The decade-long delay in the opening of the New Largo coal mine in Mpumalanga was probably the result of corrupt dealing by those with an interest in the delivery by road of poor quality coal to the Kusile power station, former Eskom CEO André de Ruyter told parliament on Wednesday.
The delay meant that Kusile has had to rely on large quantities of coal from smaller mines being trucked by road into the station, instead of transporting it by conveyor belt from the nearby New Largo deposit for which the power station was built.
De Ruyter, who appeared before parliament’s standing committee on public accounts to answer questions about his allegations of corruption at Eskom, was questioned by DA MP Alf Lees about the mine. Lees suggested that the delays in its development could well be the result of criminal cartels wishing to keep in place the road transport of coal and supply of subgrade coal and rocks to Kusile.
De Ruyter replied that with any question of this nature, the relevant principle should be to ask “who benefits?”.
The former CEO said: “The delay in commissioning New Largo I think can in all probability be attributed to the fact that there were beneficiaries of coal being transported by road and there is ample evidence that the quality of coal that was delivered to Kusile was below standard and that Kusile was significantly exposed to the consequences of poor quality coal being delivered in terms of reliability.”
Deal halted
New Largo, originally owned by Anglo American, is the closest coal mine to Kusile and has significant reserves of the right quality. Eskom originally planned to supply most of the power station’s coal. But a deal between Anglo and Eskom to develop the New Largo mine was halted during the tenure of the then public enterprises minister Malusi Gigaba a decade ago and there has been little progress since.
Anglo sold the mine to Seriti Resources some years ago, reportedly because it was unable to secure a contract with Eskom, with the power utility imposing BEE criteria that went well beyond Mining Charter requirements.
In 2015, then Anglo American CEO Mark Cutifani said the group had been negotiating for two years to sell down its interests in its domestic coal business in response to Eskom’s call for higher empowerment levels.
Lees suggested that if the cartels were successful in delaying the development of the coal mine, the co-operation of Eskom officials to ensure the “massive” delays of about 10 years would have been needed.
“It certainly seems that way, that there was some degree of collusion or complicity in taking those decisions to delay the construction and development of New Largo colliery with a view to the continued benefit of cartel actors who deliver coal by road — thereby possibly incidentally contributing to the delivery of poor quality coal to the power station and the attendant failures that occurred,” De Ruyter replied.
Lees suggested that a senior politician in Mpumalanga involved in the cartels could have been involved in this delay. High-level support was probably necessary, Lees said in an interview after the meeting. The delays were due to imposing “ridiculous” BEE requirements on Anglo Coal, he said.
An Anglo spokesperson said on Thursday that the group had said for some time that it intended to divest its Eskom-tied thermal coal assets, of which New Largo was one. It was sold to Seriti with the rest of Anglo’s Eskom-tied thermal coal assets.
“The rationale for this, which is the same as with the Thungela assets, is that these assets were unlikely to be able to compete for capital in our portfolio — but are attractive assets in other owners’ hands,” she said.
New Largo, with a resource of 585-million tonnes, was acquired for R850m from Anglo Coal in August 2018 by a black-owned consortium led by Seriti Resources (67.5%) that includes the Industrial Development Corporation and New Largo employee and community trusts.
Seriti says the operation has the potential to become a large-scale, long-life coal mine, able to supply Kusile with about 12-million tonnes per annum of thermal coal for 50 years.
Ten-year agreements
Seriti communications, media and brand manager Linda Khuluse said in reply to questions on Thursday that New Largo “is being developed as a multi-minipit opencast operation to supply both Kusile power station and the export markets.
“Albeit delayed, Seriti is in the process of concluding various 10-year coal supply agreements with Eskom which will provide Kusile power station with cost-competitive security of coal supply from the adjacent colliery at the necessary specifications.
“The 10-year coal supply agreements will further underpin the construction by Seriti of a conveyor facility from the colliery directly into the Kusile stockyard to reduce coal trucking volumes and associated logistics costs.”
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