Power Play

For those hoping that coal will be replaced by cleaner energy options sooner rather than later, Minergy CEO Andre Bojé is quick to debunk this notion, stating that the demise of coal does not exist.

“There are currently 600 million people on the African continent in need of base-load energy. Nuclear energy is currently extremely expensive to be considered a viable option and other power sources, including hydropower and solar, remain unsuitable as base-load power. Therefore coal remains the only energy source able to feed this need. In fact, I see the future for coal as robust in the medium term and certainly so for the next 15 years.”

Apart from a number of coal-related projects being developed – including Kibo Mining’s Mbeya project in Tanzania and Minergy’s Masama Coal Project in Botswana – Bojé points to Kenya, which is developing a gigantic coal-fired power station near the port city of Lamu, as a sign that coal remains very much a key component in the energy mix of the future. The Lamu power station is expected to be in operation sometime in 2019.

Masama project

Following its aggressive drilling programme, Minergy recently announced a significantly improved resource estimate for its Masama project which increased from 347.1mt to 389.9mt.

Andre Bojé – ©Martin Rhodes @ Business Day

According to Bojé, the junior miner is awaiting mining licence approval from the Botswana government and this is expected by early 2018. Given that all necessary approvals “should be completed by December”, the company is raring to bring into production its high-grade low-strip ratio opencast operation by the second half of 2018.

In fact, the required capital to bring the project into production was raised in April when the company listed on the Botswana Stock Exchange and raised initially 72m pula – and more recently raised 27m pula. “Sufficient capital to take the project up to steady state production in 2019,” says Bojé.

The Masama Coal Project has a 380mt resource with an over 100-year life of mine and is well positioned close to existing rail, road and water infrastructure. Moreover, the project offers significant distance advantages over existing suppliers to regional customers, offering great potential for the Southern African region and the export market.

The project will produce 1.2mtpa of saleable product and this is earmarked for South African industrial clientele, including the cement and limestone industry, brewery and timber industries, among others.

Apart from feeding Africa’s need for coal, Minergy – which is looking to be producing high-grade coal from its coal project, located in the south-western corner of Botswana’s Mmamabula coalfield – states that should the coal price remain at its currently attractive price range or move higher, the company will certainly look to bump up production by a further 1mtpa to feed export appetite.

According to the International Monetary Fund World Economic Outlook, October 2017: Seeking Sustainable Growth, Short-Term Recovery, Long-Term Challenges report, “the coal price index – an average of Australian and South African prices – increased by 16.5% between February and August 2017”.

The report explains that “starting July 1, China imposed coal import restrictions on several ports to limit the adverse impact of lower international prices on production. Together with the cutback of coal production in China and sporadic labour disputes in coal mines in Australia, these restrictions have put renewed upward pressure on prices”.

“The size of the resource supports scalable production, presenting an opportunity to provide export coal to traders who supply India, China, and other areas of Asia, as well as Europe, should international coal price remain stable,” states Bojé.

AIM listing?

The proposed coal producer has identified an AIM listing next year over a JSE listing given shareholder “skittishness” in relation to the challenges faced by the local mining industry, including those associated with the Mining Charter.

“An AIM listing will give Minergy access to a larger capital pool and while the company only needs to raise sufficient capital to cover its AIM listing costs, raising capital for project development from the AIM market is not yet on the cards.”