Coal Mining in South Africa to 2020

Coal is South Africa’s primary energy source, a major stimulus to its economic growth, and played a significant role in the country’s industrialization. It provides 88% of the country’s commercial energy needs and plays a vital role in meeting liquid-fuel requirements. According to Energy Information Administration (EIA), bituminous coal production accounted for 99% of the nation’s total coal production in 2013, as well as 40% of the bituminous used in electricity generation.

Scope

The report contains an overview of South Africa’s coal mining industry, together with the key growth factors and restraints affecting the industry. Furthermore, it provides information about reserves, production, prices, consumption, trade, competitive landscape and major active, exploration and development projects. Also included is the country's fiscal regime, which includes governing bodies and relevant laws, mining rights and obligations, and key fiscal terms.

Key Highlights

• According to EIA, South Africa is home to the world's ninth-largest recoverable coal reserves, and held 95% of Africa's total coal reserves at the end of 2012. Most of South Africa’s coal production is sourced in Mpumalanga province.

• In 2013, South Africa exported around 28% of total coal produced in the year, the majority of which went to the Asia-Pacific region and Europe.

• The South African government has committed to improve infrastructure facilities through the National Infrastructure Development Plan (NDP) with the objective of strengthening coal exports.

• Upcoming coal-fired power projects scheduled for commencement are likely to provide some relief to the country’s electricity crisis. The Kusile power station located in Mpumalanga province with capacity of 4,800MW and Medupi power station located in Limpopo province with capacity of 4,764MW are the two main projects scheduled for operation in 2014.

Reasons to buy

Gain an understanding of South Africa’s coal mining industry, the relevant drivers and restraining factors, reserves, historical and forecast production, consumption, trade and the fiscal regime.

Companies mentioned

Anglo American South Africa, BHP Billiton Energy Coal South Africa Ltd, Exxaro Coal (Pty) Ltd, Glencore Coal, Sasol Mining (Pty) Ltd

