Gigaba hints to ‘exciting’ New Largo BEE deal

3rd February 2014

By: Terence Creamer

Creamer Media Editor

  

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Public Enterprises Minister Malusi Gigaba says he expects to make an “exciting” announcement in the near future relating to the ownership of the New Largo coal-mine project, which has been earmarked to supply Eskom’s 4 800 MW Kusile power station, under construction in Mpumalanga.

Speaking at the most recent The New Age-South Africa Broadcasting Corporation business briefing, Gigaba said the creation of new cost-plus mines to supply Eskom was an opportunity to secure “high levels of ownership and the progressive building of black operating capacity and enterprises throughout the mining value chain at a large scale”.

“New Largo is an example of this kind of opportunity. I believe in the near future we will have something very exciting to announce in this regard.”

New Largo is owned by Anglo American Inyosi Coal, a black economic–empowerment (BEE) company, held by Anglo American (73%) and the Inyosi Consortium (27%). The project would comprise a new opencast mine, as well as a conveyor from the existing Phola processing plant to Kusile.

In December, outgoing Eskom CEO Brian Dames said 51% BEE participation was “a requirement” and that “good progress” was being made in negotiations with Anglo American Inyosi Coal regarding the Kusile supply agreement.

Gigaba reaffirmed government’s intention to ensure that, by 2018, Eskom procured over half of its coal from black coal miners, “which would be a strategic act of transformation”.

Eskom would spend R200-billion over the coming five years to shore up its coal supplies and would seek to use a new ‘Mine Development Fund’ to provide finance for the development of mines mainly at the early exploration stage.

Erstwhile State diamond miner Alexkor was being repositioned to play a “catalytic role” to support the growth and development of the emerging mining sector, as well as to support Eskom’s requirement for a secure, long-term supply of coal.

Gigaba also weighed in on the need to open up export prospects for junior coal miners, saying it was critical for South Africa to use its State-owned companies (SoCs) to open access to export markets. “We have established a task team involving Transnet and the Chamber of Mines to determine how the expansion of the Richards Bay Terminal can be leveraged to enable access to more capacity for junior miners.”

It had emerged separately, however, that there were currently three coal export terminals under consideration for Richards Bay, in KwaZulu-Natal. These included the further expansion of the existing private Richards Bay Coal Terminal, a RBT-Grindrod proposal and a possible Transnet export terminal.

Besides coal-mining transformation government would also seek to leverage the “unprecedented” infrastructure investment programmes being undertaken by the SoCs to create a “new class of black industrialists”.

During the current financial year the SoCs were set to invest R113-billion, a figure that Gigaba said represented a 100% increase on the R53-billion invested by the SoCs three years ago. Eskom would invest over R500-billion in the next five years, while Transnet would invest over R300-billion over seven years.

“There are certain non-negotiables when we procure equipment and services for our infrastructure programmes. For South Africa, such a procurement of capital goods in particular must result in tangible industrial development with significant impact on our objective of creating a new class of black industrialists,” Gigaba stressed.

Edited by Creamer Media Reporter

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