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Coal confrontation between Anglo American and Eskom

World Coal,

Anglo American is involved in a confrontation with Eskom over the coal supply contract for the Kusile power station in South Africa.

The confrontation has arisen because of revised black economic empowerment (BEE) requirements imposed by the Department of Public Enterprises, which controls Eskom. If left unresolved much longer, the dispute could lead to delays in development of the mining operation at the New Largo colliery, which is to supply approximately 16 million tpa of coal to the 4800 MW Kusile power installation.

According to reports, Eskom is pushing for suppliers of coal to be 50% black controlled (plus one share), while Anglo American’s New Largo is 27% black-owned, the level required by the Minerals and Petroleum Resources Development Act (MPRDA).

The new policy was laid out last year by Public Enterprises Minister Malusi Gigaba in a speech where he said Eskom would "increase black ownership as a means to transform the [mining] industry" and would do so by entering into discussions "to increase black ownership participation by utilising various commercially acceptable levers."

Anglo and Eskom have not yet signed a coal supply contract for Kusile, however the power utility has agreements for approximately 5 million tpy from the Australian company Universal Coal, and the state-owned coal miner, African Exploration Mining Finance Corporation. The first generating set at Kusile is due to commence in December 2014.

Anglo American has yet to start development of the new major opencast mining operation at New Largo. The power station is due to come on line in 2017.

Further delays could have serious consequences for South Africa in potential power shortages. The country is already teetering on the brink of renewed power blackouts due to delays to construction of the Medupi power station. The blackouts have been avoided so far thanks to lower than forecast growth in power demand, a slowdown in the global and South African economies, and Eskom’s campaign to cut power consumption.

Edited from various sources by Katie Woodward

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