South Africa’s major coal producers are betting that demand for the fossil fuel will remain strong even beyond the global 2050 net-zero target.
Exxaro Resources CEO Ben Magara told Business Times on the sidelines of the Joburg Indaba this week that the group is looking to expand the life of its coal assets, which will outlast the group’s mining rights.
“We are looking for life extension opportunities because we can see coal demand both locally and globally going on for longer,” he said.
Magara said coal remains the miner’s core business, describing it as “the goose that lays the eggs”. He said Exxaro’s push to extend the life of its coal assets comes at a time when global financial institutions are warming up to financing coal projects once more.
“Lenders and insurance companies have come back and are excited about coal, so we are looking at all those options.”
But Magara said the company will continue with its diversification strategy. In May Exxaro announced the R11.6bn acquisition of assets from Ntsimbintle and OM Holdings in the Northern Cape’s Kalahari manganese field. This gave it control of Tshipi Borwa mine, 51% in Mokala and 9% in Hotazel Manganese Mines, which operates the Mamatwan and Wessels mines. Exxaro also has a 20% stake in Sishen Iron Ore Co, a division of Kumba.
We believe now that an advanced exploration project would be a good addition to our business, whether in South Africa or the continent
— Ben Magara, Exxaro Resources CEO
Magara said while manganese met the group’s diversification strategy, it has dropped the idea of acquiring bauxite assets. He said Exxaro, which sits on an R18bn cash pile, wants to expand into copper — a critical transition metal of the future — in South Africa and the rest of Africa, and is open to exploration projects.
“Diversification is an insurance for the future ... We tried to get into copper in Botswana, we tried to look at projects on our continent. We believe now that an advanced exploration project would be a good addition to our business, whether in South Africa or the continent.”
Exxaro, which was listed in 2006, is also accelerating investments into Cennergi, its renewables business. Cennergi is expected to generate 1,000MW by 2033, up from 229MW now. This will help Exxaro meet its target of being carbon neutral by 2050.
Others at the Joburg Indaba, which brought together top mining executives, policymakers, investors and other stakeholders, shared Magara’s optimism about coal.
Mike Teke, chair of FutureCoal and founder of Seriti Resources, said such is the interest in coal that a net-zero alliance established by global banks to cut funding for coal projects has collapsed. “Right now that structure is gone — they have shut it down and moved on,” he said.
This is because there is consensus that coal will remain the power source for baseload energy globally, despite the push to transition to renewables.
“Let us come to our senses and understand the energy mix that is going to make the world grow faster and [allow] countries to benefit in terms of economic growth, job creation,” Teke said.
“Accommodating baseload is important, and coal plays an important role in providing that baseload.”
He criticised the pressure to close down coal-powered fire stations in South Africa, saying coal could coexist with wind and solar. “We are saying do not castigate coal and shut down 15 coal-fired power stations in South Africa. Coal mining will continue, it will be here.”
Teke cited Germany, which he said is investing €7bn (R140) in carbon capture to mitigate the greenhouse gas effects of coal emissions.
The world should recognise and accept the enduring role of coal in the energy mix and align energy choices with the needs of people, especially in the developing world
— Moses Madondo, Thungela Resources CEO
“On the insurance side, we were told nobody wants to insure you as coal players; now they are saying, ‘Can we talk?’”
Seriti Resources has invested profits from its coal mines into renewable energy, which birthed Seriti Green, a renewables division focused on building wind farms in Mpumalanga, he said.
Moses Madondo, CEO of Thungela Resources, said there is growing demand for coal as it is clear other energy sources are unlikely to satisfy global energy demand and meet development needs.
He said coal is now seen in a more positive light, with global insurance giant Lloyds and leading investment management firm BlackRock revising their climate change policies to recommit to the fossil fuel sector.
“The world should recognise and accept the enduring role of coal in the energy mix and align energy choices with the needs of people, especially in the developing world,” said Madondo.
Ruan Nothnagel, chief commercial officer at Menar, a diversified mining company with coal interests, highlighted the importance of technology to reduce emissions. India, he said, is planning 92GW of new coal-fired capacity by 2032 but will offset this with state investment in carbon capture technology.
“So the Indians, who were along with China leaders in renewables, have run out of the ability to power the economy with wind and solar, switching back to coal but promising that they will capture the carbon.”
Total emissions are climbing and the only realistic way to decarbonise is through carbon capture technologies, he said.
“There are not enough renewables on the way to meet that demand. The whole world is behind on its grid expansion.”
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