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This month's front cover

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Contents

This mThis m

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03 Comment

05 News

10 Industry View

Regional Report

12 South Africa Seeks To Save Coal Negative views on coal and its impact on the environment have resulted in a precipitous decline in the use of coal by major global economies. However, Henk Langenhoven and Bongani Motsa, Minerals Council South Africa, confirm that a number of opportunities still exist that would foster the growth of South Africa’s coal industry.

Inspection, Sampling, Testing & Analysis

18 The Key To Quality Birgit Bender, RC Inspection, the Netherlands, highlights the importance of professional inspection, sampling and sample preparation in ensuring high quality coals.

Cranes, Grabs, Shiploaders & Unloaders

23 Time Is Money Philip Waddell, Telestack, Northern Ireland, explains how the company’s technology is helping coal producers and consumers maximise their time and financial investment to achieve improved operational efficiency.

Coal Sizing

27 Finding The Right Fit Sam Barton, Xoptix, UK, discusses the potential of in-process particle sizing to optimise efficiency and reduce environmental impact.

General Interest: Coal Power

30 Full Steam Ahead Juergen Froehlich, Siemens Gas & Power, Germany, talks about Steam 4.0 – the linking element to a sustainable future.

Trucks & Tyres

35 Keep The Wheels Turning Tim Phillips, CMA/Double Coin, USA, explains how best to adapt to fluctuations in tyre demand.

In-Pit Crushing & Conveying

39 IPCC Review Featuring articles from RWE Technology International, ALLU Finland Oy and SRK Consulting.

Continuous Miners

43 The Road Ahead Is RemoteDr. Jonathon Ralston, CSIRO, Australia, details the trends, challenges and opportunities faced by advancing roadway development capabilities.

Roof Bolting & Ground Support

47 A Supported Structure Paweł Topol, FAMUR, Poland, explains how to increase the lifetime and safety of headings through bolting operations.

JENNMAR is a global, family-owned company that is leading the

way in ground control technology for the mining, tunnelling and

civil construction industries. From humble beginnings, we have

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help us help you. Since 1972, our mission has been focused on

developing and manufacturing quality ground control products.

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Comment

World Coal (ISSN No: 0968-3224, USPS No: 020-997) is published eight times per year by Palladian Publications Ltd, GBR, and distributed in the USA by Asendia USA, 17B S Middlesex Ave, Monroe NJ 08831. Periodicals postage paid New Brunswick, NJ, and additional mailing offi ces. POSTMASTER: send address changes to World Coal, 701C Ashland Ave, Folcroft PA 19032.

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Palladian Publications Ltd15 South Street, Farnham, Surrey, GU9 7QU, UK

t: +44 (0)1252 718999 f: +44 (0)1252 718992w: www.worldcoal.com

Stephanie Roker – Editorstephanie.roker@worldcoal.com

Managing EditorJames Littlejames.little@worldcoal.com

Assistant EditorClaire Cuddihyclaire.cuddihy@worldcoal.com

Sales DirectorRod Hardyrod.hardy@worldcoal.com

Sales ManagerRyan Freemanryan.freeman@worldcoal.com

Production ManagerBen Munroben.munro@worldcoal.com

Website ManagerTom Fullertontom.fullerton@worldcoal.com

Digital Editorial AssistantJohn Williamsjohn.williams@worldcoal.com

Digital Editorial AssistantNaomi Hollimannoami.holliman@worldcoal.com

Administration ManagerLaura Whitelaura.white@worldcoal.com

V ietnam has a population pushing close to 100 million and an annual GDP growth of 7%, so it’s no surprise that the country’s power generation is forecast to rise from the

current 47 000 MW to 129 500 MW by 2030.This surge in power demand has stirred up a great deal of interest from energy investors,

who are willing to spend up to US$150 billion over the coming decade as a means of meeting demand. Considering power consumption in the country reached a record 36 000 MW in May, I’d say they’re set to make some good investments.

Power generation comes in many different forms, such as fossil fuels, nuclear and renewable energy. In the case of Vietnam, it seems that “one of [its] priorities is to develop renewable energy sources to gradually reduce its reliance on traditional sources of electricity to protect the environment,” according to Vietnam’s Deputy Minister of Industry and Trade Cao Quoc Hung.

Vietnam’s first solar power plant with a licence to operate was placed in service back in April. And that’s just the beginning. The Vietnamese Ministry of Industry and Trade has revealed that over 120 solar projects in the country (with a predicted generation capacity of 6.1 GW by 2020) have been approved, and another 221 projects are currently pending government approval.

