Coal stores at the Grootvlei power station, operated by Eskom in Grootvlei, Mpumalanga. Picture: BLOOMBERG
Coal stores at the Grootvlei power station, operated by Eskom in Grootvlei, Mpumalanga. Picture: BLOOMBERG

Eskom is evaluating at least three requests for proposals (RFPs) for coal supply, including one for 100-million tonnes (Mt) and has other options, so it anticipates no difficulty in sourcing coal in future, Eskom’s senior GM of primary energy Ayanda Nteta said on Wednesday.

She was responding to questions at the Fossil Fuel Foundation’s workshop on coal infrastructure and logistics about a looming "coal cliff" after 2020.

For several years, coal analysts have warned that lack of investment in large, new mines would jeopardise Eskom’s ability to continue operating coal-fired power stations, which are 90% of its fleet.

Xavier Prévost, senior analyst at XMP Consulting, said SA’s coal mine output fell 2% in September compared with a year ago. "The coal cliff predicted for 2020 is happening," he said, but if Eskom was willing to invest in cost-plus mines — the large mines that produce more than 80% of Eskom’s coal — it would help address the shortage.

Nteta said Eskom was investing in its cost-plus mines, including through upgrading infrastructure to carry more coal to power stations such as Arnot and Grootvlei by rail rather than road.

Prévost said inland coal prices in SA were now at exceptionally high levels. The average price for duff (a low quality product) was R765 a tonne, while peas (a prime product used in boilers) were selling for about R1,068 a tonne. Next year, prices are expected to rise again.

Prévost said the reason was strong demand while SA’s production was dropping and exports were increasing. SA’s exports in September hit a record 8.07Mt for a single month, reflecting good demand from India and South Korea.

There were still untapped coal resources but banks were reluctant to lend to the sector to develop new mines, Prévost said.

Nteta said logistics were one of the biggest contributors to the cost of coal delivered to Eskom’s power stations because of location of mines, coal handling costs and diesel prices.

There were opportunities for entrepreneurs to build new infrastructure to coal terminals at power stations such as Kusile, to operate coal terminals and new rail sidings, and in road transport. Eskom’s road transport contracts end in the current financial year, which also opened up opportunities, Nteta said.

Various speakers discussed development of inland coal terminals based on clusters that would integrate junior miners, enabling them to sell to inland and export markets, and even take their coal to the most efficient beneficiation plant. Lyonell Fliss of LFA Logistics said the cluster concept was already being used by Sasol for its mines around Witbank.

Grant Wishart of Richmond Coal Resources said junior coal miners needed proper access to the Richards Bay Coal Terminal for true transformation of the coal sector to occur.

The transformed system should allow a collective of junior miners at least to export four different types of coal grades and load 7.2-million tonnes/year through the terminal at first-tier pricing. That could translate into profits of R3.4bn a year, which could be re-invested in mines and skills development.

Richards Bay Coal Terminal was built on state land with sovereign guarantees, he said. Yet after years of lobbying, junior miners had only been granted access to it through the Quattro allocation, which was inadequate.

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