Botswana ready to light coal fires

Minergy says industrial users across the border in SA will get ‘consistent quality and guaranteed supply’

Botswana ready to light coal fires

An excavator scoops up coal in an open pit at a coal deposit in Mongolia. Photographer: Taylor Weidman/Bloomberg

It ’s been known since the 1960s that Botswana has vast amounts of coal reserves, says explorer and geologist John Astrup.

Under the welcome shade of a tree in the summer heat, he casts an eye out over the flat, sandy Kalahari landscape near the Minergy opencast coal mine, just 50km north of the capital, Gaborone.

Better known for its diamond industry, the backbone of its economy, Botswana is estimated to have 212-billion tons of coal. (SA, by comparison, has an estimated 66.7-billion tons in recoverable coal, about 7% of the world’s total.)

“So [Botswana has] massive amounts of coal, but only one coal mine,” says Astrup. That’s Morupule, which feeds Botswana’s only power plant, which caters for the entire country’s energy needs.

In the 1970s and 1980s, the big oil companies — Shell, Total, BP and others — were drilling all over the country.

“In fact, our project here was drilled by Shell in the 1980s,” he says. Shell had wanted to export coal to Europe, but priorities changed when the oil price began to boom.

Digging through the archives, Astrup happened upon detailed drilling reports for the site.

“So we knew we were on some good coal here,” says Astrup.

“That old information helped us a lot in terms of where we looked.”

Minergy, a micro-exploration company run by Astrup and his partner Claude de Bruin, was the early start for the company. Now the Botswana-listed group is mere metres away from hitting coal in its Masama opencast project, outside the village of Medie. It’s on track to produce coal by February.

The resource is estimated to have 100 years of life and the aim is to produce 2.4Mt of coal a year.

“Many people proved there was a lot of coal in Botswana but they never really started a coal mine,” Astrup says.

“The coal being there is only half the story. You need a market.”

And for Minergy, that market is just across the border — in SA.

Coal producers will tell you that it’s ultimately a logistics game. Despite being in another country, Minergy says it has an advantage over SA coal producers in its ability to supply industrial users in the northern parts of the country.

CEO Andre Bojé says Minergy’s coal will not aim to plug the holes for Eskom, which is facing a supply crunch. But its customers, industrial users such as cement makers, are going to get “consistent quality and guaranteed supply at similar pricing”.

Critically, cement makers and the like can take the finer coal — the duff — while the larger pieces (“peas” and “nuts “) could be sent further into SA at competitive prices.

Astrup says that while it seems Minergy will be the first Botswana coal producer to market, it doesn’t want to be the only one. At this rate, it’s not likely it will be.

Maatla Energy is pursuing a licence to mine its Mmamabula project in Botswana. And Shumba Energy’s Mabesekwa mine is reportedly at an advanced stage and due to be commissioned by 2021.

African Energy Resources also has a project in the works and.Morupule, spurred on by high global coal prices, is ramping up production aimed for export.

“There are so many synergies when you have a coal industry — better infrastructure, more wagons, more capacity on the railway lines, which brings your tariffs down,” says Astrup. “So we don’t want to be a mine on our own. Everyone will have to find their little piece of the market.”

Once in production, Minergy plans to list on the London Stock Exchange’s Alternative Investment Market.

The company expects a warm welcome.

“They like mining, they like Africa and they specifically like Botswana,” Bojé says.

Pieter du Preez, senior economist at NKC African Economics, agrees that Botswana is a premier investment destination in Southern Africa.

It has strong macroeconomic fundamentals, solid economic and fiscal policies, and remarkably low public debt levels. It is perceived as one of the least corrupt countries in Africa.

“Botswana also has the most favourable sovereign credit ratings on the African continent, well above the junk-status grade. On the political front, Botswana will continue to be one of the continent’s model democracies,” he says.

Still, the country has numerous challenges to overcome, he says.

Mainly, it remains over-reliant on the volatile diamond mining industry despite “significant efforts” to diversify the economy.

Efforts have been complicated by a shortage of skilled labour coupled with relatively high labour costs. Recurring droughts have contributed to a weak performance by the agricultural sector.

Though the fledgling junior coal-mining industry has potential, for now, the biggest challenge for Botswana remains diversification away from diamonds, Du Preez says.