What can the Waterberg achieve? PDF created with pdffactory Pro trial version

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1 What can the Waterberg achieve?

2 Contents Global Coal market SA Coal market trends Energy demand and supply in SA. Alternative energy for SA Waterberg Coal field Exxaro s development plan for Waterberg What s happening? Constraints Future potential 1

3 Strong Industry Outlook Strong fundamentals for the local and global coal markets Significant power generation investments to be made in South Africa to meet demand following long period of underinvestment Electricity demand growing at 1,200MW per annum for the next 20 years, approximately eight new power stations will be required 89% of Eskom s installed capacity is coal-fired Coal s share of global power generation expected to be sustained while total capacity continues to grow China continuing to drive global demand while supply constraints remain RBCT expansion will enable increased exports from South Africa Prices expected to recede but remain at high levels from a historical perspective World Coal Consumption Continuing to Grow 8 (Bn tpa) Reference High Growth Low Growth Source: EIA World Power Generation Mix Coal to Maintain Its Share Other Other Hydro 2% Hydro 6% 16% 13% 39% Coal 39% Coal Nuclear 9% Nuclear 17% 19% 7% 29% 4% Gas Oil Gas Oil 16,074TWh 31,657TWh Source: IEA from ABSA 2

4 MARKET PRICES Prices USD/T Global demand is driven by the Asian factor a structural shift in prices foreseen on the long term USD/T HCC SSCC Steam API4 Market Coke Coal and coke prices coming off a high due strong demand and coke shortages Steam coal prices driven by demand and freight rates Years Commodity price rise due to weakened US dollar 3

5 RBCT EXPORT TERMINAL RBCT expansions announced Nov 2005 Construction April 2006 to June to 91Mtpa 4Mtpa to small BEE miners 6Mtpa to SDCT 9Mtpa subscription to larger BEE companies Exxaro will have 6.3Mt 4

6 AFRICAN ENERGY OUTLOOK POWER GENERATION MIX 1971 Hydro 24% Other 0% 90Twh Nuclear 0% Gas 1% 2002 Nuclear 2% Gas 22% 2030 Oil 12% Hydro 15% Nuclear 1% Hydro 7% Oil 13% Other 1% Other 2% Coal 63% 480Twh Coal 29% Coal 47% 1583Twh The expected increase in the contribution of natural gas for the generation of electricity in Africa is even more marked than for the world in total Contrary to expectations in some quarters, the IEA does not expect that the hydro-power contribution will increase, although the absolute volume is forecast to increase by 50% Persons without electricity: Africa 598,200,000 China 536,000,000 Gas 52% Oil 9% Africa energy needs to treble by 2030!! 5

7 SA energy outlook: electricity generation capacity Due to a long hiatus in electricity generation capacity investment during the last decade or two, a significant backlog has developed Considerable investment will be required in the decades ahead with an expected concomitant impact on prices Source : Eskom 6

8 The cost of future energy production The crux of the debate what will the future production costs of the different types of primary energy be? Fossil fuel derived energy will be with us for years to Source : IEA 2005 come.. 7

9 COSTS OF ELECTRICITY - WORLDWIDE South Africa Australia Norway Korea Chinese Taipei US Czech Turkey Poland Mexico Greece Spain Slovakia Finland Hungary UK Germany Switzerland France Ireland Japan Portugal Austria Italy Denmark Industry US c/kwh Households

10 South African power generation mix Installed capacity in SA ( MW) Munics 5% Eskom s installed power generation portfolio Total installed capacity : 39,154 MW 1% 2% 4% Oil-fired Hydro Pumped Storage 5% Nuclear 89% Coal-fired Eskom 95% Source: South African Coal Statistics, 2001 Source: Eskom website 9

11 Alternative forms of energy? Inga? Hydro Electricity Nuclear Solar Wind Coal bed methane/lng Fuel Cells LPG Gas Bio Mass 10

