Don´t know if this has already been posted......By: Nomvelo...

Don´t know if this has already been posted......

By: Nomvelo Buthelezi
2nd March 2012
TEXT SIZE
Text Smaller Disabled Text Bigger


Sandton-based coal developer CIC Energy is keen to export coal from Botswana but says the country’s government urgently needs to make a decision concerning the implementation of the Trans-Kalahari railway line project, as the coal industry needs to know how to plan for the future.

The lack of transport infrastructure, in particular railway lines, is one of the biggest challenges hindering progress in the country’s coal sector.

CIC Energy president Greg Kinross believes the timing to expand the country’s infrastructure is perfect as coal is in its positive cycle.

The Trans Africa Rail Consortium, of which CIC Energy is a member, is currently investigating the development of a railway line from Botswana to the Waterberg coalfield, in Limpopo, South Africa, and to a port in Namibia.

An alternative high-speed heavy rail route going east from Botswana through Zimbabwe to a port in Mozambique is also under discussion.

“There is no question that the Botswana government is feeling the pressure to make a decision on the railway line, with high-level meetings being held by both Botswana and Namibia,” says Kinross. “It is imperative that a new rail line is built and whether it goes east or west is not of consequence to us; we are route agnostic.”

Botswana is endowed with vast coal resources of about 212-billion tons, which up to now have not been fully exploited. For a long time economic situations have conspired against significant exploitation of these coal resources. It is gratifying to observe that the situation has changed and Botswana coal is in demand outside the borders of this country, says Botswana President Ian Khama.

The governments have stated that they would like to come to a decision in the next two to three months.

The consortium was established by the Industrial Development Corporation (IDC) of South Africa and includes South Africa-based mining group Exxaro, Botswana-focused coal resource developer Asenjo Energy (a joint venture between Jonah Coal Botswana and Aquila Energy), coal miner Morupule Colliery and AIIM (a joint venture between Macquarie and Old Mutual Funds Managers).
Kinross says it is important that the consortium initially focuses on players that have delineated resources that can produce export-grade coal. The current consortium could collectively produce about 60-million tons of coal a year for export on a sustainable basis.

He notes that the railway line project is capital intensive and that it will become increasingly viable as more tons are transported by the railway line, resulting in lower rail tariffs.

CIC Energy completed a prefeasibility study in early 2008, with positive results achieved, and submitted an expression of interest to develop the proposed 1 500 km Trans-Kalahari rail line in 2010. The develop- ment of the railway line has been delayed owing to the respective governments yet having to choose an appropriate develop- ment model and routing.

“Our proposed concession model involves the government’s granting the private sector permission to fund the construction of its own railway line. Although the private sector will be provided the rights to build the railway, Botswana and Namibia would still be entitled to have any commercial or political considerations taken into account.

“The concession model is suited for situations where the host government has a small balance sheet and or limited appetite for financial exposure,” explains Kinross.

Challenges
The construction of the Trans-Kalahari railway line is threatened by other potential railway projects in the pipeline, such as State-owned rail and ports firm Transnet’s Swazi Rail Link expansion, as there probably is only opportunity for one new major heavy haul coal line.

Should the country rely on other railway lines, for example, those in South Africa, this will put Botswana at a disadvantage to South African coal both from a cost point of view and capacity availability, owing to the fact that the country is further from export ports than all South African coal producers.

“If the western route is developed, it will be to the country’s advantage as there will not be competition for capacity over certain lines,” says Kinross.

However, any railway line development will have a positive effect on the country’s coal potential because Botswana will be able to export coal to countries in need, such as India and China.

Therefore, the need for the Trans- Kalahari railway line should be thoroughly examined.

“Transnet plans to upgrade existing infrastructure that will go east, towards Swaziland, instead of directly to the Richards Bay Coal Terminal, in KwaZulu-Natal. This will also include moving general freight from the Richards Bay freight coal line onto another line to free up massive capacity on the coal line and increase it from 70-million tons to 90-million tons a year. It will also free up capacity to transport coal to Mozambique,” explains Kinross.


He notes that the South African mining industry is also challenged by limited access to water. Luckily, CIC Energy’s Mmamabula coal resource is well positioned and has significant water access available and, therefore, is waiting on a railway line that will improve its export capabilities.

Kinross also highlights that there is no significant manufacturing or services sector in Botswana; therefore, exporting coal will go a long way to building its economy. In addition, CIC Energy’s two planned coal-fired power station projects, the Mmamabula Energy Project and the Domestic Power Project, have the potential to make significant contributions to the country’s economy.

“Coal has the potential to be the largest contributor to Botswana’s gross domestic product, as well as its government revenues, and would be a sustainable option for the government.

“The fundamentals for coal are good and the demand is great, especially in India. Botswana should capitalise by increasing its production capacity,” he states.

There are developers that are keen to invest in the country’s coal sector but are concerned about Botswana’s lack of progress, especially in terms of infrastructure.

“Botswana and Namibia need to consider the impact severe delays in infrastructure development have on the coal sector, as it will raise concerns about licensing for mineral rights.

“Licences have limited validity and the holders are expected to fulfil obligations within a given period. If developers are dependent on the government to provide infrastructure before mining can start, there needs to be a special concession or relief given to these companies to avoid the expiration of their licences,” explains Kinross.


Skills Development
Botswana has a skills shortage in coal mining because it has yet to establish a viable coal sector, says Kinross.

“Our mining team has worked tire- lessly for years in South Africa to get the necessary training material developed by the Mine Qualifications Authority. CIC Energy has reached an agreement with the authority to make knowledge, information and training manuals available to Botswana. This has allowed facilities and training centres to be established in the near future.”

Over time, the company hopes to source local mineworkers that are technically skilled and have become experienced in specific areas, such as mine management, which is presently lacking in Botswana, concludes Kinross.
Edited by: Tracy Hancock


http://www.miningweekly.com/article/infrastructure-challenges-hinder-progress-of-coal-sector-2012-03-02