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South Africa makes second run at Botswana coal

A SECOND attempt is underway to develop the Mmamantswe coal project in south-eastern Botswana to supply power to Eskom after the original developer of the project – the former ASX-listed Aviva Resources Corporation (Aviva) - "threw in the towel" in 2010.

This time the developer is an unnamed "experienced South African project developer" which will pay up to $20m to Mmamantswe’s current owner - ASX-listed African Energy Resources – depending on its success in tendering for the coal-fired base load independent power producer (IPP) programme currently being run by the Department of Energy (DOE).

African Energy did not disclose the identity of the project developer in its announcement and Miningmx was unable to contact African Energy MD Frazer Tabeart for further details.

The track record of Botswana projects attempting to supply power to South Africa is discouraging with the worst example being the Mmamabula project which was developed by the former TSX-listed CIC Energy (CIC).

That project was seen some 10 years ago as the front-runner and most likely to succeed with Mmamantswe - then owned by Aviva - viewed as a “long shot”.

CIC planned to build a 1,300 MW power station and associated coal mine at a cost of $3bn to supply electricity to Eskom.

The project was repeatedly delayed as Eskom and the South African government stalled decisions over the role of independent power producers (IPPs) in the country’s power supply strategy.

Mmamabula was effectively “knocked on the head” by the Integrated Resource Plan (IRP 2) released in October 2010 which indicated the South African government wanted to push for a major nuclear build programme and limit the role of IPP coal-fired projects in the future power generation mix.

At that point Aviva also gave up on Mmamantswe where it had proposed building a 1,000MW station in partnership with GDF Suez. The company pointed out it believed the IRP2 strategy on preferring nuclear to coal represented "a position which we believe is not sustainable."

It’s cold comfort that Aviva has been proven right with the South African government subsequently swinging back towards coal in addition to its nuclear plans.

Mmamantswe will be competing with a number of other IPP proposals one of which is Exxaro’s Thabametsi project but the final decision on which gets approved by the DOE may be influenced by more than just the fundamental economics and logistics.

That’s if the opinion of mining consultant Peet Meyer of PC Meyer Consulting on the influential role played behind the scenes by politics is correct.

Addressing a Fossil Fuels Foundation conference in Johannesburg in March Meyer claimed that when the proposed MOU between CIC Energy and Eskom became public, "... Cosatu said to Eskom if you build that power station in Botswana we will make this country ungovernable. You do not develop projects like that in a neighbouring country while we sit here with unemployment". Meyer added: "That whole MOU fell flat. Everybody is waiting for Eskom to take coal out of Botswana but it’s not going to happen because the trade unions won’t allow it.

"I view myself as being realistic rather than negative. Prove me wrong somebody. This has been going on for 10 years."

source: http://www.miningmx.com