JOHANNESBURG (miningweekly.com) – Diversified mining company South32 last night spoke of its “very good” working relationship in coal with State power utility Eskom.

The company, which has moved out of its large premises in central Johannesburg and set up in Melrose Arch, also indicated the unlikelihood of any further downsizing of its manganese business.

The former South32 building in Marshalltown, a landmark that formerly accommodated BHP Billiton and Gencor, has been bought by the Gauteng Department of Education.

On coal supply to Eskom, the company spoke of good prospects for domestic sales owing to more power stations coming on stream.

“We have a really good working relationship with Eskom,” South32 CEO Graham Kerr said.

Longer-term, it would need to sit down with the utility to discuss issues around its power price agreement at the Hillside aluminium smelter in KwaZulu-Natal, where it pays a lower electricity price when the aluminium price is down and a higher one when the aluminium price rises. South32 calculates that this will come to an end in 2028 whereas Eskom believes the end date is 2020.

On the coal front, South32 president and COO Africa Mike Fraser said the company’s success in lowering costs at its Khutala coal mine had resulted in Eskom indicating that it would most likely go ahead with an investment in the operation in order to extend its life to the end of the supply contract.

Overall, the thermal coal business was described as being tough, with climate change becoming an increasingly bigger issue every time the company talks to investors.

Keeping manganese supply in balance is seen as an interesting challenge for South Africa, which has 80% of the world’s manganese resources.

Recent indications point to South Africa’s growth plans being tailored to the demand for manganese and the avoidance of oversupply, the company said at the media meet attended by Creamer Media's Mining Weekly Online.