12 The Inga potential Inga Massive potential for hydro electricity ( MWe) in the Congo river But Political instability Massive infrastructure needed for electricity generation and distribution (it s a long way from Coega!) high capex long lead-time Will come to fruition only in 5-20 years from now 11

13 Nox pollution image of world showing Loyd s blanket in Highveld Source: &Beeld& (13/10/04) The expansion of electricity generation in the Mpumalanga Highveld and Gauteng will be limited due to pollution levels. 12

14 Where will all the Coal come from?? AVAILABILITY OF COAL TO ESKOM'S POWER STATIONS (CURRENT SOURCES) 200 Demand 2.5% per annum Arnot Hendrina Coal (Mt per annum) Arnot Depleted Where will all the coal come from? Source SACR Source: Year reports, SA Coal Report Optimum Stops Kriel Depleted Matla Depleted Very Expensive Coal (if available) Duvha PS stops (50 years old) Matla Kendal Duvha Tutuka Majuba Lethabo Matimba Kriel Demand 13

15 The Waterberg. 14

16 The Waterberg Coal field Zoetfontein Fault Botswana Current Pit Daarby Fault Deep Coal (250m below surface) Eenzaamheid Fault Open Pit Mine-able Coal Fault Bounded by Zoetfontein fault along the Northern side Eenzaamheid fault along the Southern boundary Daarby fault divides the coal field into open-pit mineable and underground mineable reserves Stretches 40kms from N to S and 88kms E to W. Extends Westwards into Botswana More than 40% of the remaining coal resources in RSA 15

17 Grootegeluk mine area 40- year pit layout I NFERRED Inferred Daarby Fault I NDICATED Current Pit Reserves in excess of 400 years Inferred Inferred I NFERRED Measured MEASURESD Measured Indicated Indicated I NDICATED Eenzaamheid Fault 16

18 Exxaro s development plan for the Waterberg Phase 2: Green fields expansion with a new coal mine and a new coal-fired (clean technology) power station (4200MW). Products (coal tons pa): -24 mt to Power Station (FBC) -Time-frame: 2013 to 2017 Phase 1: Brown fields expansion of current Grootegeluk coal mine near Lephalale with Medupi power station (2100 to 4200MW). Products (coal tons pa): -8.0 mt to Power Station,phase mt to Power Station, phase kt to other markets Time-frame: 2009 t Phase 3: Green fields new coal mine for exports nearby Lephalale. Products (coal tons pa): -10 mt for exports Time-frame: in 6 to 10 years Other Downstream Opportunities: Char in construction Market Coke in FS Activated Carbon Coal Liquifaction (Diesel) 17

19 GEOLOGICAL PROFILE ZONES OVERBURDEN AVERAGE THICKNESS (m) 16.5 BENCH 1 Total resources in mineral rights area: 6.016Bn tons ZONE LOM >75 years ZONE BENCH 2 ZONE 9 ZONE 8 ZONE 7 ZONE 6 ZONE 5 INTERBEDDED SC ZONE 4 INTERBED SC INTERBED SC ZONE 3 INTERBED SC ZONE BENCH 3 BENCH 4 Upper Ecca: Bright Coal with interbedded shale Lower Ecca: Dull Coal, Sand stone BENCH 5 and Carbonaceous shale BENCH 6 BENCH 7a BENCH 7b BENCH 8 BENCH 9a,b BENCH 10 BENCH 11 18

20 Grootegeluk Overall process flow BENCH 1 WASTE DUMPS BENCH 2 BENCH 3 BENCH 4 BENCH 5 BENCH 6 BENCH 7 BENCH 8 BENCH 9A BENCH 9B BENCH 10 BENCH 11 GG 1 GG 2 GG 3 GG 4/5 GG6 SEMI-SOFT COKING COAL 10% ASH POWER STATION COAL PCI PRODUCT 10% ASH MET. PRODUCTS Export Mittal Iscor Steel Matimba Saldanha Steel Local Duff Peas Small Nuts Large Nuts 19

