa. The mine also has a potential to expand coal supply for export market and power stations.

Boje said the current price of international seaborne thermal coal is around $80 per tonne, noting that South African prices are significantly higher than this at around R1,000 per tonne, which makes it a viable project.

“For developing the project, a lower capital cost is envisaged and we believe that a capital expenditure of P200 million is required to reach steady state mining,” he said.

“Whilst the initial project plan focused entirely on the 1.2 million tonnes to the regional market, attention must be paid to the export market as the AP14 index price for seaborne,” he said.

Boje said Botswana has a significant role to play in the seaborne thermal coal market due to its large untapped coal resources and close proximity to the South African coal export infrastructure.

A Bilateral agreement between Botswana and Namibia signed in March 2014 will see Namport develop a coal terminal at SADC Gateway Terminal and award a concession to a developer. An estimated 65 Million Tonnes of Botswana coal will be exported through the new Coal Terminal per annum upon completion.

The biggest importers of coal will be China and India. Construction will take five to seven years, with commissioning by 2019 to 2021. TKR capital expenditure is around US$ 11 billion plus another US$30 billion in operational costs over 30 years.

Boje said if Botswana had a vibrant coal industry it would export about 11.4 million tonnes of coal, generating revenue of P6.3 billion, royalties of $18.5 million (P188m), and taxes of $17 million (P173m).

However, according to Boje, logistical challenges to exploit this opportunity need to be addressed, noting that Minergy has had extensive engagement with Botswana Railways (BR) and Transnet Freight Rail to address the issue of getting coal to port.

He was optimistic that “The engagements have been extremely positive with an apparent will from all parties to resolve this, which is expected to result in full utilisation of the project capacity.”

He also stated that there is lack of investment in coal specific projects saying the government tends to put more focus on power related projects despite the most profitable coal mines internationally.

Boje said government should focus on the shortest lead time to market warning that otherwise Botswana will miss the opportunities.

September 2017
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