Mmamabula Cannot Proceed Without Regulatory Certainty - CIC

| Monday February 8, 2010 00:00

CIC Energy president Greg Kinross said at the Mining Indaba in Cape Town that the regulatory uncertainties were the biggest challenge confronting the advancement of the project.

The company deferred certain financial, legal and engineering activities related to the Mmamabula energy project in December.

The decision was driven by the South African government's development timeline for its energy sector integrated resource plan.

Kinross noted that the Mmamabula project could not be covered by the first integrated resource plan, which would only cover requirements for new generation capacity for the three-year period stretching from April 2010 to March 2013.

Thus, the company was awaiting the completion and approval of the second integrated resource plan (IRP2).

Kinross noted that the IRP2, which would outline requirements for new generation capacity for 2013 and beyond, was expected to be completed in June this year. Based on the company's understanding of the regulations, an approval of the Mmamabula energy project by the Department of Energy would only be possible following the completion and Gazetting of the IRP2.

He added that it was the most advanced IPP agreement in the region, although it was also delayed by regulatory uncertainties. CIC Energy is developing the so-called Mmamabula energy complex, at the Mmamabula coal field.

This planned complex consists of the Mmamabula energy project, the export coal project and a potential coal-to-hydrocarbons project.

The Mmamabula project was to supply electricity to South Africa.

 Last week, CIC said that a railway line to transport coal from Botswana to a port in Namibia could be built within five years from now, in time to allow the company to export part of its coal.

Once granted government approval, a feasibility study for the 1 500-km Trans-Kalahari line would be launched within the next six months, Eddie Scholtz, CIC's chief operating officer for mining, told Reuters on the sidelines of a coal exports conference in Cape Town.

The line is expected to be completed about a year after the Mmamabula energy project comes on stream, Scholtz said. CIC, which plans to export between around 16-million tons of coal per year through the port at Walvis Bay, joined a consortium with other producers and development agencies to make the project more feasible and gain economies of scale.

'Increasing the tonnage to 50-54 million tons per year makes the project much more viable and robust,' Scholtz told Reuters. The consortium includes diversified miner Exxaro, AIIM, Maropule, the Industrial Development Corporation (IDC) and the Development Bank of Namibia.

Logistical constraints on the railway lines have been a major headache for South African coal producers eager to ship more of their product to Asia to satisfy growing demand.

While CIC is not excluding exports out of the Richards Bay Coal Terminal in South Africa and the Dobela port in Mozambique, the Transkalahari line seems to be the best option for now.

Scholtz said the company had received significant interest for its coal from Europe.

'There's enormous appetite from Europe not only because of the high grade, but also because of the fact that we are looking at the west coast which does offer them shipping advantages,' he said.-(Miningweekly)