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BUsH teLeGRAPH

RSA coal in restructure

espite increasing pressures on industry Eskom-related business. Anglo American too big if it acquired Anglo’s export mines.”
Dover climate change and carbon emis- chief executive Mark Cutifani indicated in
sions, coal remains crucial to the South Afri- February that the group could dispose of Patrice Motsepe’s African Rainbow Min-
can economy where a huge restructuring of its remaining thermal coal mines within five erals (ARM), a group which operates major
the sector is underway. years. collieries in South Africa in partnership with
More than 90% of SA’s electricity is He commented: “What we believe is that Glencore, is also out of the running.
generated by state-owned utility Eskom the South African Government still needs Glencore chief executive Ivan Glasen-
through burning coal, while the Richards thermal coal, but whatever we do needs to berg said in February that the group would
Bay Coal Terminal (RBCT) is one of the be sensitive and we need to make sure they allow its coal reserves to deplete to meet
largest export coal terminals in the world [the assets] are in the right hands.” planned reduction in greenhouse gas emis-
and a huge contributor to the country’s for- But the $64,000 question is: Who is going sions targeted by 2035.
eign exchange earnings. It is particularly to buy those mines? There would appear to ARM chief executive Mike Schmidt add-
of great value when the price of seaborne be a dearth of serious buyers, which makes ed: “Our collieries will be mined down over
traded thermal coal booms, which is not their remaining economic lives. If we were
happening right now. Mark Cutifani to look at Anglo’s collieries then we would
In a nutshell, the major groups which talk to our partner Glencore with whom we
have dominated the coal business for dec- have a collaboration in coal in SA. That dis-
ades – Anglo American plc, Glencore and cussion has not taken place. Given Glen-
South32 Ltd (which took over BHP Ltd’s SA core’s stated position it seems unlikely.”
coal business) – are getting out. That leaves heavyweight Exxaro Re-
All cite market and/or strategic restructur- sources Ltd, which operates the huge
ing and/or environmental concerns as rea- Grootegeluk colliery in the Waterberg sup-
sons for their actions. While those factors plying two of Eskom’s biggest power sta-
have played a role, the real motivation is tions and which, up until a couple of years
that the coal majors are no longer prepared ago, made no secret of its desire to greatly
to put up with the anti-mining industry ideol- expand its coal export business.
ogy of the ANC Government in general and Exxaro has since undergone a radical
being messed around on coal supply con- strategic shift in its business priorities since
tracts by Eskom in particular. new chief executive Mxolisi Mgojo took over
Given the other pressures currently ap- running the group.
plied on the coal industry, the He does not want those Anglo
majors have decided it is sim- American export mines either,
ply not worth it. That requirement is important albeit there is one exception,
They are being replaced “ given SA’s politically charged which is the Anglo American/
by a new generation of Exxaro Mafube colliery JV.
BEE-controlled coal com- situation. What Anglo American Mgojo’s new doctrine is to
panies which are buying up does not want is political comeback speed up the development and
the unwanted coal assets at utilisation of Exxaro’s own high-
knock-down prices with the against its other operations in the value coal assets so as to pull
clear winner being Seriti Re- forward expected revenues
sources run by former Billiton country should the new owner of its while there is still strong demand
executive Mike Teke. former coal mines screw up. for the coal. He does not want to
Teke started off by buying end up with “stranded assets” in
all Anglo American’s Eskom- the form of coal reserves that he
tied collieries bar New Largo in 2017. Seriti Cutifani’s task all the harder given he wants cannot mine and sell because there may be
eventually took New Largo in a separate to put the mines “into the right hands”. no future demand for them.
deal in 2018. That requirement is important given SA’s Exxaro is also getting rid of coal assets
Late last year, Seriti was also designated politically charged situation. What Anglo it deems not to be high-value and therefore
the successful bidder for South32’s South American does not want is political come- non-core. It has given up the prospecting
African Energy Coal (SAEC) division. back against its other operations in the rights to the huge Waterberg North and
That deal should be concluded by the country should the new owner of its former South projects and is about to sell its ECC
middle of the year, subject to a successful coal mines screw up. and Leeupan collieries.
outcome of negotiations between South32 Teke has ruled his group out of the equa- At the same time Exxaro is looking to ex-
and Eskom over the future of the loss-mak- tion. pand into renewable energy in a major way
ing coal supply contract between South32’s “This is not something we are considering having bought out its partner – Tata Power
Wolwekrans Middelburg Colliery (WMC) at this stage. It would be very difficult for us – in subsidiary Cennergi. Mgojo says Cen-
and Eskom’s Duvha power station. That’s because of competition issues,” Teke said. nergi is going to be Exxaro’s stepping-stone
worth a column on its own and I don’t have “Once the acquisition of the South32 into the group’s renewable energy strategy
the space to get into it here. SAEC assets is approved we will be the but he will not provide specifics at this stage.
Next up for sale appears to be the ex- second largest coal exporter from South
port coal mines, which Anglo American re- Africa. Anglo is already the largest coal ex- Brendan Ryan is a Johannesburg-based
tained at the time it decided to sell out of its porter from the country. Seriti would become mining writer

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