Anglo American’s South African coal unit expects domestic demand to drive future expansion, especially in the underexploited Waterberg area, the unit’s head said late on Wednesday.
Norman Mbazima said the company’s goal to raise its South African coal output to 90-million tonnes from 60-million tonnes would be largely driven by demand from top customer Eskom, which currently relies on on coal for 95% of its energy supply, and independent power producers due to join the energy sector.
“The preponderance of new mines that people are going to build are Eskom mines because of the type of ore that is there in Mpumalanga right now and because of the type of ore that is there in the ground in the Waterberg when we go there,” he told Reuters on the sidelines of a McCloskey coal exports conference.
The Waterberg area has been touted to become the country’s next coal hub, but lack of adequate infrastructure and water have been identified as a major challenge to the industry.
“The key for me to go to the Waterberg is what Eskom decides to do in the Waterberg. If it decides to build another power station there, or two power stations, then I think the rail will come and the water will come,” he said.
Mbazima said he expects Anglo to start mining for coal in the Waterberg, where the company has in excess of four billion tonnes of coal, within the next 10 years.
The unit, which delivers more than 60% of its output to Eskom, has two new projects on the cards, meant to feed the utility’s power plants.
Its Zondagsfontein mine is ramping up production to six million tonnes a year by 2012 and its New Largo mine is scheduled to supply up to 15-million tonnes of coal to Eskom’s new 4 800MW Kusile plant.
Exports drive
Anglo exports about 27% to 28% of its coal ouput and while the tonnage of exports might increase in the future, Mbazima expects this percentage to fall.
Most other South African coal producers have been focusing on exports to feed rising demand from Asia, especially India.
Lack of reliable infrastructure has been a problem for the industry as logistics firm Transnet suffered delays and interruptions on its coal lines because of its ageing fleet.
Transnet has been investing heavily to upgrade its infrastructure and some in the industry say the country may be able to export up to 68 to 72-million tonnes this year, up from 61-million the country shipped last year, but Mbazima is doubtful.
“Going from 61-million to those kind of figures is a stretch in one year,” he said, adding 65-million was more realistic.
He also said that 81-million tonnes was “within grasp” in the medium term.
Mbazima declined to comment on prices, but said that coal fundamentals were strong in the medium- to long term. – Reuters