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Production and Investment Forecasts of the South African Coal Mining Industry
Frost & Sullivan, April 2010, Pages: 118
This Frost & Sullivan research service titled Production and Investment Forecasts of the South African Coal Mining Industry provides a detailed analysis of the production and capital expenditure trends in South Africa’s coal mining industry. This research service focuses on coal production at the industry and company levels to understand the key production trends in the industry. It also focuses on capital expenditure by tracking expansion projects, major cost drivers of expansion projects and equipment needs of the industry.
Market Overview
Greater Demand for Coal from the Power Generation and Synthetic Fuels Manufacturing Industries to Spur Growth of the South African Coal Mining Industry
Depleted mines, declining coal recovery grades and rising operating costs in South Africa’s coal mining industry have resulted in sluggish coal production at approximately 240 million tonnes per annum for the greater part of the decade. Coal production is likely to increase marginally during 2010, as no major projects will be transitioning to full production during this period. The electricity crisis in South Africa highlighted the need for not only expanding power generation capacity, but also ensuring adequate supplies of coal to power generating plants. Coal production must grow to cope with the anticipated increase in demand from the power generation and synthetic fuels manufacturing industries. The domestic demand for coal in South Africa is projected to increase by an additional 75 million tonnes in the next 5-10 years. Coal mining companies are expanding the existing mines and building new ones to meet the anticipated rise in demand for coal, and all tier-one coal mining companies have announced expansion projects.
“The construction of two new power stations by Eskom, the de-mothballing of three others, and the construction of an extra synthetic fuel manufacturing plant will result in the domestic demand for coal stepping-up by an additional 75 million tones,” notes the analyst of this research. “Fresh coal mines need to be developed and existing ones expanded to cope with the surge in demand for coal.” The Waterberg coal basin, which currently has one coal mine, is poised to become the mainstay of coal mining and power generation activities in the long term. Exxaro is expanding its Grootegeluk mine to cater to the demand for coal from Medupi power station, while Sasol has completed feasibility studies for its Mafutha project in the Waterberg coal basin.
However, infrastructure-related concerns, difficult geology, low-quality coal grades and housing and water shortages are likely to hamper the large-scale coal mining activities in the Waterberg coal basin. “The existing Polokwane-Witbank railway line has the capacity to move approximately 5 million tones of coal per annum,” explains the analyst. “This is likely to impede the development of coal mines that produce coal specifically for the export markets.” Development of new mines in the Waterberg coal basin to replace the depleted mines in the Witbank, Ermelo and Highveld coalfields is the sole sustainable method to successfully meet the rising demand for coal in the long term. “The construction of Medupi power station by Eskom, the development of Sasol Mining’s Project Mafutha and an independent power plant will spur coal mining activities in the Waterberg coal basin,” concludes the analyst.
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