Miners shrug off negative sentiments

Coal investors this week shrugged off damning allegations by two South African geologists who accuse Botswana of exaggerating her coal endowments. Peer Meyer and Xavier Prevost said government is aware that information on coal reserves in Botswana is a “big lie” and urged the Department of Geology to invest in research on coal deposits. Botswana coal roadmap puts total reserves at 210 billion tonnes, making the diamond rich country one of the largest coal rich countries in the world.

Local coal juniors trading on the Botswana Stock Exchange (BSE) remained flat on Wednesday as hopes of improving coal features in the international market overpowered a batch of unsettling news from Meyer and Prevost. First to take the cue was Morupule Colliery, a subsidiary of Debswana Diamond Mine.

Plant Manager, Mathews Bagopi said his firm does not need an approval from Meyer as they rely on cutting edge equipment for assessing coal reserves in line with international best practices. “Here at Morupule, our area of focus has got over 12 billion tonnes of coal reserves which we are currently exploring; now how much do you think the entire country has?” Bagopi responded angrily. Meyer is consultant for Meyer Consulting Firm and Prevost consults for XMP Consulting Firm. The geologists claim that Botswana has a little over 33 billion tonnes of coal. This infuriates Bagopi. “I cannot tell you the specific number of coal resources in Botswana, but I know the country has more than enough,” he explains. He believes South African geologists’ conclusion and allegations are damaging but argues that the two geologists fell short on research. President of Botswana Chamber of Mines (BCM) Charles Siwawa agrees with Bagopi and faults SA geologists for basing their assessments on ongoing exploration focus areas to the exclusion of larger coal reserves in Botswana that remain unexploited.

Owners of Mmamabula Energy Project, Jindal Africa were also adamant about Botswana’s estimated coal reserves. “The reason we acquired CIC Energy is because we saw that the company had potential to make a killing from coal explorations given the large coal deposits in the country,” said Bharat Rohra, Chief Executive Officer (CEO) of Jindal Africa striking a familiar chord with Mashale Phumaphi, Managing Director of the Botswana Stock Exchange (BSE) greenhorn Shumba Coal. India’s titanic steel firm, Jindal BVI acquired Canadian explorer, CIC Energy for US$115 million for the development of a coal-fired mine in central Botswana. Phumaphi said Shumba already has identified over 1 billion tonnes of coal which they have began exploring while Rohra who doubles as the President of the Indian based company said; “Our current annual production and target this year is to mine 4 million tonnes of coal.” He said the company is in the process of revamping their production and start exporting millions of coal to India, whose demand for coal is currently at rooftop level for electricity production.

Rohra also said Jindal is a power producing company that aims to develop coal powered stations in Botswana. The company is in the process of developing the 1200 Mega Watt Mmamabula power station while Phumaphi added that Shumba coal’s Sechaba Thermal Power plant was due to be connected to the national grid by 2016, with potential to export power within Southern Africa. Meanwhile, Prevost said that exploring companies in Botswana are going to have a hard time exporting coal because there is currently no transport route for exporting coal, thus making it more expensive to export coal. He stressed that for the next seven years Botswana will not import any significant coal because of lack of a railroad.

An economist at Econsult Botswana Thabelo Nemaorani said investing in coal was risky given the high investment on an uncertain future considering unavailability of transportation infrastructure. However he said coal is becoming increasingly important as exploration firms struggle to find new diamond mines. “Coal exports are projected to grow steadily until they plateau at P16 billion in 2024,” said Nemaorani. Further Prevost also said that it is not going to be easy to locate potential investors on the proposed Trans Kalahari Railway line because it is at around P80 billion it is prohibitively expensive. He said investors would benefit less from coal proceeds because of dwindling coal prices. The latest data shows that coal prices have been going down for the past years. In 2008 coal prices were at an average of US$150/tonne, however by April this year the prices had settled to an average US$60/tonne which is equivalent to a 60 percent decline for the past five years. While coal’s contribution to employment is currently low in Botswana, Nemaorani expects coal employment to peak in 2024 and employ around 7 000 people accounting for 35 percent of employment in the mining sector and 2 percent of national employment figures.