1. South African Coal Reserves and Production
M Junction
Kolkata, India
12th September 2017
Divyesh Kalan - Makoya Advisory

2. Content Introduction Reserves Production and Coal Chain Markets
Outcomes / Expectations

3. INTRODUCTION South Africa 7th largest producer of coal in the world
6th largest exporter of coal
3.5% of world coal reserves (IEA)
Coal in South Africa accounts for
1st highest foreign exchange earnings in the country
2nd largest mining income-earning commodity, beating gold
95% of SA energy production
90% of carbon reductants in the metallurgical industry
40% of petrol and diesel requirements
200 major chemicals for 1000s of carbon-based product

4. South African coal 2017 Projected figures for 2017 are:
Saleable production ~242.5Mt
Exports 68.1Mt, Revenue: R46.8bn
Local sales 176Mt, Revenue: R66.4bn
Although the inland average price was less than half of export, excluding Eskom sales, some local prices were equal or higher than exports. Currently, prices are rising.
Even with seaborne prices and demand low, coal is still the highest SA mining revenue earner.
China has only imported SA coal once in three years

5. Inland sales

6. South African coalfields

7. Reserves by coalfield

8. Coal resources and reserves
Coal seams are being worked out in current traditional mining areas – considerable resources are available in further afield coalfields.
Coal qualities are reducing as the better qualities are being mined out and/or exported – new technologies are being introduced which can utilise low grade coals – UCG, FBC, Supercritical PF, IGCC, etc.
Alternative coalfields are a greater distance away and lacking in water and logistics – dry technologies are fast developing; on-site processing with transmission lines is under review.

9. Coal chain 2016 Local Use 25.9 Mt Stocks Exports 78.7 Mt 11.9 Mt
“Washing”
69.8 Mt
11.9 Mt
35.0 Mt
Discards
74.8 Mt
Synfuels
42.9 Mt
Electricity
128.2 Mt
333.6Mt
Run-of-Mine
Production
5.0Mt
31.0 Mt
93.2 Mt
Screening
124.2 Mt

10. SA coal exports 2016

11. SA coal exports 2016
India is the biggest client by far, followed by Turkey, Morocco, Italy and Pakistan.

12. SA coal exports 2017

13. Export prices have prices have fallen substantially this decade but recovered amazingly since

14. Prices should through 2017

15. Production by company

16. Production by mine size

17. Global coal trade in 2016

18. SA Coal industry
Despite the rapid increase in renewable energy sources, fossil fuels still provide the major share of power generation with coal alone accounting for 40% of the world’s electricity, a situation that will not change in the near term”. IEA
As a result of the current lack of incentives and capital to implement new coal projects, the production has remained static, but because some of the older big mines resources are almost exhausted, production will soon will drop drastically. (Coal cliff.)
Inland prices have increased continuously and some better grades fetch now higher prices that similar grades in the seaborne market.
Exports are constrained by lack of sustained demand and extremely low prices.

19. Coal in south africa context
According to the DMR, coal mining provides more than jobs now, this figure will increase, as more smaller mines will be opened in the future, if the financial situation does not deteriorate further. Coal mining jobs fuel other jobs. For every coal mining job, many additional are created elsewhere as coal is the mainstay of the economy. In other words, coal mining keeps a few million of people – including coal miners – on the job supporting themselves and their families. Coal mining jobs are relatively well paid and stable. If mines were closed down, or become unprofitable all those jobs will be lost, increasing unemployment and poverty. Coal is abundant and affordable. Coal supplies 95% the electricity consumed by SA. Electricity from coal still rates as being one of the lowest in the world (in spite of the regular increases).

20. South Africa Coal Status
As a result of the current lack of incentives and capital to implement new coal projects, production has remained static, some of the older large mines, like the Eskom’s captive collieries are almost at the end of their lives, so production could soon (2020) drop considerably.
Inland prices have increased continuously and some higher (A, B) grades fetch now higher prices that similar exported grades.
Exports are constrained by unsustainable demand and unpredictable prices.

21. Collieries are now in urgent need to optimise costs and revenue.
Exports will not be best profits earners anymore. Due to less exports, more high and low grade coal need to find a niche market inland, at better prices than exports.
The Waterberg Coalfield exploitation becomes now more a question than ever.
New large mines are needed to supply coal to Eskom and IPPs, after 2020 (Coal Cliff), they will not be implemented until politicians’ views of the coal industry change.
All other sources of energy, cannot compete with coal in price and reliability of supply.
conclusions

23. Coal Qualities

24. INLAND Coal prices

25. Small-scale mines

26. PRODUCTION BY MINE
Most of the steam coal for export and domestic markets (36%) is produced by 4 large and 9 (26%) mid-sized mines. These two groups produce 72% of the total South African coal output.
KZN Coalfields have only six small mines, producing mainly anthracite used by the metallurgical industry. Some anthracite, of lower quality is exported.
The Vereeniging-Sasolburg Coalfield has two mines, with very low coal quality. The remaining coal resources in the Free State Coalfield contain even higher ash.

27. The inauguration of Donald Trump as the new US President is an opportunity for the new Administration to revisit some of the policies that have hindered access to both affordable energy and all low-emission technologies. The big bet for the new administration will be to adopt a global leadership role and demonstrate that it is possible to provide affordable energy from coal and utilise technologies that significantly reduce emissions. Energy and climate don’t have to be competing priorities; a technology-neutral view towards cutting CO2 emissions is possible with the use of cleaner coal technologies.
Coal’s light is still burning.
2017, an exciting year