South Africa’s major coal producers are betting that demand for the fossil fuel will remain strong even beyond the global 2050 net-zero target.
Exxaro Resources CEO Ben Magara told Business Times on the sidelines of the Joburg Indaba this week that the group was looking to expand the life of its coal assets, which will outlast the group’s mining rights.
"We are looking for life extension opportunities because we can see coal demand both locally and globally going on for longer," he said.
Coal remained the miner’s core business, which Magara described as "the goose that lays the golden eggs".
He said Exxaro’s push to extend the life of its coal assets comes as global financial institutions are warming once more to financing coal projects.
"Lenders and insurance companies have come back and are excited about coal, so we are looking at all those options."
But Magara said the company would still continue with its diversification strategy. In May, Exxaro announced the R11.6bn acquisition of assets from Ntsimbintle and OM Holdings in the Northern Cape’s Kalahari manganese field.
That gave it control of the Tshipi Borwa mine, 51% of Mokala and 9% of Hotazel Manganese Mines, which operates the Mamatwan and Wessels mines.
Exxaro also has a 20% stake in Sishen Iron Ore Co, a division of Kumba.
Magara said that while manganese met the group’s diversification strategy requirements, it had dropped the idea of acquiring bauxite assets.
He said Exxaro, which sits on an R18bn cash pile, wants to expand into copper — a critical energy transition metal — in South Africa and the rest of Africa, and was open to exploration projects.
"Diversification is an insurance for the future ... We tried to get into copper in Botswana, we tried to look at projects on our continent.
"We believe now that an advanced exploration project would be a good addition to our business, whether in South Africa or the continent," Magara said.
Exxaro, which was listed in 2006, is also accelerating investments into Cennergi, its renewables business.
Cennergi is expected to generate 1,000MW by 2033, up from 229MW now, which will go some way in enabling Exxaro to meet its target of being carbon neutral by 2050.
Others delegates at the Joburg Indaba, which brought together top mining executives, policymakers, investors and other stakeholders, shared Magara’s optimism about coal.
Mike Teke, chair of FutureCoal and founder of Seriti Resources, said such was the interest in coal that a net-zero alliance established by global banks to cut funding for coal projects had collapsed.
"Right now that structure is gone; they have shut it down and moved on."
He said there was a growing consensus that coal would remain the power source for baseload energy globally, despite the push to transition to renewables.
"Let us come to our senses and understand the energy mix that is going to make the world grow faster and [allow] countries to benefit in terms of economic growth, job creation," Teke said.
"Accommodating baseload is important, and coal plays an important role in providing that baseload."
Teke also criticised the drive to close down coal-powered fire stations in South Africa, saying coal could coexist with wind and solar.
"We are saying do not castigate coal and shut down 15 coal-fired power stations in South Africa. Coal mining will continue, it will be here."
Teke cited Germany, which he said was investing €7bn (R140bn) on carbon capture to mitigate the greenhouse effects of coal emissions.
"On the insurance side, we were told nobody wants to insure you as coal players; now they are saying, ‘Can we talk?’"
Seriti Resources had invested profits from its coal mines into renewable energy, which led to Seriti Green, a renewables division focused on building wind farms in Mpumalanga, he said.
Moses Madondo, the incoming CEO of Thungela Resources, said there was growing demand for coal as it was clear that other energy sources were unlikely to satisfy global energy demand and meet development needs.
He said the fossil fuel was now seen in a more positive light, with global insurance giant Lloyds and BlackRock, the world's largest asset manager, revising their climate change policies to recommit to the fossil fuel sector.
"The world should recognise and accept the enduring role of coal in the energy mix and align energy choices with the needs of people, especially in the developing world," said Madondo.
Ruan Nothnagel, chief commercial officer at Menar, a diversified mining company which has interests in coal, highlighted the importance of technology to reduce emissions.
India, he said, planned to have 92GW of new coal-fired capacity by 2032 but would offset this with state investment in carbon capture technology.
"So the Indians, who were leaders in renewables along with China, have run out of the ability to power the economy with wind and solar, switching back to coal but promising that they will capture the carbon."
Nothnagel said total carbon emissions were climbing and the only realistic way to decarbonise was through carbon capture technologies.
"There are not enough renewables on the way to meet that demand. The whole world is behind on its grid expansion," he said.
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