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CONTINENTAL

COAL

FEATURE


C O N T I N E N TA L

S H O W S C OA L IS ST I LL

ENERGY’S The black diamond is not Green’s best friend, but for energy users worldwide its popularity is running high and growing. And for thermal coal producer Continental Coal, Africa is the big resource and Asia the market focus, as CEO Don Turvey tells South Africa Magazine. By Colin Chinery

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VIP

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nvironmentalists may bark but the coal wagons roll on. And on. In the past 10 years global coal consumption has risen by close on 50 percent and will continue to grow through this decade. Greenhouse gas emission bad hat it may be, but King Coal is standing his ground against the Green Knight. China accounts for nearly half of global demand and analysts see a massive increase in imports from 175 million tonnes to around one billion by 2030. Adding to this fellow Eastern rising star India is forecast to increase its imports by more than five times to at least 400 million tonnes over the same timespan. The passage of the Kyoto Protocol in 1997 may have contributed to rising Asian coal consumption by encouraging countries to reduce their own CO2 emissions while not discouraging countries from importing goods made in countries using coal as their primary fuel for electricity. Go figure. “Whether people like it or not, coal is still one of the cheapest forms of energy in the world,” says Don Turvey, CEO of South African thermal coal producer Continental Coal, with a project portfolio in South Africa’s major coal fields. Used


Continental Coal FEATURE

in power stations worldwide to generate electricity, thermal coal’s importance is set to continue, fuelling an estimated 44 percent of global electricity in 2030. Formed to take advantage of the robust domestic and global demand, and with particular focus on Southern Africa, Continental is targeting production from its portfolio of predominantly export thermal coal mines of 10Mtpa ROM by 2015. Already listed in Australia, last year Continental placed its ordinary shares on the London Stock Exchange’s Alternative Investment Market (AIM), a move Turvey says will enlarge its international profile and engagement with additional European funds and institutional investors.

Continental Coal currently has two operating open cast coal mines, the Vlakvarkfontein and Ferreira, producing close to two million mt per year of thermal coal for the export and domestic markets. A third, Penumbra a shallow underground mine project started last September - is scheduled to begin export production in the third quarter of this year. And with a Bankable Feasibility Study completed, a fourth mine - the De Wittekrans Coal Complex Project - is set to become the company’s largest new development. Others initiatives include the Vlakplaats coal project under an agreement with major global coal investors Korea Resources Corporation (KORES), and a black economic empowerment (BEE) partner.

Whether people like it or not, coal is still one of the cheapest forms of energy in the world Don Turvey

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Continental Coal FEATURE

“We’ve got a long and strong project pipeline in South Africa, about 65 million tonnes of classified reserves and over 600 million tonnes of resources. A big factor is that we are operating in an established coal mining area, not especially challenging and well supported by rail, road, and power.” Over the border in Botswana are three further projects, which Turvey sees as a longer term play. “A domestic market is starting to develop there and we have an exploration target of over two billion tonnes. Here too exports are a key, but this will only happen once there is a rail and port link. Coal mining companies are putting pressure on Government to establish a rail and port network, and there are a lot of initiatives taking place involving private companies from China, India and elsewhere in the East involved. “At present while we haven’t any assets in Mozambique, Tanzania or Kenya, we’ve been looking at projects - coking coal in Mozambique, and in Tanzania and Kenya most probably thermal coal. We are focused around the east side of Africa with a view to the growing market in Asia.”

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Continental is focused on both export and domestic sectors. “The latter is very important, supplying domestic customers such as Eskom, with whom we recently signed a long term agreement. At the same time exports are a key from a revenue perspective and adding a lot of value if you have the projects to support.” Coal, says Turvey, is a necessary and responsible partner in the energy supply mix. “Whether people like it or not, coal is still one of the cheapest forms of energy in the world. It’s still the dominant supplier of energy, and over the years we haven’t seen any slow down in sea-borne export growth - in fact year on year there’s a continuing growth. “It’s the same on the domestic side. The building of two new coal fired power stations is evidence of that growth. The replacement of production to Eskom in the next two to five years will create further potential for supplies. “The fact is that the other alternative sources of energy cannot keep up with the growth in demand - especially the renewables. We are not antirenewables or anti-nuclear, there’s a space for all of it, in fact we see nuclear and renewable energy resources’ increasing their share of the total energy mix. But this doesn’t mean coal will diminish, in fact in many places it will increase. There’s a worldwide growth in demand as more nations urbanise and industrialise. Then you have countries like Germany that have turned against nuclear.”


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With coal suffering from negative environmental perceptions, sector hopes are heavily pinned on Clean Coal developments such as a current example from Britain. This is the new carbon capture and storage coal fired plant - Caledonia Clean Energy Project – to be based at the port of Grangemouth, west of Edinburgh designed to capture carbon emissions on more than 90 percent of its production capacity. “The way coal is now mined is to be as clean as possible, with usage having the minimum environmental impact. Great strides have been made to ensure that.” Meantime, Continental Coal is advancing at an impressive pace driven by a very strong management team most with large mine background. Now committed to moving Continental on to mid-tier status, their strategy is simple - growth, with an enabling operating cash flow and depth funding. “We are a company with a deep profile of organic projects in South Africa, successful in supplying into both the domestic and export

markets and with the capability of developing projects, Penumbra being an example. “From a management perspective we have a team in place to deliver on the operations side and in the project pipeline. We have a good handle on our costs and know how to manage our margins. “Key strategic alliances and partnerships we have established, such as those with the very powerful EDF trading and a South African first with KORES, have been significant for Continental Coal. Every one of these deals comes with due diligence. And when you get the green light it’s a vote of confidence. The fact that we’ve managed to secure debt funding for our third mining development is a further example of investor confidence. “We are an experienced operator with the ability to grow the company organically and through M&A. We strive to deliver. Continental Coal is heading to become a significant global mid-tier coal company.” END www.southafricamag.com

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CONTINENTAL COAL FEATURE  

SA MAG 24 CONTINENTAL COAL FEATURE

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