In a similar vein, the Global Wind Energy Council is set to hold meetings in June in the country’s capital, Hanoi, as it looks to drive further growth in the renewables market.

But Vietnam still needs to meet its ever-growing energy demand, and quickly. That’s where coal comes in.

In a bid to satisfy the nation’s power grid demands, companies have turned to coal as a cheap alternative to boost electricity generation. To put this into perspective, Vietnam’s coal use grew 75% from 2012 - 2017; this is faster than any other country in the world. And more recently, between January and February, the country’s total coal tonnage amounted to 5.47 million, up from 2.32 million t in the same period last year.

According to Pat Markey, Managing Director of Sierra Vista Resources: “Vietnam is a country in the midst of massive economic growth, so they will need to expand their power capacity as fast as possible at manageable costs.”

In an eff ort to placate the country’s power boom, Russia increased its coal exports to 852 000 t between January and February, from 237 000 t the year prior. Vietnam Electricity (EVN) is also playing a role, as it intends to bring a number of coal-fi red facilities online from now till 2020.

Likewise, on 19 April, The Japan Bank for International Cooperation signed a loan agreement with Van Phong Power Company Limited for a project finance scheme totalling up to US$1199 million for the Van Phong 1 coal-fired power generation project in Vietnam. Van Phong Power Company Limited will construct, own and operate the super-critical coal-fired power plant with an installed capacity of 1320 MW (two units consisting of 660 MW each) in the Van Phong district, Khánh Hòa Province in Southern Vietnam.1

In a recent announcement, The Japan Bank for International Cooperation explained that “the construction of power plants has been lagging behind the demand, resulting in tight power supply in the country, and it is, therefore, imperative for the Vietnamese government to resolve power supply shortages. To overcome [these] power supply shortages, the Vietnamese government revised its Seventh Power Development Plan announced in 2016 in order to promote the construction of power plants and swiftly develop power sources. This project is in line with the Plan that incorporates the expansion of power supply capacity and [is] expected to contribute to economic development in Vietnam through a stable supply of electricity as a baseload power source in the 2020s and beyond.”

1. https://www.jbic.go.jp/en/information/press/press-2019/0419-012106.html

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May/June 2019 | World Coal | 5

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Coal News

W irtgen’s 220 SM 3.8/220 SMi 3.8 surface miner selectively mines raw materials up to a cutting

depth of 350 mm and a uniaxial compressive strength of 35 MPa. Thanks to its 3.8 m wide cutting drum designed specifically for soft rock mining, the compact surface miner achieves maximum productivity at low operating costs and is perfect for use in small to large mining operations.

Selective extraction makes it possible to mine raw materials with a high level of purity. The material, which is extracted in an environmentally-friendly manner without drilling or blasting, is continuously deposited behind the machine in a windrow and then loaded onto trucks with other equipment.

In this context, refraining from drilling and blasting makes it possible to conduct efficient mining operations close to industrial sites and other infrastructure, such as pipelines or high voltage power lines, which ultimately results in the optimised exploitation of the deposit.

The cutting drum is designed specifically for demanding windrow applications in soft rock, such as coal or salt. Maximum cutting performance combined with the ideal use of engine power and low specific fuel consumption allows raw materials to be mined in an extremely cost-effective process. Six different adjustable cutting drum speeds ensure that the machine can be perfectly adapted to the material being extracted. This leads to a significant reduction in pick wear, minimal diesel consumption, and increased productivity, which translate into an impressive daily output and low cost per tonne of extracted material.

In opencast mining, the continuous availability of the machine and its safe operation are of critical importance. This is why the surface miner’s components are designed to achieve a long service life, even under extreme conditions. For example, filters in all circuits and a pressurised hydraulic reservoir ensure maximum purity in the hydraulic system and, as a result, safe operations. In turn, the clean oil prolongs the service life of the downstream components and thus increases the availability of the machine.

The 220 SM 3.8/220 SMi 3.8 also meets occupational safety requirements in opencast mining thanks to the standard-equipped ROPS/FOPS operator’s cabin. The cabin features additional soundproofi ng and vibration isolation, allowing the operator to work for several hours without the risk of fatigue. The ergonomically designed and clearly arranged controls are integrated into the armrests of the driver’s seat, and all of the machine’s key functions are logically incorporated into the multifunctional joysticks. This means that the operator can operate the machine intuitively in just a few steps and fully concentrate on high precision mining. The state-of-the-art, fully air-conditioned, large capacity cabin also features generously sized windows, giving the operator a direct view of the cutting edge and with it, the results of their work.

