With worldwide demand for coal, last week two SA companies announced major coal projects.
Thungela listed on the JSE plans to acquire a majority interest in the Ensham coal mine in Queensland, Australia, and Canyon Coal, part of the private investment company Menar, has started building a new 1.2 million ton coal mine a year in Hendrina in Mpumalanga.
The Canyon Coal Mine in Hendrina, known as Gugulethu Colliery, expects to deliver its first coal by the end of 2023.
The cost of developing the mine is over R1.4 billion, with Canyon Coal stumping up R600 million for the first phase of the project. The development of the underground mining section will require more than R890 million.
“We are in the development stage and have done tenders for civil and processing plants. Our mining equipment has started to arrive,” said the general manager of Gugulethu Colliery Jarmi Steyn.
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Thungela’s first foray outside SA
For Thungela, this is the first robbery outside of SA, where the company has faced the challenge of getting all its products to the port.
Diversification into Australia’s coal sector will help ease some of the freight rail congestion caused by Transnet’s inability to cope with rising SA coal demand amid a global energy drought.
Thungela has made money while the Ukraine war sent energy prices into orbit. The average export price in 2022 is $236.11 per ton, more than double the $103.82/t obtained in 2021.
t will pay R4.1 billion (A$335 million) for about 80% of Australia’s thermal coal operations which last year produced 3.2Mt of high quality, low ash and low sulfur thermal coal.
This is in addition to the estimated 12.8Mt exported by Thungela in 2022, although the figure would be closer to the 2021 export figure of 15Mt if there were no Transnet Freight Rail bottlenecks.
Thungela Resources Australia, wholly owned by Thungela, will gain control of the mine through the acquisition of a majority interest in Sungela Holdings, which will acquire an 85% interest in the Ensham Business from Idemitsu Australia and its subsidiary, Bligh Coal.
The Ensham mine has the potential to expand production and, according to the extension of the existing mining agreement, the life of the mine until around 2039. The mine is due to apply for license renewal in 2028.
The deal gives Thungela access to Japan and other Asian markets, where demand for coal is strong and it sells at Newcastle export coal prices, which are traditionally higher than the benchmark Richards Bay price.
“This acquisition provides our strategy to pursue geographic diversification through commodities that we know and we have the right to win. Because of the similarity of the operating methodology between Ensham and the South African underground operations, we can use our core skills to create value,” said CEO Thungela Juli Ndlovu.
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New coal mine for Mpumalanga
Canyon Coal’s Gugulethu Colliery was formerly known as De Wittekrans and is a greenfields project bought from a business rescue.
Phase 1 of the project has economic mineable reserves of 14.3 million tons in three pits, one of which has been specially designed to gain access to underground reserves that will be developed in the second phase of the project.
The project has a mine life of over 20 years based on production of approximately 2.4Mt a year from the opencast section.
The underground part, which will start operations in 2028 after the completion of open cast reserves, will maintain a production of 2.4Mt a year.
The Gugulethu product will be trucked 43km to the Rietkuil side for transport to the Richards Bay Coal Terminal in KwaZulu-Natal.
All of Canyon Coal’s export allocation at the terminal is being used but the capacity for tonnes of Gugulethu will be freed up when the company’s 1.4 million ton Phalandnwa Colliery in Delmas closes at the end of this year due to end of life.
Canyon exports some products through Grindrod’s Terminal de Carvao da Matola (TCM) port in Maputo.
The mine has partnered with the non-profit Bettercoal which works with the mine to achieve responsible and sustainable coal production. More than 400 jobs will be created once the mine is operational.
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ESG highlights
The launch of new coal mines at a time when environmental, social and governance (ESG) pressures are mounting around the world has put the operation in the spotlight.
Steyn acknowledges that ESG concerns influence corporate strategy.
“It is not only coal mining companies that must take into account ESG concerns. Mining companies that extract minerals used for decarbonization must also be sensitive to environmental, social and ethical governance issues,” he said.
“Coal is a reliable source of energy in many countries, helping to grow economies and sustain livelihoods. Coal power is also used to produce products such as steel that are useful for producing solar panels and wind turbines.
“More importantly, [the] The coal value chain creates business opportunities, jobs and taxes which, in turn, help with social upliftment. We have a policy of empowering our host community with business opportunities. We mine responsibility and rehabilitation afterwards. This principle will be applied in Gugulethu Colliery.
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