Mmamabula coal exports unviable
Brian Benza | Tuesday May 13, 2014 12:49
The results of the study found that it will take either a fall in rail tariffs or increase in coal price to make the coalmine project sustainable and profitable.
The underground operation would have a run-of-mine output of some 4.4-million tonnes a year, and would require a capital investment of $113-million (P994 million) for an owner-operated mine and coal handling and processing plant over a mine-life of 20-years.
In a statement to the Botswana Stock Exchange (BSE), African Energy said while an export market for the Mmamabula coal existed in South Africa and Asia, at current coal prices, the cost to transport the coal to market would not sustain a profitable operation.
“Coal will be loaded into trains at the siding for transport to market. The two principal markets that have been identified for Mmamabula West coal are Eskom’s power station fleet in South Africa and the seaborne market bound for Asia. Existing rail and port infrastructure provides access to both markets.
“At current coal prices, the current rail tariffs are marginally too high for profitable export operations from Mmamabula West,” said the company.
The total initial capital costs of approximately P994 million will be incurred in the two years of construction with the mining schedule assuming a conservative ramp up to full production over seven years.
This defers capital expenditure of $64m until years five to seven of the project.
The coal produced at Mmamabula would initially be trucked from the mine stockpiles to a storage and rail loading facility at the nearest rail siding, where it would be loaded onto trains for transport to market. The project is estimated to have a run on mine operating cost of $17 per tonne, and an estimated product operating cost of $25 per tonne at mine gate.
“An increase in the coal price, and or a reduction in freight costs would have a positive impact on the project economics. The company is thus continuing to discuss rail and port tariffs with regional operators,” the company said.
The company acquired the Mmamabula West project last December owing to its relatively high in-situ coal quality and perceived potential as a source of export coal. The resource occurs in three seams, and a global resource of 2.4-billion tonnes has been estimated for the project.
Apart from the Mmamabula west project, African Energy also owns significant coal reserves in Mmamanstwe and Sese.
Last year, the company concluded a deal to buy the 1.3 billion Mmamantswe resources securing the rights to a total of 3.8 billion tonnes of coal in Botswana.
African Energy recently entered into a non‐binding Memorandum of Understanding (MOU) with Zambia’s electricity utility ZESCO Limited.
In the statement the company said that the parties have agreed to work together to explore the potential for the delivery of 300MW of base‐load electrical power from African Energy’s Sese Coal & Power project into ZESCO’s grid in southern Zambia, 500km to the north of Sese. African Energy will undertake a desktop study to evaluate preferred options for the transmission and integration of 300MW of power supply from Sese into southern Zambia.