The LEVEL PRO PLUS levelling system has a proven track record in road construction and mining and is intuitive and easy to operate. A flat or inclined formation level can be created with absolute precision thanks to side plate scanning and the cross-slope sensor. The machine is also ready to be equipped with GPS or laser control.

GERMANY Wirtgen launches a new surface miner for selective extraction

USA New electricity sources are more costly than existing coal-fi red power plants

On 3 June, America’s Power, in conjunction with the Institute for Energy Research (IER), released a study

that analyses and compares the levelised cost of electricity (LCOE) for new and existing sources of electricity.

The LCOE includes all of the costs (variable and fixed operating and maintenance expenses, capital investments and financing costs) of an electricity source over its lifetime and is a useful way to compare existing power plants to new facilities. The new analysis finds that, on average, the levelised cost of electricity from the coal fleet is less than the

levelised cost of new natural gas combined cycle, new wind and new solar.

America’s Power issued the following statement by Michelle Bloodworth, President and CEO: “This new study is unique because it provides an apples-to-apples comparison of existing and new electricity sources. The study shows that policymakers should carefully consider levelised costs when decisions are being made to retire coal-fired power plants because replacing them with gas, wind or solar could be a bad economic decision.”

DIARY DATES

6 | World Coal | May/June 2019

Coaltrans Asia 2019 23 - 25 June

Bali, Indonesiahttp://www.coaltrans.com/asia/details.html

India Coal Conference 201930 - 31 July

New Delhi, Indiahttp://www.elekore.com/icc-2019/

AIMEX27 - 29 August

Sydney, Australiahttps://www.aimex.com.au/home/

KATOWICE Mining Fair10 - 13 September

Katowice, Polandhttps://www.ptg.info.pl/en

Bluefi eld Coal Show 201911 - 13 September

Bluefi eld, West Virginiahttp://www.bluefi eldchamber.com/bluefi eld-

coal-show

Coal Association of Canada Conference8 - 10 October

Vancouver, Canada https://www.coal.ca/

China Coal & Mining Expo 201930 October - 2 November

Beijing, China http://www.chinaminingcoal.com/web/

Mining & Minerals Expo 20195 - 7 November

Kiev, Ukrainehttp://www.iec-expo.com.ua/en/

mieen-2019.html

MetCoke World Summit 20195 - 7 November

Nashville, Tennesseehttps://www.metcokemarkets.com/

metcoke-summit

Coal News

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Mechel PAO, a leading Russian mining and metals company, reports signing an agreement with CTP BELAZ-24 OOO for 15 dump trucks with a total value of

approximately 2 billion rubles.The deal was signed on the sidelines of the international specialised mining

technologies exposition ‘Russian Coal and Mining’ held in Novokuznetsk.The new trucks with capacity ranging from 130 - 220 t will come to Mechel’s facilities in

Kemerovo and Irkutsk regions, with 11 BELAZ trucks intended for work on Southern Kuzbass Coal Company’s open pits and four for the Korshunov mining plant. The trucks are due to arrive in June - August 2019.

“Upgrading our mining fl eet is an important priority for our programme of capital investment in our mining facilities. Acquisition of these new dump trucks will enable us to boost mining and stripping volumes,” commented Mechel Mining Management OOO’s CEO Pavel Shtark.

RUSSIA Mechel enters dump truck agreement with BELAZ

Morien Resources Corp. has received notice from Kameron Collieries ULC, the owner and operator of the Donkin coal mine in Cape Breton (Nova Scotia),

that it has been granted approval by the Nova Scotia Department of Labour and Advanced Education (LAE) for a revised ground control procedure, which allows for the continuation of mining and development operations at Donkin.

Kameron announced in early January that LAE had rescinded its approval of the existing ground control procedure at Donkin due to a fall of ground. No workers were injured nor equipment damaged. Kameron submitted a revised ground control procedure and mine plan to LAE in late January and was subsequently granted approval to recommence mining on a limited scale. Since that time, Kameron has operated on a limited basis at a reduced capacity using the interim ground control plan.

With the recommencement of normal operations at Donkin, Kameron currently has two fully operating coal sections. These include one section with a recently installed fl exible conveyor train, which is a continuous haulage, mobile conveyor belt that replaced the shuttle car fl eet in that section. The second coal section is using a traditional shuttle car fl eet. Both coal sections are actively developing the mine’s main underground infrastructure and fi rst production panel.

