Minergy through its 100% owned Masama Coal Mine, located in the Mmamabula Coalfield of Botswana, has exported over 615,000 tonnes of coal in 22 months from late 2019. With operations nearing nameplate capacity at the Botswana Stock Exchange-listed company, this supported increased sales in Botswana, and in the region, South Africa and Namibia.
According to group CEO Morne du Plessis, Minergy has benefited from the price momentum of a burgeoning commodity market, including South African coal, which has seen the highest export coal pricing in a decade. In addition, he said, average pricing has increased from a stronger South African rand, which resulted in higher pula recovered prices at the mine in the last six months and a better product mix featuring larger fraction products.
“A further 12-month offtake agreement was signed, supplementing the existing three-year offtake agreement in place. Both these offtake agreements are to operators in the South African cement industry.
Additional offtake is currently being negotiated, including for the larger fraction products,” he said.
However, the group plans to complete stage four of the Processing Plant (Rigid Screening and Stock Handling section) this August as completion was delayed as a result of a Southern African-wide shortage of structural steel.
“Completing this final stage will provide additional material handling and associated processing cost savings and stabilise supply at nameplate capacity,” he said.
The CEO further noted that they aim to achieve nameplate capacity during this calendar year by completing the final ramp-up of operations. This will enable the company to generate sufficient cash flow to stabilise the business and break-even or better. Minergy expects the momentum in the international coal pricing for southern African coal to remain in place. Higher coal prices have resulted in coal being withdrawn from the inland market to attractively priced international markets. The bullish coal market is also providing support.
According to du Plessis, the regional market is currently undersupplied, which supports pricing and new customer opportunities.
He said the booming commodity markets have allowed Minergy to reconsider a listing in London, with evaluations currently taking place to understand the best way to achieve this.
In addition, the CEO noted that Eskom’s due diligence process is gaining momentum, and Minergy looks forward to closing this out during the current calendar year.
Meantime: Four-way race opens for 300MW contract
Four local coal developers have been shortlisted by the Government to develop a 300MW power station, the last fossil-fuel-based electricity the state plans to procure in the next 20 years.
Minergy Coal, Sese Power, Jindal Africa and Maatla have extensive resources in the country’s coalfields and are at varying, but largely advanced, stages of development. Of the four, only Minergy is already in production while Sese, Jindal and Maatla have coal mining licences.
The 300MW tender, first floated in 2013, represents the only government-backed fossil fuel procurement in the 20-year Integrated Resource Plan prepared by the Ministry of Mineral Resources, Green Technology and Energy Security. The balance of projects in the plan is from sustainable sources.
“There is a 300MW tender that has been given out, and we believe the companies shortlisted will prove successful at it,” Mineral Resources, Green Technology and Energy Security Minister, Lefoko Moagi told a televised briefing last Monday.
“The four companies are already advanced, and we are yet to see which one will be selected.
“The power station will be built next to the mine.”
Of the four shortlisted firms, Minergy is expected to be a nose ahead of the field as it already has a demonstrated coal mine in operation, while the other bidders will have to prove both coal mining capacity and readiness as well as power station readiness. However, bidders will be ranked primarily according to technical and financial capacity, as well as any experience the project leaders have. Project funding for coal has been drying up globally ahead of the 2030 deadline set for developed nations to abide by the UN’s climate change commitments. Developing nations such as Botswana can use coal power until 2050, but many of the financiers of major energy projects are in developed countries already turning away from coal, leaving China as the primary source of funding.
The 300MW being government-backed means all the bidders will have an added guarantee when they approach funders for the power station, particularly since Botswana still enjoys Africa’s best sovereign credit rating. Botswana Chamber of Mines CEO, Charles Siwawa said Botswana would use all coal opportunities at its disposal ahead of the official UN-mandated cutoff.
“We have a lot of coal, and even if we gain $10 billion between now and when they want us to stop, it means a lot for our economy, even if for some people it may not be anything,” he said.
“We can use that $10 billion to improve, and when we stop, the economy will be somewhere.
“We are also not irresponsible in the development of our coal, and the mining has to be done responsibly.”
While the costs of a 300MW power station are unknown, CIC Energy, which Jindal Africa took over in 2012, previously estimated that its own 300MW coal-fired power station could cost US$800 million, including the cost of the capital equipment and infrastructure. The estimate was valid as of 2010 and taking into account costs over the years, the 300MW power station could cost over $1 billion. According to the tender award, the winning bidder will be expected to build, own, operate and maintain the plant, which can be located anywhere in Botswana. The winning builder will also have to enter into a Power Purchase Agreement with the Botswana Power Corporation. Analysts said the pricing of the power coming out of the station will be determined by capital and operating costs, the profit mark-up charged by the developer and other factors.