Eskom's financial woes weigh heavy on junior miners
JOHANNESBURG - Eskom's financial woes are weighing heavily on the ability of junior miners to access funding in the face of growing anti-coal sentiment in South Africa and abroad.
The two-day 15th Annual Southern Coal Conference held in Cape Town which ended on Friday heard how Eskom accounted for the bulk of coal supplied by South Africa's coal juniors.
Octagon Minerals managing director Waheed Suilaman said financial institutions now attached a lot more risk to Eskom coal contracts than they did a few years ago.
"In prior years when you went to a bank or a funder with an Eskom contract, it was considered bankable,” Suilaman said. “Nowadays lenders are not prepared to do that anymore.
It makes it more difficult for companies that do not have access to funding to use their Eskom contracts as collateral to raise that money."
Conference delegates who included coal chief executives, analysts and focus groups heard how coal companies should work together to support Eskom as a national duty.
Reginald Demana, a mining specialist and Wescoal chief executive said South Africa needed a working Eskom as coal remained fundamentally important for energy generation despite the global anti-coal sentiment, and the difficulty to get funding from banks.
"When we talk about how to take this economy forward, first and foremost we have to talk about the need to invest in coal and to support Eskom. That is the national duty for us.
As a supplier to Eskom we are saying coal is here to support this economy for time to come. It cannot be phased out irresponsibly," said Demana.
Eskom currently operates 15 coal-powered fire stations and plans to decommission ageing power stations as well as introduce renewable energy as part of the Integrated Resources Plan which was unveiled last October.
Seriti Resources chief executive Mike Teke the phasing out the ageing power stations should be managed properly.
Teke said the industry needed to work together to ensure that Eskom avoided the coal cliff.
"All of us depend on Eskom,” he said. “If we shut Eskom down, I shudder to think what will happen. I am saying we are aware of the coal cliff. Why don't we come together? We have a new chief executive at Eskom, mistakes have been made. Let us go in there and say how we assist Eskom."
Teke said South Africa needed to do more in terms of research and development.
"We talk of high efficiency and low carbon environment in the IRP,” he said. “I believe as a country we can do more and we are not doing more.”
Teke said productivity lagged behind and technology lagged behind in South African coal mining.
"When I talk productivity I am talking about producing serious tons. When I was in the US I visited a long haul mine with 176 people and they produced 40 million tons of ore and I could not believe it. I said to myself if I produce 17 million tons with 1 000 people I ask what is happening?.
He said mines should embrace technology .
"I am talking about new equipment. to compete out there and have proper infrastructure which we have because Transnet is delivering. There are opportunities still to take advantage of coal-fired power stations that are being built in other countries although they are not big," said Teke.