Nastassia Arendse
4 minute read
30 Jan 2018
8:51 am

Anglo hives off Eskom-tied coal asset

Nastassia Arendse

‘Eskom…would prefer their coal supplies to be from empowered entities,’ explains Anglo American deputy chair Norman Mbazima.

NASTASSIA ARENDSE:  Earlier today I had a conversation with Norman Mbazima, who’s the deputy chairman of Anglo American South Africa. It was because the company announced the sale of the New Largo Thermal Coal Project that’s in Mpumalanga for around $71 million. It’s part of their strategy to exit some of the South African domestic coal projects.

NORMAN MBAZIMA:  It’s a project that will be able to supply large amounts, between 15 and 20 million tonnes for lengthy periods of time, maybe over 40 years, to Kusile Power Station. So it’s a very big project.

NASTASSIA ARENDSE:  You say in your statement that the sale delivers on your longstanding strategy to exit the Eskom-tied coal assets. Tell me about that strategy and where you are at this point.

NORMAN MBAZIMA:  When this transaction is finished we will basically have fully exited Eskom-tied collieries. The thing is that over the last so many years Eskom has not made a secret that they would prefer their coal supplies to be from empowered entities, i.e. those that are over 50%-owned by HDSA (historically disadvantaged South Africans). We’ve worked with everybody over the last two years to see whether we could exit that in a responsible manner that doesn’t threaten the coal supply, which is necessarily for how the major power stations work. And I think we’ve reached that medium right now. I think it’s excellent.

NASTASSIA ARENDSE:  It was in 2015 or 2016 when everybody was reeling from the commodity crash. One of the things Anglo American did talk about is a point to focus on – on copper, diamonds and platinum. But now we are starting to see a bit of a recovery in commodity markets. What do you make of the commodity markets’ picture at this point?

NORMAN MBAZIMA:  It’s certainly much better than it was at the end of 2015 and coming into 2016. There is a lot of optimism in the mining industry right now. We are looking forward to how 2018 is going to pan out with a lot of optimism.

We are happy with the portfolio of assets we have in South Africa now, including manganese, iron ore, coal, platinum, and diamonds. We will continue to hold those assets into the future of course, unless somebody comes with a ridiculously large cheque.

NASTASSIA ARENDSE:  [Chuckling] Before I let you go, I think in less than a week a lot of the top mining companies will be descending on Cape Town for the Mining Indaba. What do you think are some of the big key themes that the mining industry is grappling with, both from a local and international perspective?

NORMAN MBAZIMA:  I think from a local perspective the mining industry was troubled by the political environment and the regulatory environment more than anything else. With the conclusion of the ANC conference people are feeling a lot more bullish. But remember, we start off with sentiment and then you have to change the underlying things that are happening. I think sentiment is beginning to turn around and we look forward to the underlying things also following.

Internationally it’s mostly about what the world economy is going to do. Even there, if you read what’s been happening at Davos, there is a lot more optimism about the growth of the world economy and following that the prices of major…

NASTASSIA ARENDSE:  Just to go back a little on the New Largo asset. Can you tell me a little about it, in terms of where it’s situated?

NORMAN MBAZIMA:  It is situated in Mpumalanga. Anglo American has been holding this asset since about 1953, when we first invested in it. It’s the right grade for the kind of power stations that have been built. And, as I said, it’s the biggest remaining piece of coal in the ground in Mpumalanga. We knew that eventually a big power station would be built close to it because of the availability of that coal. So the Kusile power station was probably placed there because of that coal being right there, and being able to supply that power station for 40 or 50 years. So ja, it’s a very exciting project.

Brought to you by Moneyweb

For more news your way, follow The Citizen on Facebook and Twitter.