21 GG 6 Beneficiation plant 20

22 GG 6 plant commissioned 21

23 Medupi Grootegeluk 22 Matimba MEDUPI PROJECT Geographical Layout 22

24 MEDUPI PROJECT Pit Layout 23

25 MATERIAL FLOW BENCH PLANT DESTINATION 24 BENCH 1 GG1 GG2 SSCC 10% Ash Power Staton Coal Export BENCH 2 BENCH 3 GG6 GG3 Iscor/ Mittal ICC BENCH 4 BENCH 5 BENCH 6 BENCH 7a BENCH 8 BENCH 9a,b BENCH 10 BENCH 11 BENCH 7b GG8 GG7 GG4/5 Power Staton Coal PCI 10% Ash MET. Coal Matimba A Matimba Medupi B Saldanha Local Small Nuts Duff Peas 24

26 ROM production.. 6 PACK: Mining Tons per Bench / Year mt ROM T o n s Bench 1 Bench 2 Bench 3 Bench 4 Bench 5 Bench 6 Bench 7A Bench 7B Bench 8 Bench 9A Bench 9B Bench 10 Bench 11 25

27 Exxaro s development plan for the Waterberg Phase 2: Green fields expansion with a new coal mine and a new coal-fired (clean technology) power station (4200MW). Products (coal tons pa): -24 mt to Power Station (FBC) -Time-frame: 2013 to 2017 Phase 1: Brown fields expansion of current Grootegeluk coal mine near Lephalale with Medupi power station (2100 to 4200MW). Products (coal tons pa): -8.0 mt to Power Station,phase mt to Power Station, phase kt to other markets Time-frame: 2009 t Phase 3: Green fields new coal mine for exports nearby Lephalale. Products (coal tons pa): -10 mt for exports Time-frame: in 6 to 10 years Other Downstream Opportunities: Char in construction Market Coke in FS Activated Carbon Coal Liquifaction (Diesel) 26

28 Downstream value generation Exxaro Exxaro 27

29 Sintel Char project 28

30 Char plant in construction 29

31 And progressing. Commissioning Nov

32 Coal production volumes PROJECTED COAL PRODUCTION P 3 could be moved earlier Phase 3 Tons per annum (millions) Production 18,5mt! GG6 Phase 1 Phase 2 Coking Steam Eskom Current Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 31

33 Rail capacity Grootegeluk Expansion Projected Waterberg Rail Requirements (May 2007) Exxaro "Probable" Exxaro "Bankable" Kumba "2005" Exxaro "High" Million tons Exxaro "Probable" Exxaro "Bankable" Kumba "2005" Exxaro "High"

34 Grootegeluk RAIL INFRASTRUCTURE Thabazimbi Northam Rustenburg Rustenburg Pyramid-South Pretoria To Germiston Van der Bijl Greenview Sentrarand Blackhill Witbank Delmas Ogies Welgedag Saaiwater Leeuwpan Hawerklip Broodsnyersplaas Halfgewonnen Technical options identified ie electrification etc Costing in progress S W A Z I L A N D Saldhanha To Springs Kelty/Leandra Trichardt Twistdraai Bethal Volksrust Hamelfontein Overvaal ERMELO Panbult Kemp Piet Retief Newcastle Utrecht Ngagane Ballengeich Dannhauser Hattinghspruit Glencoe Talana Elandslaagte To Durban Paul Pietersburg Mahulumbe Sikame Vryheid Lenjanedrif Vryheid-East AAAAA = COAL Line = General Freight = GG Destinations Enqolothi To Empangeni Nsese RBCT RBCT (March 05)

35 Alternative rail routes 34

36 Conclusion Development plan on track Infrastructural constraints being addressed Downstream projects on track See you in the Waterberg!!!!! 35