Two major coal mining projects announced in one week

With coal in hot demand around the world, last week two SA companies announced major coal projects.

JSE-listed Thungela plans to acquire a majority interest in Ensham coal mine in Queensland, Australia, and Canyon Coal, part of private investment company Menar, has started building a new 1.2 million ton a year coal mine at Hendrina in Mpumalanga.

The Canyon Coal mine in Hendrina, known as Gugulethu Colliery, expects to ship 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 a further R890 million.

“We are in the development phase and have already done the tenders for the civils and the processing plant. Our mining equipment has started to arrive,” says Gugulethu Colliery general manager Jarmi Steyn.

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Thungela’s first foray outside SA

For Thungela, this is its first foray outside of SA, where the company has faced challenges in getting all its product to port.

Diversifying into the Australian coal sector will help ease some of the freight rail bottlenecks caused by Transnet’s inability to handle the surging demand for SA coal in the midst of a global energy drought.

Thungela has been minting money as the Ukraine war sent energy prices into orbit. Average realised export prices for much of 2022 were $236.11 per ton, more than double the $103.82/t fetched in 2021.

t will pay R4.1 billion (A$335 million) for about 80% of the Australian thermal coal operation which last year produced 3.2Mt of high-quality, low-ash and low-sulphur thermal coal.

This is a considerable addition to the roughly 12.8Mt exported by Thungela in 2022, though that figure would have been closer to 2021’s export figure of 15Mt had it not been for the Transnet Freight Rail bottlenecks.

Thungela Resources Australia, wholly owned by Thungela, will acquire control of the mine through the acquisition of a majority interest in Sungela Holdings, which in turn will acquire an 85% interest in Ensham Business from Idemitsu Australia and its subsidiary, Bligh Coal.

The Ensham mine has potential to expand production and, subject to the extension of the existing mining approvals, has a life of mine through to about 2039. It will have to apply for a licence renewal in 2028.

The deal gives Thungela access to Japan and other Asian markets, where demand for coal is strong and sold at the Newcastle export coal price, which is traditionally higher than the Richards Bay benchmark price.

“This acquisition delivers on our strategy to pursue geographic diversification through a commodity we understand and in which we have a right to win. Given the similarity in operating methodology between Ensham and our South African underground operations, we can leverage our core skills to create value,” says Thungela CEO July 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 that was bought out of business rescue.

Phase 1 of the project has an economically mineable reserve of 14.3 million tons in three pits, one of which has been specifically designed to gain access to the underground reserve to be developed in the second phase of the project.

This project has a life of mine of more than 20 years based on production of about 2.4Mt a year from the opencast section.

The underground sections, which will commence operations in 2028 after the completion of the open cast reserve, will sustain production of 2.4Mt a year.

Gugulethu’s product will be trucked 43km to the Rietkuil siding for transportation to the Richards Bay Coal Terminal in KwaZulu-Natal.

All of Canyon Coal’s export allocation at the terminal is in use but the capacity for Gugulethu’s tonnages will free up when the company’s 1.4 million ton-a-year Phalanndwa Colliery in Delmas is closed later this year as it reaches the end of its life.

Canyon exports some of its products through Grindrod’s Terminal de Carvao da Matola (TCM) port in Maputo.

The mine has partnered with non-profit Bettercoal which works with mines to achieve responsible and sustainable coal production. More than 400 jobs will be created when the mine is fully operational.

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ESG spotlight

The launch of a new coal mine at a time of rising environmental, social and governance (ESG) pressures across the world places these operations under a spotlight.

Steyn concedes that ESG concerns are influencing the strategies of firms.

“It’s not only coal mining companies that should take into account ESG concerns. Mining companies that extract minerals used for decarbonisation are also required to be sensitive to environmental, social and ethical governance concerns,” he says.

“Coal is a dependable energy source in many countries, helping to grow economies and sustain livelihoods. Coal power is also used to manufacture products such as steel which are useful in producing solar panels and wind turbines.

“More importantly, [the] coal value chain creates business opportunities, jobs and taxes which, in turn, help with social upliftment. We have a policy of empowering host communities with business opportunities. We mine responsibly and rehabilitate afterwards. This principle will be applicable in Gugulethu Colliery.”

This article originally appeared on Moneyweb and was republished with permission.
Read the original article here.

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