COAL SECTOR OVERVIEW & OPPORTUNITIES

Transcription

1 October 2013 COAL SECTOR OVERVIEW & OPPORTUNITIES MASHALE PHUMAPHI Managing Director - Shumba Coal

2 1. Overview of Botswana's Coal Resources 2

3 Up until 2012 Botswana had produced less that 1 million tonnes of coal per annum for over 30 years. This year we are looking at over 3 million tonnes and the trend is set to continue. 3

4 Coal Fields of Botswana 4

5 Coal Resources of Botswana 5

6 Botswana Chamber of Mines Market capability study REASON: To inves4gate poten4al coal produc4on from Botswana s iden4fied coal projects and the market for Botswana thermal coal. 1. Poten4al Product specifica4ons for domes4c and export coal 2. Poten4al produc4on volumes for domes4c and export coal 3. Implica4ons for rail and power infrastructure develops 4. If the volumes forecast are sufficient to make the planned railway line developments viable 5. Iden4fy key target markets and poten4al market demand for defined Botswana product specifica4ons 6

7 Key Outcomes Based on intended mine developments from exis4ng resources up to 24 new mines producing over 190 million tonnes per annum of coal could poten4ally open The Mmamabula and Morupule areas have the poten4al for the most mines with a possible 9 each Current resources holders have plans to produce over 115mtpa of coal for export and this number could increase substan4ally The coal intended for Power Genera4on ( 75 mtpa) could sustain a power industry producing 15 GW of power for domes4c regional consump4on 7

8 2. Export Market

9 Poten&al Globally Significant Exporter 9

10 Exporting of coal from Botswana via Transnet Export Possible via Existing Railway and Future Developments o Transnet is availing export capacity for Botswana coal as follows: o Up to 2 million tonnes per annum available now o Significantly more capacity available by 2016 o Large tonnages can be exported after 2018 via a rail link between Botswana and South Africa as part of the current heavy haul expansion in Limpopo's Waterberg

11 Other opportunities for export of Botswana Coal o The first dedicated regular export coal train from Botswana has began exporting coal using existing rail via Zimbabwe to the Matola Coal Terminal in Mozambique. o Two consortia intend to construct two separate rail way lines. The Trans-Kalahari route shall terminate at ports in Namibia and the Ponto Techobanine rail route will terminate at the Mozambique port

12 Large amounts of coal needed by Eskom in the short and medium term Ian Hall, chairman of the South African Coal Roadmap Society (SACRM) says Our power sta4ons are reaching the end of their lifespans and the coal opera4ons that supply them will reduce produc4on or close en4rely around This means we need to source anywhere between 60 and 120 Mtpa of new coal supply before then to sustain our power sta4ons and growing energy requirements. SA Cabinet has approved the building of a third coal- fired power sta4on by Eskom

13 3. The Regional Power Situa&on

14 Central Location

15 SAPP (Southern African Power Pool) connecting 9 countries

16 BPC TRANSMISSION GRID PLAN Katima Kasane ZAMBIA Livingston Victoria 113km Hwange Shakawe Pandamatenga ZIZABONA INTERCONNECTION N A M I B I A Hana Maun DML BK11 Orapa 25km AK 6 348km Sowa Orapa 90MW Mowana Dukwe Francistown TaJ 30km 80km 160km Z I M B A B W E Bulawayo Gantsi Gope ACAP Serule 51km Phokoje 151km 44km Selebi-Phikwe Omaere Morupule A Morupule B Jwaneng Molepolole Isang 2x215km 47km Delta 49km MaJmba P/S S O U T H A F R I C A Tsabong Heuningvlei Thamaga Kanye 50km 52km 65km GABORONE Lobatse Spitzkop Proposed ExisJng 66kV 132kV 220kV 400kV HVDC Westcor

17 Botswana ESI Overview (Single Buyer Model) Mining Commercial Government BPC Genera4on BPC Transmission BPC Customer Services & Supply DomesJc Electricity End Users Regulator BEWRA IPP Genera4on SAPP Import / Export BEWRA : New EnJty under Establishment

