Aligned to its view that coal will remain a key component of South Africa’s energy mix for at least the next two decades, coal mining company Seriti will continue to focus on investing in coal assets and improving operations at existing coal mines, said Seriti CEO Mike Teke on July 23, at the Coal and Energy Transition Day, which took place in Johannesburg.

In conversation with conference chairperson Bernard Swanepoel, Teke explained that Seriti is prioritising efficiently operating its South African mines, particularly those supplying State-owned power utility Eskom.

Acknowledging prevailing emissions-reduction narratives about the phasing-out of coal under the Just Energy Transition, Teke explained that Seriti viewed these sentiments as opportunities to acquire assets that other companies were divesting.

He said that while major global mining houses had become cautious about the long-term viability of coal mining, Seriti, in contrast, prioritised its strategic growth, with investment in coal assets being a high priority.

“When anybody sells any asset related to coal, we want to buy and that’s how we took advantage of that,” said Teke.

Commenting on declining coal prices, Teke affirmed Seriti’s commitment to ensuring operational efficiency, stating that the company focuses on factors within its control as opposed to factors outside its control, such as price volatility and added that Seriti’s mines remain cost-competitive and profitable at current coal prices.

Addressing the viability of selling coal at a cheaper price to State-owned utility Eskom, Teke explained that Seriti already has a cost-plus pricing model agreement with Eskom. Therefore, to enhance cost effectiveness for the utility, Seriti continuously pursues operational efficiency and improvements at mines that supply coal to power stations.

A cost-plus model is a contract where the mine operator’s operating costs and capital investments are covered by their client, such as an electricity company, who then pays an agreed-upon fixed profit margin for the extracted resource.

He added that cost-plus pricing models are a valuable model for Eskom as it ensures consistent demand for and supply of Seriti’s coal, with Teke noting that, in Seriti’s case, all coal produced at its Eskom-dedicated mines is supplied directly to the utility.

Given the mutual benefits of the model, Teke reflected that the model would “work well” for power stations not currently covered by a cost-plus agreement.

Alongside its contract with Eskom, Seriti is actively pursuing export opportunities, despite challenges in South Africa’s logistics infrastructure, such as those associated with State-owned logistics company Transnet.

Teke noted that while ideal coal export volumes would be about 90-million tonnes a year, current levels remain between 50-million and 60-million tonnes a year.

He added that various ongoing challenges continue to limit Transnet’s capacity – an issue Seriti is committed to finding ways to assist with.

“We know that . . . Transnet is a challenge, and we are helping. We want to help Transnet,” he stated.

Future Coal Needs
Despite Department of Electricity and Energy special adviser Silas Zimu having stated in his keynote address at the Coal and Energy Transition Day that South Africa will not build new coal-fired power stations as they are not fundable, Teke asserted that he does not anticipate a decline in coal demand.

However, Teke noted that it will be valuable to have South Africa’s long-term strategy for energy clearly defined with clear targets stating, for example, a targeted energy mix of 80 GW to meet the needs of South Africa’s growing population of over 64-million people.

He proposed that this framework should outline the specific shares of the energy mix that will be met through coal, renewables and other sources, as this would enable government to open bidding windows to provide the appropriate solutions, accordingly.

At present, he noted, South Africa has about 46 GW of installed generation capacity but only produces about 30 GW on average, with uncertainty over when generation deficits, and resulting loadshedding, may occur.

Teke stressed the need for clarity on what South Africa’s energy and power landscape requires over the next decade and said a defined pathway to achieve this is required.