CAPE TOWN (miningweekly.com) – Coal needs higher prices to survive, XMP Consulting coal analyst Xavier Prevost said on Wednesday in a presentation that positioned South Africa as the world's sixth-largest producer of the mineral with a reserve of 32-billion tonnes.

Speaking at the IHS Energy South African Coal Exports Conference 2015 attended by Mining Weekly Online, Prevost spoke of South Africa’s own local internal domestic market, which needs more coal, not following the downward price trend of export coal.

He outlined how inland markets, which were firmer than export markets, were fetching prices of R1 000/t at a time when mines needed to enhance their returns.

While the development of new coal mines was needed, it was failing to take place.

“We need new mines and new investment, but we don’t have enough investment even though coal is always going to be the cheapest source of energy,” added Prevost, a former manager of South Africa’s national coal database.

He reported that State electricity utility Eskom and other South African electricity producers collectively used 128.2-million tonnes of coal last year, out of 333-million tonnes of run-of-mine coal extracted.

Department of Mineral Resources small-scale mining director Kwata PG (Gad) Kwata said South Africa had the sources of coal and the demand for coal and the sector was attracting small-scale miners.

Sicelo Sikakane, GM corporate strategy and planning of State mining company African Exploration Mining and Finance Corporation (AEMFC) called for a greater direct role for government in coal mining, especially in cases where risk capital was unprepared to invest.

“What we need is a direct role by the State to derive full benefit in the same way as the Arab countries deal with their oil reserves.

“We need to be bold and develop State-owned entities without fear or hesitation,” Sikakane urged.

An upping of its game by government in this way was not nationalisation.

It was imperative, however, that the State ran its mining businesses profitably.

He criticised the private-sector legacy of ghost mining towns and acid mine drainage, which, he said, would never have happened under State mine ownership.

Earlier the conference was told that AEMFC, which currently provides Eskom with half-a-million tonnes of coal a year, is planning to up that level to one-million tonnes of coal a year.