The exodus from SA coal by multinational companies will make way for new local mining powerhouses, the CEOs of SA’s largest mining companies have said.
Speaking at the Coal Industry Day on Tuesday, July Ndlovu, CEO of Thungela, a listed coal company carved out of Anglo American in June, said the exit from thermal coal by major owners is a global trend.
“This creates a completely new opportunity for those who want to grow, those who think that there is value to be created out of thermal coal. And therefore I think we’re going to see new major players beginning to emerge and beginning to consolidate some of these assets. This is simple economics.”
Mike Teke, CEO of Seriti Resources, which has become the largest supplier of coal to Eskom since it acquired South32’s SA coal assets on June 1, agreed.
“It’s a great opportunity for SA investors who, some of them, were not exposed to this specific industry [and] this is a great opportunity for us to grow businesses, as owners, as shareholders, and drive this economy and participate ... directly as operators of these assets,” he said.
Now employing more than 20,000 workers, Seriti Resources is poised to become a major player in the industry, Teke said.
“Thungela is a major player, Exxaro is a major player, Sasol is a major player. So we are seeing a serious representation of SA shareholders who are taking these assets, who are interested in growing these assets and contributing directly to the economy of SA.”
Although traditional funding continues to dry up for coal projects all over the world, Ndlovu believes that while there is demand for coal there will be people who are prepared to invest in it.
It’s a highly lucrative endeavour for the moment.
Xavier Prévost, a senior coal analyst at XMP Consulting, said a number of factors have been pushing coal prices upward, including floods and other natural disasters in Europe and China.
“The prices are their highest in 13 years ... and they keep on going up.” This affects SA export prices, which are also rocketing, rising almost daily. “The last shipment from Richards Bay went to $128 a tonne,” Prévost said.
Prévost forecasts that seaborne coal prices will be supported by market conditions for years to come, dropping to $85 a tonne in 2024, which is still a good price for SA producers.
Despite global sentiment turning against coal, Michelle Manook, CEO of the World Coal Association, said coal energy is not in decline. It remains the largest single source of electricity and is expected to remain so until at least 2040.
Both Ndlovu and Teke also have rosy outlooks for the industry in SA.
Teke points out that even though the Integrated Resource Plan, the country’s electricity infrastructure road map, sees coal’s contribution to the energy mix dropping from 72% currently to 43% by 2030, this does not render coal insignificant to the economy.
“You cannot just switch off [millions of] tonnes of exports and [billions] in foreign currency earnings. What are you going to replace them with? What does it do to your current account balance?” Ndlovu said.
“These are big decisions. That’s why I think when we talk about the just transition [away from reliance on fossil fuels], we mustn’t just always think about the energy issue. This is a broader socioeconomic development issue that requires us to balance all these competing issues.”
Manook said while the coal industry is not dead, it does have a lethal branding problem, which the next generation of coal miners will have to address.
“I believe this new generation of coal players will have a different mindset and a more sustainable business model, ensuring that their investment case supports both economic and environmental goals. I believe that, as a result, they will be differentiated and rewarded as responsible players in the coal value chain.”
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