eBusiness Weekly
Martin Kadzere
Zimbabwe’s coal mining giants face an uncertain future after Zimbabwe Power Company (ZPC) — a subsidiary of Zesa — said it is weighing an option of investing heavily into coal mining as it seeks to produce own fuel for its thermal plants, Business Weekly can report. ZPC claims inadequate supplies of coal and an unsustainable pricing structure by the miners are threatening the country’s power generation and wants to produce its own fossil fuel to guarantee power supplies.
However, Coal Miners’ Association (CMA), a lobby group that represents the interests of the country’s three major producers, said the move by ZPC “is misplaced” and threatens the future of the miners. It also warned that investors become “jittery” in investing more. The three companies—Hwange Colliery Company (founded in 1899), Makomo Resources and Zambezi Gas, supplies almost 90 percent of its output to ZPC.
ZPC operates Hwange Thermal Power Station, the country’s second largest electricity plant in terms of capacity and small thermal plants —Harare, Munyati and Bulawayo.
ZPC is expanding Hwange under a US$1,5 billion deal with Sino-Hydro to boost electricity production by additional 600MW. The plant has since outlived its lifespan.
It is expected Zimbabwe coal output will increase largely on the back of expansion of Hwange station also referred to as Zesa Stage 3. As such, future investment plans by the miners are largely informed by anticipation of increased demand by ZPC.
Under the recently launched mining roadmap, Zimbabwe is targeting US$1 billion from coal.
With industrial capacity remaining subdued, domestic demand of coal will remain low. On the hand, prices of coal on the international market are strongly regulated and the same across user markets. According to industry players, thermal coal is around US$40 per tonne. Zimbabwe produces a tonnes at about US$20.
Transport to port is around US$60 per tonne. If port and sea freight charges are factored, exporting the mineral will be very uncompetitive. Technically, no studies have also been done to establish steel plants abroad that can use local coking coal.
According to our sister paper, The Chronicle, ZPC head of operations Kenneth Maswera, told Energy and Power Development Minister, Fortune Chasi, during a recent tour the initial steps have been taken to secure the claims in coal rich Hwange District.
“Honourable Minister we are considering mining coal ourselves as a long-term measure to avert the current challenges. We had been granted mining rights in the western areas.
“However, the structure of the company we had partnered with changed and this affected the implementation of the project. We may still pursue the issue plan.
“The major problem is that we are not getting enough supplies from Hwange Colliery, Makomo (Resources) and Zambezi Gas. Our target stock is 300 000 tonnes, which is equivalent to 45 days of power generation at 600MW. However, we have 84 729 tonnes, which is equivalent to 11 days generation,” said Chivurayise.
The chairman of CPA Ray Mutokonyi, said the move would “literally kill” the current producers.
“It’s now clear the agenda is to kill current suppliers,” said Mutokonyi.
Business Weekly recently reported that Hwange was operating with critically low coal stocks due to low supplies from the miners with the situation likely to worsen in the summer season as open cast operations will be affected by the rains.
While admitting the challenges around the supply of coal for electricity production, Mutokonyi said evidence on the ground points to a number of ZPC “own problems.”
He said the recurring breakdowns of ZPC’s generating units were affecting electricity output to an extent of failing to exhaust their stocks despite subdued deliveries.
Coal for Munyati and Bulawayo is available from all miners but the National Railways of Zimbabwe is failing to provide wagons. The coal miners also cited non-payments of as another reason affecting coal production. As of October 23, HCCL was owed $37 million, Makomo $31 million while Zambezi Gas was owed $13 million.
In addition, efforts to have an upward review of coal price have been “frustrated” with the last adjustment done in 2011. This situation has crippled production, resulting in operating capacity falling below 50 percent, according to Mutokonyi.
Analysts say the Government should decide a Thermal Energy Business model weather power generators should mine for self or sourcing from generic mining companies.
