The position of coal as the backbone of South Africa’s mining sector is currently under threat from exhausting reserves and an overall lack of investment in further exploration and capacity development, according to Xavier Prevost, a Senior Analyst at mining consultancy XMP Consulting.
A global dip in the price of precious metals in 2014 substantially dented the revenues and market capitalisation of South Africa’s mining sector. Nevertheless, while revenues were dragged down by gold and platinum, the only degree of stability came from coal, which has remained in steady demand since.
According to Xavier Prevost, however, this scenario is likely to change in the near future. Provost works as a Senior Analyst at XMP Consulting, a firm with mining expertise that offers a range of services in resource analysis, processing, market analysis, competitor analysis and even transportation analysis.
Provost confirms what many mining experts have been saying for some time now – that the existing reserves in South Africa are severely depleted and the lack of investment in exploration is preventing the emergence of stable alternatives.
“We don’t have the investments right now, [which means that] we cannot plan new projects or new mines – and that is the lifeline of the industry. We are not doing that well – we are actually decreasing production. And with this comes increasing costs, increasing prices and, therefore, everything is [affected],” says Prevost.
As a possible solution, he advocates an inward-looking approach, wherein existing coal mining entities embrace the judicious use of their resources and optimise their overall production process. New technologies coming up for the mining sector will help firms with this process.
Nevertheless, the current outlook appears bleak as per Prevost’s analysis. “Export coal cannot grow until the present coal oversupply and Richards Bay Coal Terminal price decreases. It’s not working for them as a country, and economically, it’s actually a big problem in terms of producing energy or electricity at competitive prices.”