Table of Contents

1 Executive Summary 1

2 Coal Mining in South Africa 6

2.1 Country Overview 6

2.2 Mining Overview 6

2.3 Coal Mining in South Africa – Drivers 7

2.4 Coal Mining in South Africa – Restraints 8

2.5 Upcoming Projects 8

3 Coal Mining in South Africa – Reserves, Production, Consumption and Trade 9

3.1 Reserves by Geographical Location 9

3.2 Historical and Forecast Production 11

3.2.1 Total production by grade 11

3.2.2 Total production by mining method 13

3.2.3 Total production by state/province 13

3.3 Coal Prices 14

3.4 Competitive Landscape 15

3.4.1 Anglo American South Africa (AASA) 15

3.4.2 BHP Billiton Energy Coal South Africa Pty Ltd (BECSA) 17

3.4.3 Exxaro Coal (Pty) Ltd (Exxaro Coal) 18

3.4.4 Glencore Coal, formerly Xstrata Coal South Africa (XCSA) 19

3.4.5 Sasol Mining (Pty) Ltd (Sasol Mining) 21

3.5 Total Production by Major Mines 22

3.6 Major Exploration and Development Projects 24

3.7 Coal Consumption and Trade 26

3.7.1 Total consumption by type – non-coking 26

3.7.2 Domestic consumption vs. exports 27

3.7.3 Exports to Destination Countries and Other Regions 29

3.7.4 Exports by type – steam coal 31

3.8 Demand drivers 32

3.8.1 Indian demand for steam coal 32

3.8.2 Chinese demand for coal 33

4 Coal Mining in South Africa – Fiscal Regime 35

4.1 The South African Mining Industry – Governing Bodies 35

4.1.1 Department of mineral resources 35

4.1.2 Department of energy 36

4.1.3 National nuclear regulator (NNR) 36

4.1.4 The mine health and safety council 36

4.2 The South African Mining Industry – Governing Laws 37

4.2.1 Minerals and petroleum resources development Act 37

4.2.2 Mineral and energy laws rationalization Act, 1994 37

4.2.3 Precious metals Act, 2005 37

4.2.4 Nuclear energy act, 1999 (Act no.46 of 1999) 37

4.2.5 National nuclear regulator Act, 1999 (Act no. 47 of 1999) (NNR) 38

4.2.6 Mine health and safety Act, 1996 (Act no. 29 of 1996) 38

4.2.7 Diamond export levy (administration) Act, 2007 38

4.3 The South African Mining Industry – Prospecting and Mining Rights 39

4.3.1 Application for a prospecting right or a mining right 39

4.3.2 Prospecting rights 39

4.3.3 Mining right 39

4.4 The South African Mining Industry – Prospecting and Mining Obligations 41

4.4.1 Prospecting rights holders 41

4.4.2 Mining rights holders 41

4.4.3 Environmental protection and assessment 41

4.4.4 Issuance of a closure certificate 41

4.4.5 Cancellation and suspension of rights 41

4.5 The South African Mining Industry – Key Fiscal Terms 42

4.5.1 Royalties 42

4.5.2 Depreciation 42

4.5.3 Corporate tax 42

4.5.4 Capital gains tax 43

4.5.5 Dividend tax 43

4.5.6 Real property tax 44

4.5.7 Withholding tax 44

4.5.8 Branch profits tax 44

4.5.9 Loss carry forward 44

4.5.10 Value added tax (VAT) 44

4.5.11 Tax incentives 44

5 Appendix 45

5.1 What is This Report About? 45

5.2 Methodology 45

5.3 Secondary Research 45

5.4 Primary Research 45

5.5 Contact GlobalData 46

5.6 About GlobalData 46

5.7 GlobalData’s Services 47

5.8 Disclaimer 48

List of Tables

Table 1: Typical Proximate Analysis of Various Coals 9

Table 2: Coal Mining in South Africa – Production by Type, Bituminous and Anthracite (Million Metric Tons), 2000–2020 12

Table 3: Coal Mining in South Africa – Anglo American South Africa, Major Projects, 2014 17

Table 4: Coal Mining in South Africa – BHP Billiton Energy Coal South Africa Pty Ltd, Major Projects, 2014 18

Table 5: Coal Mining in South Africa – Exxaro Coal (Pty) Ltd, Major Projects, 2014 19

Table 6: Coal Mining in South Africa – Glencore Coal, Major Projects, 2014 20

Table 7: Coal Mining in South Africa – Sasol Mining (Pty) Ltd, Major Projects, 2014 21

Table 8: Coal Mining in South Africa – Major Active Mines (Million Metric Tons), 2014 22

Table 9: Coal Mining in South Africa – Major Exploration Projects (Million Metric Tons), 2014 24

Table 10: Coal Mining in South Africa – Major Development Projects (Million Metric Tons), 2014 25

Table 11: Coal Mining in South Africa – Consumption by Type, Steam and Coking Coal (Million Metric Tons), 2000–2020 26

Table 12: Coal Mining in South Africa – Consumption vs Exports (Million Metric Tons), 2000–2020 29

Table 13: Coal Mining in South Africa – Export to Region and Destination Countries (Million Metric Tons), 2013 30

Table 14: Coal Mining in South Africa – Steam and Coking Coal Exports (Million Metric Tons), 2000–2020 32

Table 15: The Mining Industry in South Africa – Depreciation Rates (%), 2014 42

List of Figures

Figure 1: Coal Mining in South Africa – Location of Coalfields, 2013 10

Figure 2: Coal Mining in South Africa – Production by Type, Bituminous and Anthracite (Million Metric Tons), 2000–2020 13

Figure 3: South African Nominal Coal Prices (US$/ Metric Ton), 2000–2014* 14

Figure 4: Coal Mining in South Africa – Consumption by Type, Steam and Coking Coal (Million Metric Tons), 2000–2020 27

Figure 5: Coal Mining in South Africa – Consumption vs Exports (Million Metric Tons), 2000–2020 28

Figure 6: Coal Mining in South Africa – Export to Destination Countries# and by Regions (%), 2013 30

Figure 7: Coal Mining in South Africa – Exports by Type, Steam Coal (Million Metric Tons), 2000–2020 31

Figure 8: Indian Coal Imports (Metric Tons), 2009–2013 33

Figure 9: Chinese Coal Imports (Metric Tons), 2009–2013 34

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