18 Current Power Demand Situation

19 Severe Short fall in All Power Markets (Opportunity for New Power Producers) In Botswana alone an addi4onal 600MW is required in the short term The South African economy has been growing in excess of 3-5% per year. This growth rate has resulted in a situa4on where ESKOM, southern Africa s major genera4ng u4lity and price bench mark seder, no longer has sufficient surplus genera4ng capacity. Leading coal industry experts, Wood Mackenzie believes that there is a massive poten4al power deficit that could emerge in South Africa with a poten4al capacity shorgall of up to 32,000MW by In SADC, Namibia and Zimbabwe have historically been power deficit countries. Zambia is expected to run short of power as its mining sector grows. Combined; these three countries will have a power deficit of nearly 4,000MW in the near future. Infrastructure and legisla4on for regional power distribu4on already in place Eskom s average tariff adjustments have meant an 150% price increase in the last 4 years and there are further increases planned over the coming 5 years. Adrac4ve returns available for new Independent Power Producers

20 4. Investment Opportuni&es 20

21 Areas of Possible Investment 1. Mines and Explora4on 2. Power Sta4ons 3. Provision of Services and Equipment to growing Coal Industry 4. Power Distribu4on Infrastructure 5. Rail and Rolling Stock 6. Coal Okake 21

22 Mines and Explora&on At present there is the opportunity to invest in or purchase coal deposits at all 4me low level. The GFC has lead to a severe drop in the valua4on of non revenue producing companies such as junior miners. The last three coal deposits sold were bought at a price lower than the expenditures that had been spent of that project by the previous owners. 22

23 Power Sta&ons Power Distribu&on Infrastructure The current and forecast domes4c and regional power shortage presents an opportunity in this area. 23

24 Rail and Rolling Stock With the need to supply coal to regional and interna4onal customers, Botswana export infrastructure requires investment. By 2016 Eskom will need an addi4onal 60Mtpa and India an addi4onal 200Mtpa 24

25 5. The anrac&ons of Inves&ng in Botswana Coal 25

26 ANrac&ons Centrally located in a power hungry region The SADC region has severe power which is only going to get worse Botswana has large easily mined coal resources In order to produce cheap compe44ve electricity it is best for the Power sta4on to be close to the coal. Transport costs can add significantly to costs. This will make it very compe44ve in rela4on to Eskom Easy DistribuJon via SAPP from Botswana (Infrastructure in Place) The South African Power Pool exists and can enable the export of cheap Botswana power throughout SADC from its central loca4on DomesJc beneficiajon of coal By beneficia4ng we aim to maximise the local economic contribu4on of the coal sector to Botswana 26

27 ANrac&ons...Con4nued A Favorable investment climate...best in Africa Botswana has a stable and democra4c poli4cal environment, rule of law, and a favorable regulator environment for business. Power sta4ons are highly capital intensive with long pay back periods and that thus a stable predictable jurisdic4on is key. No foreign exchange controls Botswana has no foreign exchange controls and allows full repatria4on of profits, investments and capital gains, free of withholding taxes. Again this will be adrac4ve Financing opjons Botswana has one of the most highly developed financial sectors in Africa, with a range of private and government backed financial ins4tu4ons able to provide loans, overdram facili4es, and equity capital to both foreign and domes4c investors. 27

28 Adrac4ons...Con4nued Africa s Best Mining DesJnaJon According to the authorita4ve the Fraser Ins4tute Annual Survey of Mining Companies, Botswana remains the most preferred mining and minerals investment des4na4on in Africa. CompeJJve investment incenjves Botswana incen4ves include duty free import of all capital equipment for all companies and duty free import of raw materials for exporters. Certain tax holidays are also available, although Botswana has reduced corporate income taxes to some of the lowest on the con4nent: 15% for manufacturing opera4ons and 25% for all others. 28

29 6. Posi&ve Regional Effects of Developing Botswana s Coal Sector 29

30 Cheap power will benefit the whole region Obvious benefits to the retail market which does not want huge power price hikes or power cuts The South African economy is a clear example of how cheap power can s4mulate industrial development. Cheap power will allow the regional metal beneficia4on industry including Botswana, South Africa, Zambia and Zimbabwe to grow as the smel4ng and processing of mineral ores can be very power intensive. 30

31 Sa&sfac&on of Regional Integra&on Objec&ves Meets NEPAD's aim is to promote regional economic integra4on by bridging Africa's Infrastructure gap. There can be no meaningful development without trade and there can be no trade without adequate and reliable infrastructure. Follow on from signing of a Memorandum of Agreement on Coopera4on in the Field of Energy in rela4on to Coal- Based Energy Projects in mid 2012 by President Jacob Zuma and Botswana s President Ian Khama. 31

32 THANK YOU 32