Morien owns a gross production royalty for the mine of 2% on the revenue from the fi rst 500 000 t of coal sales per calendar quarter, net of certain coal handling and transportation costs, and 4% on the revenue from any coal sales from quarterly tonnage above 500 000 t, net of certain coal handling and transportation costs. The royalty is payable to Morien on a quarterly basis over the anticipated more than 30 year mine life.

Morien’s royalty payments from Kameron increased from CAN$4000 in 2Q17, when production at Donkin commenced, to CAN$298 000 in 4Q18. During 1Q19, while production was temporarily suspended and while Kameron operated at a reduced capacity, Morien’s Donkin royalty decreased to CAN$169 000. At full production of 2.75 - 3 million saleable tpy, and using a wide range of coal pricing (CAN$60 - 120/t), royalty payments to Morien could be in the order of CAN$5 million - 9 million/yr.

CANADA Morien Resources provides Donkin update

Experience the progress.

ship.port.crane@liebherr.comfacebook.com/LiebherrMaritimewww.liebherr.com

Performance is the key – Liebherr CBG 360• Larger and additionally strengthened pulleys for increased service life of the ropes

and reduction in abrasion• Operational optimization for rope capacity• Reduction in overturning moment thanks to the installation of a counterweight• Increased outreach possible through an excentre platform• Compliance with CE regulations

8 | World Coal | May/June 2019

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Coal NewsRussia’s fi rst new-generation excavator on Sakhalin was

recently put into operation at SUR.The EKG-20 excavator was manufactured by Yekaterinburg

Uralmashzavod under the special order of the East Mining Company, and a new technique has been designed for excavation of overburden on the Solntsevsky coal mine. A distinctive feature of this excavator from analogs is the modifi ed bucket volume. Given the characteristics of local breeds, it was increased from the standard 20 m3 up to 22 m3.

In the coal mine is the 21st excavator, but the fi rst domestic and electromechanical. Before the enterprise acquired and operated electro-hydraulic excavators of Japanese and German production. The choice in favour of the Russian career technology is not accidental. In the domestic engineering industry, ECG-20 is a new generation excavator, whose mass production began about three years ago. It is not only not inferior in performance to foreign peers, but also provides a much more economical excavation. The equipment consists of 95% of Russian components, and is equipped with a modern AC drive, information management system, diagnostic systems of components and mechanisms, and control of workfl ow parameters.

Workers of the mine are calling the new excavator a giant machine. Its height is 18 m, width is more than 30 m, weight is 750 t. Today, it is the most dimensional career equipment on Sakhalin. For machines of such parameters, ECG-20 develops one of the highest speeds: 1.1 km/hr.

The assembly of excavator equipment was carried out on the territory of the mine by representatives of the manufacturer and local specialists. Welcoming the participants of the solemn event dedicated to the commissioning of new equipment, Igor Kovach, on behalf of the All-Russian State Corporation, thanked for the well co-ordinated and high quality work of suppliers of equipment, contractors and employees of the company – all those who were directly involved in ensuring that the next stage of technical re-equipment successfully passed.

The annual technical re-equipment of the Solntsevsky coal mine allows it to achieve higher rates of coal mining. Along with this, the East Mining Company is upgrading other production facilities that provide for the extraction and shipment of coal in the territory of the Uglegorsk district. In 2019, the company will allocate about 11.5 billion rubles to the development of these areas.

RUSSIA Solntsevsky coal mine receives next-generation excavator

The Minerals Council of Australia has welcomed the approval of Adani’s Black Finch Management Plan by

the Queensland Department of the Environment and Science.The fi nalisation of the Management Plan is great news for

jobs and stronger regional communities in central Queensland.Approval of the Water Management Plan on 13 June will

provide the fi nal certainty which these communities have been asking for over many years.

The Carmichael coal mine will generate billions of dollars for taxpayers over decades to fund nurses, teachers, police, hospitals, roads and other services and infrastructure for Queensland families and communities.

The coal mine will also open up the North Galilee Basin for further development, adding to Australia’s rich history of mining exploration and development which has made the nation a global mining powerhouse.

AUSTRALIA Adani’s environmental approval to benefi t Queensland

G lobal Mining Guidelines Group (GMG) and the Society for Mining, Metallurgy & Exploration (SME)

have announced a strategic partnership between their two organisations. A partnership between SME and GMG will drive increased openness in the mining industry.

The SME-GMG partnership will enable SME members to maintain a leadership position in the global mining community. GMG has similar agreements with other mining organisations

as a key strategy to building and strengthening the global mining innovation network.

