Johannesburg, South Africa — ESI-AFRICA.COM — 15 December 2011 – South African national power utility Eskom’s new coal-fired power station Kusile “’ due for commissioning of its first generating set in 2015 “’ appears to have become the subject of a bidding tussle between Anglo-American Coal and Australian-listed Universal Coal.
Miningmx reports that Universal is pitching to supply coal from its planned Kangala mine to Eskom’s Kusile power station, despite the fact that Anglo American Coal holds the contract to supply Kusile.
Kusile is a 4,800MW power station situated near Delmas which will burn around 17Mtpa of coal, with the first generating set due to be commissioned by the beginning of 2015.
According to information on the Eskom website, “Anglo Coal South Africa has committed, in a letter of intent, to supply the 17Mtpa of coal over a period of 47 years through its empowerment subsidiary Anglo Inyosi Coal.” Eskom indicated that the coal would come from the New Largo reserve with supporting production from Zondagsfontein.
Yet, Universal CEO Tony Harwood told financial media at a briefing here that his company was in off-take discussions with Eskom to supply coal from Kangala to Kusile.
Asked about the situation regarding Anglo Coal holding the supply contract Harwood replied: “Yes, I also thought Anglo Coal had the Kusile contract tied up, but the situation is that Eskom is keen to talk to us about accessing coal from Kangala.”
Universal is currently optimising the bankable feasibility study (BFS) for Kangala and a contract to supply Eskom would have major impacts on the cost of the mine and its level of production.
Kangala is being planned as an operation which would produce 2.5Mt run-of-mine (ROM) annually.
Actual sales production from that ROM output could vary between 1.6 and 2.2Mtpa depending on the product quality required. Greater volumes of lower grade coal would be supplied to Eskom, compared with lower quantities of the higher-grade, washed coal demanded by foreign customers.
Harwood estimated the cost to Kangala at around US$60 million if a dual washing plant was needed to supply both the export and domestic markets, and at around US$35 million if it supplied only Eskom.
He added that the optimised BFS should be completed by the first quarter of next year, which was when Universal expected to receive its mining right, along with the necessary environmental permits and water use licence.
Although Kangala was likely to be the first mine that Universal would bring into production, Harwood said the group’s flagship project would be the Berenice-Cygnus coking coal project in Limpopo Province.
This was a coking coal deposit with a JORC compliant resource of 1.32 billion tonnes situated immediately north of the Soutpansberg mountains and west of Coal of Africa’s Makhado project.
Universal also holds the rights to the smaller Somerville-Donkin project situated west of the Mapungubwe National Park and located in the environmental buffer zone for the proposed Limpopo Transfrontier conservation area centred on Mapungubwe.