Coal still powers SA for now

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JIMMY MOYAHA: The team at Exxaro Resources reopened their Matla coal mine after 10 years of the mine being closed for the installation of safer shaft infrastructure. We’ll be looking at this decision by Exxaro with executive head of coal Caroline Shirindza. She joins me on the line now to see what we make of these developments. Caroline, lovely having you on the show. Thanks so much for taking the time.

The Minister of the Department of Mineral Resources and Energy announced at the re-opening of the coal mine that coal was an essential part of infrastructure development in the country, and essential towards critical minerals in the country and on the continent.

Given that South Africa has one of the largest coal reserves in the world, and Exxaro sits right in the middle of that, would you agree with the minister that this should be a critical mineral for us?

CAROLINE SHIRINDZA: Definitely. Thank you, Jimmy, for having me. I agree with the minister because South Africa still needs the base load of coal. We have plenty of it and we have the experience of mining it and reliably supplying our power stations.

So although there’ll be transition into other sources of energy, coal remains the baseload, and that’s why it’s still critical.

JIMMY MOYAHA: Caroline, we’ll come back to the [Just] Transition conversations and how those have been unfolding. Let’s look at the reopening of the Matla plant. This, after 10 years for a business like Exxaro, clearly demonstrates a commitment to ensuring that safety is upheld and maintained – but ensuring that nothing is compromised – [and a] willingness to close the plant for as long as necessary to get this operational.

Take us through the changes that have happened there, the infrastructure adjustments and improvements that have been made.

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CAROLINE SHIRINDZA: Following putting our shaft under care and maintenance, obviously we had to relook how we get access to the reserves that we still have [under]ground. So that’s where this project was based: we had to find a way to access this coal and secure a coal-supply agreement with Eskom.

The project entailed opening up a boxcar so we can have a decline to access the coal, but also to bring the infrastructure closer to the mine. The project included having a conveyor belt that can take the coal out, but also have all the other supporting infrastructure – a lamp room so our people can go underground at Mine 1, as well as supporting workshops and offices.

That enabled us to have quick access to the coal, but also be able to reliably supply Eskom Matla Power Station, which is in close proximity to the mine.

JIMMY MOYAHA: Caroline, let’s look at the output of the mine now that it is reopened. This was a significant contributor from an Exxaro point of view – at least [in terms of] what Exxaro was able to add to the Eskom tonnage overall. Take us through what the mine is going to be capable of doing now that [it’s] back in operation.

CAROLINE SHIRINDZA: With this mine in particular, Mine 1, the shaft we open will contribute 4.2 million tonnes annually of coal. But with Matla as a colliery, we signed a coal-supply agreement with Eskom in April and that agreement actually gives us an extension of 17 years.

So Matla as a unit, as a complex, will now be able to supply coal to Eskom until 2043. In total that’s 9.3 million tonnes that we’ll be able to do.

JIMMY MOYAHA: Now, Caroline, that doesn’t even cover the breadth of what we have in terms of coal reserves as a country. If we’re looking at some of the estimates that I’ve seen, there is at least 150 years of sustained coal production that we can achieve with the reserves that we have in South Africa.

I want to come back to that to Just Energy Transition conversation. We have been seeing a lot of conversations around moving towards cleaner energy sources but, from a South African perspective – and I know this might be a slightly biased view according to some, given that Exxaro is a coal-mining company – can we take a look at that baseload conversation, that Just Energy Transition conversation, and how we can rely on the resources we currently have without necessarily avoiding the transition?

It seems our government is very clear that a transition needs to take place, but we also have to be practical about that, I suppose.

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CAROLINE SHIRINDZA: You’re correct. At Exxaro alone we still have nine billion tonnes of coal. So coal remains an important part of our country’s Energy Transition pathway, and we do recognise that we still require stable baseload electricity.

Exxaro’s approach is centred on balancing energy security, but with a responsible decarbonisation journey. While coal remains a key part of our business and South Africa’s energy mix, our ESG (environmental, social and governance) strategy outlines a clear pathway towards a lower carbon future.

So our sustainable growth and impact strategy focuses on responsibly maximising value from our coal assets, while simultaneously investing in future-facing energy solutions.

We remain committed to our carbon neutrality ambition by 2050, and we continue to advance the decarbonisation initiatives across our operations… Exxaro has Cennergi, our energy business. So we are growing our renewable energy portfolio as well, while exploring cleaner technologies and operational efficiencies that reduce emissions’ intensity.

You’ll appreciate that it’s not just coal. We are cognisant that this coal will coexist with renewables and other sources of energy.

Listen: Exxaro raises dividend as manganese, energy expansion pays off

JIMMY MOYAHA: … I’m hoping you can give me some insight around the financials.

While the Matla operation was partly under care and maintenance, was it contributing towards the financial results of Exxaro from a reporting perspective? If it wasn’t, do we kind of have an idea of what it’ll start to add back into those financials? I know you’re not the CFO of the company, so I’m not going to hold you to the numbers.

CAROLINE SHIRINDZA: I am the executive head. Of course I have the privilege of heading the coal business. So, while we were on planned maintenance, it was one shaft. Matla is a complex. We have two other shafts. So Matla has been contributing to the economics of the business.

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The opportunity we have now with the third shaft open is that we’ll see more tonnes coming out of Matla to Eskom. Our production will definitely go up, and we will be able to fulfil our CSA [coal supply agreement] commitment.

So yes, that does come with the financials because we now have an opportunity to leverage on three shafts instead of two.

JIMMY MOYAHA: Caroline, how are you feeling about the average coal price at the moment [locally and internationally]? That has taken quite a bit of a knock across a couple of years. There was a time when average coal prices were sub-$100 per tonne. That was very concerning. We finally seem to be managing just above that level with the elevated geopolitical uncertainty…

CAROLINE SHIRINDZA: I think coal producers, when we look at the export prices, have all had a bit of relief. We have an opportunity as coal producers and suppliers to leverage on the current coal price. So of course we are happy.

But what we need to manage is our operations – manage the cost competitiveness of our operations and efficiencies – so we can reap the rewards when the coal price does go up, as we are seeing now.

JIMMY MOYAHA: Managing those operations is a difficult task at that. This is why the team at Exxaro is so good at what it is that they do, being able to return one of the shafts at their Matla operation back on line, and having that contribute towards the overall production that they aim to achieve for the year.

We’ll leave the conversation on that note. Executive head of coal at Exxaro, Caroline Shirindza, joined us to take a look at the restoration of some of their Matla operation and what that means for the business.

Read: South Africa is moving away from coal …

#Coal #powers