As part of this collaboration, SME will become the offi cial partner on all GMG events held in the US as of 2020.

“The United States is one of the leading mining nations in the world, home to many large mining companies as well as key mining suppliers, both traditional and non-traditional,” said SME Executive Director David L. Kanagy.

USA GMG and SME form strategic partnership

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For over 75 years you’ve trusted your coal prep needs to Elgin Separation Solutions.Familiar Brands, Unmatched PerformanceCentrifugal Services (CSI) manufactures new rotary breakers and reconditioned centrifuge assemblies with a full line of superior quality replacement components and screens for both products.Centrifugal and Mechanical Industries (CMI) centrifuges are the industry standard in coal dewatering, offering a full line of centrifuges in horizontal and vertical configurations in a wide range of sizes.Tabor Machine (TM) has provided vibrating screens and feeders for dewatering and sizing in the coal and mineral processing industries since 1961.

Norris Screen (NS) manufactures high quality screening media for stationary and vibrating screen systems and other diverse applications.Clinch River (CRC) is a full service shop specializing in material handling and structural fabrication for power, coal prep, aggregate and underground mining applications.Elgin Separation Solutions is committed to delivering performance excellence and earning your trust on every project. Visit www.elginseparation.com for more information on our specialized capabilities.

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10 | World Coal | May/June 2019

Ind

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Industry View

The insurance industry is increasingly coming to grips with the realities of climate change. A recent survey

of North American actuaries found that climate change was voted the number one risk that the industry faced.

It is no coincidence that in recent years insurers have paid out more to policyholders as extreme weather events, such as fl ooding, droughts, storms and heatwaves, become more frequent and severe. Insurers are responding to increased losses on natural disasters by either pricing policies out of the market or withdrawing coverage from regions facing the impacts of climate change, as more and more places are categorised as so-called ‘uninsurable markets’. And Munich Re has warned publicly that climate change could make insurance cover unaff ordable for ordinary people.

This is part of a growing conversation about the threat that climate change poses to the global economic system. In April, a consortium of central banks published a report exploring the impacts of rising temperatures on the economy. The warning was dire. As the governors of the Bank of England and Bank of France – Mark Carney and Francois Villeroy de Galhau – wrote in The Guardian: “If some companies and industries fail to adjust to this new world, they will fail to exist.”

Addressing climate change, they declared it will require a “massive reallocation of capital.”

Recent moves from insurance companies signal that the reallocation of capital is already under way. 13 of the largest global insurers have adopted policies restricting coal underwriting and investing. In fact, in March and April alone, fi ve companies announced new coal exit policies that include restrictions on both underwriting and investment in coal. One of those was the fi rst non-European insurer to adopt such policies: Australian-based QBE, which said it would exit its thermal coal underwriting entirely by 2030.

These companies are part of a global movement of fi nancial institutions away from the coal sector. According to a recent publication from The Institute for Energy Economics and Financial Analysis, coal exit announcements from globally signifi cant banks and insurers (those holding more than US$10 billion worth of assets under management) have occurred since 2013 at a rate of more than one per month. With three insurers announcing coal exit policies this April, that rate is clearly increasing.

Every insurer that withdraws from the coal sector represents a loss of capital, coverage and vital expertise that will inevitably

reach critical mass, leaving companies and projects reliant on the least experienced and capitalised fi rms, or the need to self-insure, both of which will need to be explained carefully to institutional lenders and investors.

These institutions realise that holding onto coal assets, insuring coal projects and fi nancing coal companies can be a liability: reputationally, fi nancially and legally. As A.M. Best noted in a recent report, insurers that are involved in ESG-related scandals will face diffi culty maintaining and attracting clients. They are also at risk of litigation, which may pose a direct threat to the business’ profi t.

Insurance companies are anticipating climate-related legal risks. Liberty Mutual and Zurich recently launched insurance products specifi cally designed to cover corporate boards of directors in the case of climate change litigation. Meanwhile, Liberty Mutual itself is facing increased scrutiny and pressure to get out of the coal sector from the US-based Insure Our Future campaign.

Across the Atlantic, the UK-based environmental law organisation ClientEarth wrote Lloyd’s a letter concerning Adani Group’s Carmichael coal mine in Australia. Given the fi nancial, social and human rights issues associated with the project, the lawyers wrote: “Should you or your syndicates fail to take these factors into account as part of your risk management processes, this may constitute a breach of your legal duties.”

