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South32 CEO Warns over Coal Contract with Eskoms for Duvha

Coal News - Published on Fri, 14 Feb 2020

Image Source: South32 Eskoms
EnergyMX reported that South32 CEO Mr Graham Kerr has again emphasised the need for a positive outcome to the negotiations underway with Eskom over the hardship clause regarding the supply of coal from the group’s Wolvekrans-Middelburg Colliery to Duvha power station. Mr Kerr also stressed that a positive outcome from these talks was crucial for the success of the deal through which South32 was selling its South African Energy Coal assets to Mike Teke’s Seriti group.

He said “The real push around this transaction is to create a black-empowered sustainable business. For that to be a reality then clearly a Duvha contract, which is loss-making on every ton, is not sustainable for Seriti. We are very focused on creating a new mining house that is empowered and sustainable. We want this business to be successful but it will not be sustainable if we do not get an adjustment to that Duvha rate. We are not looking for a massive move. We want a rate which will allow that business to break-even and allow Seriti to continue to grow and provide Eskom with more tons at a time when they are short of tons at various power stations. We cannot continue to run a business that is losing cash on every ton of coal it sells. That’s the picture on the table. If the worst comes to the worst and we cannot get a solution that takes us to a break-even position then it’s very simple for us. We do not run businesses that are cash-flow negative.”

Negotiations on the WMC supply contract have been underway with Eskom since June last year. The key issue is that WMC is supplying coal to Eskom’s Duvha power station for a price of just over ZAR 200 per tonne whereas Eskom is paying an average price of ZAR 450 per tonne plus transport costs of up to ZAR 150 per tonne for much of the coal its other power stations consume.

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Posted By : Yogender Pancholi on Fri, 14 Feb 2020
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