Johannesburg - Coal of Africa Limited (CoAL) is to inject R220 million into the expansion of its Vele colliery in Limpopo, even as analysts have said the government was making it difficult for the coal sector to attract much-needed investment.
“This [Vele] mine is a small mine. There are many projects that are being held off until something happens to change the regulatory environment,” Xavier Prevost of XMP Consulting said yesterday.
Investors are shying away from South African coal mining, mainly because of the negative policy and regulation climate, which could threaten the availability of coal for local consumption and exports.
Investor fears are being stoked by the Mineral and Petroleum Resources Development Amendment Bill, which gives the minister of mineral resources the discretion to declare resources, including coal, as strategic minerals. The bill, which is before the portfolio committee on mineral resources, will give the minister the power to control the price and export volumes of coal.
Prevost said there was an investment drought and a power shortage was on the cards by 2020 if the government did not clarify the regulation.
Citing the Coal Roadmap, an initiative by the government, Eskom, Sasol and coal producers, Prevost said the resources of South Africa’s big coal mines were being depleted and the smaller mines that could replace their production did not have sufficient capital to be able to provide coal to the power utility by 2020.
According to the roadmap, new mines need to be developed urgently because higher-grade resources are being depleted.
Companies have opposed the amendment, saying it would lead to weaker share prices.
In its annual report this year, junior producer Keaton Energy noted that the bill listed coal as a strategic mineral that needed to be beneficiated locally.
“This could impact coal’s pricing and, given that 75 percent of production is already used in South Africa, further beneficiation makes little sense,” the company said.
Meanwhile, CoAL said it would halt production at Vele this month to prepare for the construction phase of its expansion. The expansion is aimed at increasing efficiency and improving profitability.
It had retained 49 contractors. About 138 employees had been redeployed to other operations and 155 employees had been retrenched.
“Throughout this process, the company attempted to minimise job losses, while proactively engaging with all its stakeholders to minimise these impacts.
“This resulted in 55 percent of jobs preserved,” CoAL said.
The expansion was expected to be completed by the end of next year. The colliery would begin to ramp up operations in 2015 and would be at full production by the end of that year.
CoAL said the board had approved the Vele expansion in August following confirmation of the quality of coal at Vele and the conclusion of a review of its operations.
Its strategy was “to reposition itself as a project development company focusing on its coking coal assets”.
CoAL shares rose 0.76 percent to close at R1.33 on the JSE yesterday, off an intraday high of R1.35. - Business Report