The South African Coal Mining Sector

This report focuses on the mining of coal in South Africa as well as the activities of coal testing laboratories. South Africa depends heavily on coal as a source of economic value, employment and energy. According to StatsSA’s latest available figures, coal mining contributed R64bn, or 1.8%, to the country’s economy in 2013. The sector employs approximately 90,000 people and during 2014 the country’s coal exports amounted to 77.9Mt valued at US$5.1bn, while 183.0Mt of coal were sold locally.

Eskom’s Need for Coal

State-owned Enterprise, Eskom is dependent on coal for 90% of its power generation. Although the government’s revised Integrated Resource Plan 2010 - 2030 has targeted a reduction in South Africa’s coal-fired energy to 65% of the current value by 2030, replacing it with renewable energy (9%), nuclear power (20%), hydropower (5%), and closed cycle gas turbines (1%), industry commentators believe that these targets are unlikely to be achieved.

Challenging Conditions

Junior coal mining companies created by broad-based black economic empowerment initiatives are responsible for an estimated 30% of total South African coal production. However, many of these miners are struggling to survive because of high production costs, the low margins obtained on domestic sales and inadequate rail infrastructure for the transport of coal for export. Other challenges faced by all role players relate mainly to regulatory changes that have brought uncertainty, insufficient investment into establishing new mines, unreliable and reduced electricity supply, falling coal prices, and rapidly escalating production costs.

Report Coverage

The South African Coal Mining sector report describes the current market, outlines M&A developments and corporate activity within the sector and focuses on factors influencing its success. The report profiles 25 companies, including the five major producers, Anglo American, Glencore, Exxaro Resources, Sasol and BHP Billiton Coal South Africa, now South32. Also profiled are junior miners including Sumo Coal (Pty) Ltd, which employs 55 people at its Kopermyne Colliery and is involved in three exploration projects, and Continental Coal Ltd, which is currently undergoing business rescue proceedings.