The myriad of risks associated with the project have led three dozen fi nancial institutions to commit not to fi nance it and 15 to rule out insurance services.

This rush of investment and insurance out of the coal sector stands in stark contrast to the coal industry’s own views of its future. Even though the International Energy Agency Chief Executive Fatih Birol has said there is no room to build any new CO2-emitting power plants if we are to keep global warming to less than 2˚C, many coal companies continue to rely on scenarios that depend on decades of increasing coal consumption.

In every respect, this is unsustainable. While the coal industry expects growth and prosperity for decades to come, investors, insurers and the growing political eff ort to reduce greenhouse gas emissions are betting otherwise. Something has got to give in the tug of war between a coal industry desperate to expand and prolong its life, and a fi nancial sector rapidly draining its support for an industry.

Is coal a liability? The insurance industry is signalling yesElana Sulakshana (USA) and Julien Vincent (Australia), Unfriend Coal Campaign

J.H. Fletcher & Co. cannot anticipate every mine hazard that may develop during use of these products. Follow your mine plan and/or roof control plan prior to use of the product. Proper use, maintenance and continued use of (OEM) original equipment parts will be essential for maximum operating results. 2017 J.H. Fletcher & Co. All Rights reserved.

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12 | World Coal | May/June 2019

May/June 2019 | World Coal | 13

Negative views on coal and its impact on the environment have resulted in a precipitous decline in the use of coal by major global economies. However, Henk Langenhoven and Bongani Motsa, Minerals Council South Africa, confi rm that a number of opportunities still exist that would foster the growth of South Africa’s coal industry.

In South Africa, as in many other parts of the world, the coal industry is – if not much maligned – then rarely promoted as a thriving contributor to socio-economic development. In South Africa, coal has been instrumental

in the economy’s development, not only in the mining sector, but also playing a part in broader industrialisation.

Even today, coal remains one of South Africa’s most abundant and valuable resources, from which the country derives over 82% of its electricity requirements. Moreover, the coal mining industry’s economic impact is far-reaching; it has a signifi cant impact on other industries such as electricity, manufacturing, construction and fi nance. It is the largest component of mining by sales value and

remains a critically important source of primary energy (electricity and liquid fuels) that drives South Africa’s economy.

In 2018, the coal industry produced 252.6 million t of coal, generated sales of R139.4 billion (49% through exports) and paid R1.6 billion in royalties.

In 2018, the coal industry employed 86 919 people, representing 19% of total employment in the mining sector. These employees earned R24.7 billion in wages and salaries. In the same year, the coal industry spent R60 billion on the procurement of goods and services, most of it locally. This contributed to creating and maintaining jobs in other industries. Indirectly, the coal industry created 160 000 jobs mainly in the transport and storage sector and, given the dependency ratio across the region, around 2.4 million people depend on this industry for their livelihoods.

Decline in coal demandNonetheless, negative views on coal and its impact on the environment have resulted in a precipitous decline in the use of coal by the major global economies. Many jurisdictions, including South Africa, have put in place legislation and taxes, which will aff ect the demand for coal.

There has been a shift in demand for South African coal from European markets to Asia. India accounts for almost half of the country’s total exports in terms of volumes. This is set to continue as India’s growth trajectory continues. Globally, 1600 coal-fi red power plants are being planned or under construction in 62 countries. Thus, the future looks bright for South African coal exports.

ContextLocal coal is mainly of the bituminous type and about 4% of coal demand is satisfi ed by metallurgical coal imports worth an estimated R4 billion. The largest share of demand in terms of value originates from electricity (53%), then the basic iron and steel sector (20%), followed by the synthetic fuel and chemical industries (10%).

Constraints to growthThere are a number of factors (other than demand/prices) that will result in the stagnation, and potentially, shrinking of the South African coal industry.

Policy and regulatory factors rank at the top of the list. It is the Minerals Council’s contention that environmental policies and regulations aimed at reducing the country’s carbon emissions should take into account South Africa’s developmental exigencies of aff ordable and reliable power and energy security. Excessive taxes will aff ect all coal users and reduce the competitiveness of the country’s producers. South Africa currently has limited alternative solutions for reasonably priced power other than coal (especially baseload power generation). Coal can, and should, remain part of the energy mix.

Further, the enacting of environmental laws in major jurisdictions around the world has resulted in less and less credit being extended to the construction of coal power plants.

Inadequate infrastructure is a major challenge for the South African sector – the lack of rail and water infrastructure are the main challenges preventing the development of new coal mines in the Greater Waterberg, a highly prospective coal mining area.

