Coal mining industry in South Africa

Most coal production in South Africa – about 53% – is from opencast mines, with the balance being produced by bord-and-pillar (40%), stoping (4%) and longwall mining (3%). Coal-mining operations are clustered in the country’s Mpumalanga province, accounting for over 84% of South Africa’s coal production. The remaining output comes from the Limpopo province’s two operating mines – Grootgeluk, in the Waterberg coalfield, and Tshikondeni, in the Soutpansberg coalfield – the Free State’s New Vaal and Sigma collieries, and KwaZulu-Natal’s six anthracite operations.

Since 2003, South Africa’s coal production has remained fairly stagnant at levels of around 240-million tons a year, posting only small increases at best. This stagnation has been attributed to depleted coal mines in the Witbank, Ermelo and Highveld coalfields, in Mpumalanga province, as well as operational and technological constraints that coal miners have been facing. Geology has determined that the Witbank coalfield is by far the most significant source of South Africa’s mined coal at present.

The Waterberg deposits, which extend into Botswana, however, are widely expected to become the country’s main future coal resource, particularly as this is the region expected to become home to many of the next-generation thermal power stations. Over 80% of South Africa’s saleable coal production is from mines controlled by five mining companies – Anglo Coal, BHP Billiton Energy Coal South Africa (Becsa), Exxaro Resources, Sasol Mining and Xstrata Coal South Africa. However, empowered mining companies and junior miners with black economic- empowerment (BEE) partners are playing an ever-increasing and influential role in the sector.

For instance, Exxaro Resources, one of the big five coal miners, is the largest BEE mining company in South Africa. In addition, Anglo Coal, Sasol Mining and Xstrata Coal South Africa are involved in joint ventures (JVs) with BEE mining companies. The rise of BEE companies and junior miners has been facilitated by the Mineral and Petroleum Resources Development Act (MPRDA) and the disposal of noncore coal-mining assets by the larger industry players.

Consumption
Coal has traditionally dominated the energy supply sector in South Africa, accounting for 61% of local coal sales in 2007. According to the Energy Information Agency, in the US, coal provides about 88% of South Africa’s total primary energy and accounts for 93% of the country’s electricity generation.

The importance of coal in power gene- ration was made abundantly clear in January 2008, when low coal stocks, together with poor coal quality, wet coal and technical problems plunged South Africa into a power supply crisis. At the height of the crisis, coal stockpiles at Eskom’s power stations had declined to a low of ten days and mines and other energy-intensive industries were compelled to decrease their power consumption by 10%. While coal had played a central role in the crisis, it would be the intense focus on increasing coal supply that would see the country out of its power supply crisis.

Eskom required an additional 45-million tons over a two-year period to rebuild its emergency stockpiles. By late January 2009, the power utility had increased its coal stockpiles to an average of 38, 7 days, with none of its power stations having coal stockpiles of below 20 days. In addition, Eskom had brought extra capacity on line in 2008. All eight units at the Camden power station had been brought back to full operation, while two units of the Grootvlei power station and one unit at the Komati power station had been synchronised to the national grid, as part of the power utility’s return-to-service programme.

Eskom has initiated a capacity build programme. In addition to the three mothballed power stations that have been brought back on stream, the power utility is building two new coal-fired power stations. In April 2008, Eskom started construction of the Medupi power station, located near Lephalale, in Limpopo. Medupi will be South Africa’s first greenfield coalfired power station to be built in more than 20 years. The first unit is scheduled for completion in 2012, with the entire station to be operational by 2015. Medupi will have an installed capacity of 4 800 MW.

Exxaro Resources signed a coal supply agreement with Eskom in September 2008 to supply the new baseload power station. In terms of the agreement, Exxaro Resources’ Grootegeluk mine will supply 14, 6-million tons a year of power-station-grade coal for a period of 40 years.

In addition to the Medupi project, there is also the Kusile power station, which is situated close to the Kendal power station, in the Witbank area of Mpumalanga. Eskom plans to have Kusile’s first 803-MW unit in commercial operation by 2013, with the subsequent five units being commissioned at eight-month intervals. The last unit is expected to enter commercial operation in 2017. The power utility signed a letter of intent with Anglo Coal in August 2008 to supply the Kusile power station with thermal coal at a rate of 17-million tons a year for a period of 47 years.

The combined consumption of the three recommissioned plants and the two new coal-fired power stations under construction could raise Eskom’s coal use by over 50- million tons, assuming these power stations use the average amount of coal burned by the power utility’s existing power stations in 2007.