Regional update – Botswana: railways and CBM

In April it was reported that an agreement had been signed between the Botswana and Namibian governments to go ahead with development of the US$ 10 billion Trans-Kalahari railway (TKR) project, which would – at least initially – primarily move coal from landlocked Botswana to a port and loading terminal to be developed in Namibia as part of the project. Following these reports, a second project has surfaced.

A private developer has reportedly commissioned a feasibility study for a similar project to move Botswana’s coal eastwards to a proposed deep-water port at Ponto Techobanine on the Mozambique coast. This 1100 km rail link would pass through Zimbabwe, potentially to pick up export coal from that country. A link that would allow Botswana to export coal to Zambia has also been suggested.

Botswana’s minerals, energy and water resources minister, Kitso Mokaila, has said that a completed pre-feasibility study is on the table. The consulting firm has been named as Bergstan Africa. Botswana-based Transwana Group Holdings has also been named as the developer looking for funds, but has not yet been successful in finding them.

Botswana’s Chamber of Mines CEO, Charles Siwawa, believes the east and west coal export routes would not compete with, but instead complement each other. “Our intention is to transport around 150 million tpa of coal and we can’t depend on the TKR alone,” he said. A Ponto Techobanine export route would improve access for Botswana’s coal to Asian countries. “We are optimistic that we can ship 90 million tpa to India and China,” Siwawa said.

The development of two export routes has been suggested before and at times supported in Botswana. However, official support has always been for the Namibian route, largely because of the historical ties between the two countries, but also because of the ongoing uncertainties of the political situations in both Zimbabwe and Zambia.

There have been no official comments on this latest announcement.

Killer costs fear

Generally acknowledged as the Botswana junior operator most ahead of the game, ASX- and Botswana-listed African Energy Resources (AFR) has questioned the viability of exporting Botswana coal at present prices, given likely costs – most of which will undoubtedly be racked up by railway and port charges and the cost of developing those facilities. In conjunction with the established Morupule coal mine, which is ultimately owned by Anglo American, AFR has successfully exported trial shipments of coal from its developing Sese mine along existing rail tracks to an existing port and terminal in Mozambique.

The company recently declared an initial inferred coal resource of 2.5 billion t at the Sese West project, which brought the company’s total inventory to 8.7 billion t.

A prefeasibility study at AFR’s Mmamabula West project, has, the company says, shown that mining and transport costs would not sustain a profitable export operation at current coal prices. Based on the 200 million t indicated resource, the prefeasibility study indicated that up to 3 million tpa of export-quality thermal coal could be produced, with an expected mine life of 20 years. Required investment would be US$ 113 million, with ROM operating costs of US$ 17/t and an estimated product operating cost US$ 25/t at the mine gate.

Mokaila has already announced that the government is, with the backing of the World Bank, to fast-track the introduction of a new mineral policy to drive development of the country’s non-diamond mining industry. Permanent secretary in the ministry, Boikobo Paya, said the framework would likely be approved by mid-2015: “I am optimistic that cabinet will receive a draft policy by April 2015, with the target for implementation to start in July,” he said.

Botswana and CBM

Plans for a coal-to-liquids fuel industry, first mooted by CIC Energy when it moved to open up Botswana‘s major coalfields in 2007, should now be pursued, the Botswana Chamber of Mines has suggested. A gap in the regional market may be created by a strategic decision taken by South Africa‘s Sasol, which was, until recently, the world‘s largest and most technologically advanced producer of liquid fuels. The company has indicated it will not pursue any new coal-to-liquids opportunities and focus on producing liquid fuels from gas.

Botswana is now busy lining up coalbed methane (CBM) projects. Sasol is one of the two giants among four majors active in the Karoo Kalahari Basin, which holds an estimated 30 trillion – 40 trillion ft3 of CBM.

Sasol has a market cap of US$ 32 billion, while the other majors are Anglo American (US$ 37 billion), Origin Energy (US$ 13.7 billion) and Exxaro Resources (US$ 4.96 billion). Magnum Gas & Power is reported to be seeking to raise up to US$ 1.34 million for Botswana CBM projects. It is also seeking to list on the Botswana Stock Exchange. Not yet in the same league as the majors, longer-time Botswana junior ASX-listed Tlou Energy has observed evidence of the first gas breakthrough at the Selemo pod of its Lesedi CBM project in the Karoo Kalahari Basin.

Mokaila says his ministry has retained the consulting firm Sewell & Associates (NSA), to develop a national strategy for the development of the basin.

Kicking the ball into play

Smaller projects to kick off Botswana‘s coal export industry are well developed. The country’s only fully operating coal mine, Morupule, has won a contract to supply a South African cement producer with washed coal and is targeting some producers in other countries in the region.

AFR has entered into a non-binding memorandum of understanding with Zambia’s electricity utility, ZESCO, to explore the potential for the delivery of 300 MW baseload power from its Sese project.

Botswana-listed junior, A-Cap Resources, is busy raising funds for its Mea and Bolau projects. Raw coal quality at Mea was potentially higher than most other coal found in Botswana, CEO Paul Thomson said in the latest company update. “The higher quality coal defined at Mea and new discoveries at Bolau gives us options to add significant potential value to the company. We are also looking at short- to medium-term rail options via South Africa, which will open up new market opportunities for us.”

Written by Barry Baxter. Edited by Jonathan Rowland

Read the article online at: https://www.worldcoal.com/cbm/24072014/world-coal-regional-update-botswana-railway-and-coal-bed-methane-july2014-coal1121/