Transnet, the state-owned rail enterprise, has responded positively to the rail infrastructure backlog and is considering investing in a further 6 million tpy of coal capacity on the rail line from Lephalale in the Waterberg to Richards Bay. Transnet is seeking to double that to 12 million tpy by 2020, and expanding the line to beyond 24 million tpy capacity in later phases.

Water is another constraint. South Africa is a water-scarce country and, throughout the entire value chain, the industry makes use of water. In South Africa, water scarcity is compounded by the lack of investment in water infrastructure, such as dams and canals.

If the industry is not able to overcome technological barriers to producing ‘cleaner’ coal, this will also constrain its sustainability. Coal technology is the cheapest among electricity-generating technologies. In China, for example, coal’s high effi ciency, low emissions (HELE) technology is fi ve times cheaper than renewables. These new technological solutions – such as HELE coal technologies – result in a reduction in CO2 emissions of between 2 - 3% for every 1% improvement in effi ciency of a conventional pulverised coal combustion plant. Other technological solutions include the use of effi cient coal technologies to benefi ciate discarded coal resources for power generation, which also reduces environmental degradation. Further-out technological solutions include underground coal gasifi cation and carbon capture and storage (CCS). As the economy transitions to a greener energy future, the industry believes that this could be done in a way and within a timeframe that can potentially enhance, instead of eroding, the competitiveness of the South African economy.

While new technologies are always disruptive, the transition should be pragmatic and should not penalise or subsidise nascent technologies at the expense of

14 | World Coal | May/June 2019

Figure 1. South African coal production scenarios. Source: Department of Energy, Price Report, 2016; Quantec.

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conventional ones as this creates market and price distortions.

Plotting a way forwardThe Minerals Council South Africa – with the support of leading South African coal companies – has developed a number of scenarios to help industry players, policy-makers and others that depend on coal to better plan their future and, hopefully, develop strategies that are both focused and fl exible (Figure 1). It is unlikely that any of the scenarios will play out exactly as presented. But, the value of this exercise is in the planning and anticipation of the possible scenarios.

While GDP growth is a major indicator determining economic performance, for the purposes of this analysis, coal production has been used to develop these scenarios. GDP is an indirect measure of industry performance, while coal production presents the actual situation. This does not suggest that coal production is delinked from economic performance.

Four scenarios have been considered and named respectively: Burnt Coal, Trudge-along, Firelighter and Extinguisher.

South African coal production scenariosThe fi rst, called Coal Extinguisher, describes a future in which the coal industry is disenfranchised to the point of near obsolescence. This scenario occurs under the following assumptions:

Public opinion ensures that coal falls out of favour. Environmental and water regulations stifle coal use. Access to capital is severely limited. Renewable energy technologies improve to offering

baseload. Coal is designated a strategic mineral. Battery technology for renewable energy makes a

quantum leap. Export markets for coal collapse as India resorts to

nuclear technology. Natural gas presents an alternative for baseload.

Karoo shale gas deposits are exploited. Water scarcity escalates and no new infrastructure is

developed.

In this scenario: Nuclear power and renewable technologies supplant

coal as the country’s primary energy source, while shale gas becomes viable.

Coal use declines by two-thirds of current national consumption levels and, globally, an over-supply of coal and lower prices threaten the viability of many producers.

Coal mining communities suffer the most as people lose jobs and companies close.

Subsidies ensure that renewables surpass coal use in power generation. Since renewables are capital intensive, and without a well-implemented localisation strategy, job losses will not be accompanied by equal or more jobs created.

The transportation sector, including Transnet, are net losers.

Coal is declared a strategic mineral, and major private assets are sold to a state-owned company. Investment declines, tax and royalty revenues shrink.

In the Trudge-along scenario, there are positive and negative developments, resulting in an average growth rate of 1% in total coal production. Underpinning this scenario are the following assumptions:

Carbon tax is introduced across the board. Land access becomes contentious. Trade taxes are effected on goods produced using coal

power. Eskom continues its policy of cost-plus contracts, thus

maintaining certainty. The necessary infrastructure in the Greater Waterberg

is developed, including road, rail and water. Renewable technologies do not develop at the rate

they could, as oil prices remain stagnant and oil companies invest in increased output and new deposits are discovered and developed.

Nuclear power becomes expensive and the state procures only a few reactors, which represent half the 9.6 GW initially intended to be sourced.

