Name and Location
New Largo coal mine project, Mpumalanga, South Africa.

Client
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%).

Project Description
New Largo is planned to be an opencast mine in the Witbank area and is expected to produce 14-million to 15-million tons of thermal coal a year to supply Eskom’s 4 800 MW Kusile power station, which is currently under construction.

The project will include a conveyor from Anglo American Inyosi Coal’s Phola processing plant to Kusile.

At full production, the Kusile power station will require 17-million tons of coal a year, depending on its quality. Anglo American intends to enter into a long-term coal supply agreement with Eskom for the new power station.

Key mining and associated amenities planned for New Largo include the opencast mine pit; draglines; crushing plants; trucks and large electric shovels; conveyor belts and tips; coal stockpiles; access roads; haul roads; overburden disposal facilities; stormwater and process water management services, with pollution control and balancing dams; a water treatment unit to treat water pumped from the old underground mine workings, and contaminated water from the proposed new operations; and power lines and substations.

The project has an estimated mine life of 50 years and it is expected to process at least 12.7-million tons a year of raw coal. Two draglines will be used to strip the required volumes of overburden.

Additional coal supplies will be required when the Kusile power station reaches full production and the intention is to source the additional reserves from the New Largo coal reserve.

Value
The project has an estimated capital cost of between R16-billion and R20-billion; however, this figure could be revised after the prefeasibility and feasibility studies.

Anglo previously indicated a possible capital cost of $1.5-billion, or about R12.5-billion.

Duration
The New Largo coal mine is expected to reach full capacity in 2017.

Latest Developments
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 creating 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,” he said.

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

Eskom will spend R200-billion over the coming five years to shore up its coal supplies and will aim 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 is being repositioned to play a “catalytic role” to support not only the growth and development of the emerging mining sector, but also Eskom’s requirement for a secure, long-term supply of coal.

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

It has emerged separately, however, that there are currently three coal export terminals under consideration for Richards Bay, in KwaZulu-Natal. These include 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 will 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 are set to invest R113-billion, a figure that Gigaba says represents a 100% increase on the R53-billion invested by the SoCs three years ago. Eskom will invest more than R500-billion in the next five years, while Transnet will invest more than R300-billion over seven years.

Key Contracts and Suppliers
None stated.

On Budget and on Time?
The project has not yet been approved.

Contact Details for Project Information
Anglo American media relations, Pranill Ramchander, tel +27 11 638 2592, fax +27 11 638 2557 or email pramchander@angloamerican.co.za.