Morupule Coal Mine is now a player in the cutthroat global coal markets. It has taken a lot of behind the scene preparations and sacrifice. However, it appears the future looks bright for the Palapye based outfit which turns 50 next year. Below, KOOBONYE RAMOKOPELWA speaks to the mine's Business Development Manager, MATTHEWS BAGOPI on what lies ahead.
BOTSWANA GUARDIAN: We understand that Morupule Coal Mine recently exported its first coal produce to the global markets. Kindly take us through the whole process up until the coal landed in Mozambique enroute to the global markets? MATTHEWS BAGOPI: This effort has been under negotiation for close to a year with our client having approached us to find an FOB (free on board) solution that did not impose onerous risks on us and does not drastically change our traditional trading model. This was way before the current global price bubble, when offshore traded coal prices were hovering around USD90/metric tonne. Our client worked hard to obtain port and rail allocations at reasonable cost even before the bubble and we worked closely with them to educate the overseas market on our coal characteristics and the uniqueness it presents, compared to the traditional sources of coal they are used to. Collaboration between MCM, the client, the rail companies and port operators yielded the solution that we are now witnessing undergoing these trials, hoping to establish a viable coal evacuation route. MCM in principle trades on an FOR/FOT (free on rail/free on truck) basis and the solution that was arrived at in this deal delivers an FOB (favoured solution for overseas clients) without changing MCM’s trading model. This was a big value addition to us and the market, that this collaboration has yielded.
BG: Where exactly is this coal headed? MB: The product is being exported as an aggregated consignment to a global coal trader who will identify the final destination.
BG: Now that MCM is exporting its coal, does this mean you have increased production levels for the current operational year? Please provide specific figures. MB: MCM is in the process of increasing its production capacity of washed coal products to 1.2 million metric tonnes per annum. This is what the Motheo Project will give us. The current exports are opportunistic supplies, utilising the current production capacity at best to supply these new markets. BG: Exactly how much of coal tonnage has been exported in the first tranche? MB: The trial train carried 40 BHS wagons of export grade coal at 2,000 metric tonnes. We expect to continue this trial this week with a further 2,000 metric tonnes consignment. This enables us to understand the supply chain better; where the bottle necks are and what needs to be done to make the chain a smooth and reliable logistical route. This is very important and will be followed up by a planned delivery of 170,000 metric tonnes by end of the year. This will be supplied by new product from MCM’s open cast mine, project Motheo, which is meant to produce first coal by end of August 2022.
BG: What mode of transport is being used to transport this coal and why that particular mode (of transport)? MB: The coal is transported to port by rail, utilising Botswana Railways, National Railways of Zimbabwe and CFM of Mozambique. Coal as a bulk commodity is best transported by rail as huge volumes can be moved over a short period of time compared to road. This is suitable for coordination with shipping vessels which then take the consignement, between 35 kilotonnes to 200 kilotonnes in a shorter (and therefore economically viable) period if supplied by rail than road transport.
BG: The mine has now entered the global markets space. Does this mean the company has exhausted the Southern African markets which you have been servicing for years? MB: MCM still has a presence in regional markets and still has interest in growing that presence in these markets. The current exploits are enabled by the ongoing price bubble and we can only hope it encourages development of this route for sustained supply going forward. Of course, we do have an interest that this is just the beginning and our presence in the global markets will also grow, because we certainly have an abundant resource to supply to the global markets.
BG: How better- prepared is MCM now that it has entered the cut throat global coal export market? MB: We always prepare to identify and manage business risk in whatever space we trade in. We have partners in this in form of our customers and service suppliers (rail companies) who all understand the associated risk and place those risks where they are best managed by a party that is best suited to mitigate them. We believe this is why we have been able to undertake this in the first place and we will jointly learn lessons going forward that will prepare us for the next phase of this market development.
BG: MCM has been mining coal for nearly half a century. Why is it that the company is finding it suitable to start selling on a global scale? MB: Global markets have always been attractive, despite their ups and downs in the commodities price cycles. A major constraint for MCM has always been distance from ports, access to those ports and lack of suitable infrastructure to evacuate products in a profitable and sustainable manner. The moving parts of this supply chain are perhaps in their best possible position to enable viable exports and that is why we are able to do it at the moment. In addition, the world’s reluctance to invest in coal creates a space for us to fill in gaps on the supply side of the global energy equation as is being witnessed currently. We believe we are in a good position to take advantage of this and even create a whole new global supply that can be reckoned with in global coal trade.
BG: How important is Motheo project, once commissioned, to MCM latest plan to start selling abroad? MB: The whole essence of Motheo is just what we are seeing now. The project, as its name suggests, sets the foundation for global exports. We are banking on these markets being the long term offtakers for the Motheo products and any expansions that will in all likelihood follow Motheo Project as currently scaled.
BG: What strategic partnership(s) has MCM entered into which will enable for the successful execution of exports of this commodity? MB: MCM’s preferred trading model is FOR/FOT (free on rail and tree on truck) Incoterms. This means MCM prefers point of sale and payment at our weighbridge on the mine. This presents less risk for us as a producer and seller whilst it is incongruent with the global market expectations where seller must take risk of transportation to port and loading into vessel, known as FOB (free on board). Our partners in the current transaction, a consortium between Leruo Resources; Mufasa Resources and African Rail Company undertakes this FOB element, meaning that we do not over extend ourselves to risk profiles that we are not comfortable to manage at this point.
BG: Lastly, how upbeat is MCM on the coal markets in the short to medium term? MB: We are very upbeat about this and we have been working on this even before the current price bubble, realizing that we have a product that the world will need even though it may not be fully cognizant of this at this stage, considering all the anti-fossil fuel narrative that is ongoing at the moment. However, there are key enablers that need to come into reality to make this sustainable. Debatably, the single most important of these enablers is the development of a heavy haul rail line suitable for bulk commodity transportation that can place the logistics cost of evacuating our products on a globally competitive footing. Discussions around the development of the Lephalale Rail Link are very key in this and in the least what we are doing is to convince the national rail operators in Botswana, Zimbabwe and Mozambique to do something between themselves to ensure that the current rail infrastructure that they run on this route can be of economic use to the end of being a viable export rail route. So far, they are proving to us that they also share these optimistic sentiments with us and things can only get better if we all drive to this common goal.