South Africa will take a cautious, yet pragmatic, view on coal use. While wanting to abide by its international commitments to reduce greenhouse gas emissions, the use of coal for baseload power is not overtly criticised.

This scenario, even though lukewarm to the coal industry, manifests some positives which the industry can build on. Key to this outcome is the maintenance of Eskom coal cost-plus contracts.

Under the Burnt Coal scenario, growth continues at a respectable 2.3%/yr, with coal as an indispensable power source. The scenario has the following assumptions:

Clean coal technologies are faster, and cheaper to install and retrofit.

16 | World Coal | May/June 2019

Figure 2. Glencore's Impunzi central plant located in Emalahleni (South Africa).

Coal is the fuel of lowest risk (including environmental hazards) and provides the highest return.

Eskom continues with its policy of procuring coal by means of cost-plus agreements. Even as it undertakes arms-length contracts with some producers, these offer certainty as Eskom commits to offtake agreements.

Internationally, renewables will have underperformed. Coal use makes a major comeback, with coal technologies becoming cleaner and less polluting.

From a stakeholder response perspective, the government is more consultative and transparent in policy design, formulation and implementation. Multi-year wage agreements are concluded, fostering certainty among private players and labour.

Finally, the Firelighter scenario will see a 5% growth rate. This scenario explores a future in which coal is an indispensable power source, and makes the following assumptions:

There is a major leap in coal technology, such as HELE and CCS, while battery technology for renewables as a baseload solution moves slowly.

Coal is the fuel of lowest risk (including environmental) and provides the highest return.

Export demand increases significantly as enabling infrastructure is developed.

A shift in public opinion to other economic, social and political issues favours coal.

Government policy and regulation supports the coal industry and a balanced approach on transformation is adopted.

Mutual understanding between labour and the coal industry is based on respect, trust and consultation is in place.

South Africa’s economy is growing at a rate of over 3%/yr and coal production increases. Transnet expands railway infrastructure in the Greater Waterberg area, and its railway infrastructure project pipeline is set to expand to 24 million tpy. Beyond this capacity a new line would be needed. This assumption also relies on water resource infrastructure being developed. Other assumptions include:

Stakeholder response is equally positive. Coal producers increase production, while government

policy supports further investment. Eskom and the coal industry reach a progressive

compromise where – in the absence of cost-plus contracts – the utility is prepared to pay competitive domestic coal prices.

Eskom agrees to offtake agreements with coal producers, bringing certainty and investment, resulting in more jobs.

ConclusionThese scenarios present possible outcomes for the South African coal sector. The Minerals Council is convinced that these positive scenario are possible, provided that the turnaround plan for Eskom is fulfi lled, and that the other conditions come into being.

The Minerals Council’s analysis estimates that the coal sector has an export potential of 110 million tpy (vs current 75 million tpy). Exploiting the 35 million tpy export potential could result in increases in employment (by 13%); and a more than 10% rise in investment. The latter could result in gross fi xed capital formation as a result of coal assets increasing to over R20 billion/yr (R18 billion in 2017).

On the domestic front, Eskom currently purchases around 120 million tpy. According to the update Draft IRP 2018 (released in March 2019), by 2030 Eskom will produce 33 847 MW of power using coal from 39 126 MW. This represents a 5279 MW reduction and is the equivalent to 6 566 654 t of coal. This translates to 2310 direct jobs lost in the coal mining industry by 2030. With an employment multiplier of four this means that over 9000 jobs will be aff ected in ‘downstream’ industries. In 2017, the coal industry indirectly employed 336 804 people. Most of these jobs are in the Mpumalanga and Limpopo provinces. It is therefore important that projects aimed for ‘energy transitions’ are earmarked for this province. Failure to do so will result in untold social, economic and political instability. Already, mining companies operating in the province are experience disruptions in operations arising from community protests.

Eskom will also be decommissioning a number of coal-fi red power plants as they get old and costly to operate. Given this situation, around R20 billion/yr of investment would be required to replace them.

Together, the combination of export and domestic growth could have a signifi cant impact on investment and job creation in the sector. More importantly, as a driver of growth in the entire mining sector, a thriving coal sector will spur growth in other sectors of the economy.

A number of opportunities still exist that would foster the growth of the coal industry. Over 200 products can be made from or include coal. New coal applications should be investigated by allocating resources for research and development in higher institutions of learning. Coal is an important resource for the country, and it should not be allowed to go into oblivion.

May/June 2019 | World Coal | 17

Figure 3. Glencore's Impunzi Arthur Taylor colliery located in Emalahleni.

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