During the 12 months to June 30, diversified mining company South32 has progressed initiatives to support its target of halving operational greenhouse gas emissions by 2035.

At Worsley Alumina in Australia, which supplies South Africa's Hillside Aluminium smelter in KwaZulu-Natal, conversion of the first onsite boiler from coal to natural gas has commenced and conversion of the second boiler will begin this financial year (FY23).

At Sierra Gorda copper mine in Chile, the company has transitioned to an agreement for cost-efficient 100% renewable electricity supply.

In South Africa, the Sydney-, Johannesburg- and London-listed company, headed by CEO Graham Kerr, is continuing to work with Eskom and other stakeholders in this country's energy sector on pathways to secure lower carbon electricity supply for the Hillside smelter, which produced a production record in the 12 months to June 30.

The company has also signed a non-binding memorandum of agreement with Eskom to explore the potential to purchase nuclear energy attributes in the near term as it continues to investigate and undertake market testing for renewable power supply at Hillside in the longer term.

Also achieving a yearly production record were South Africa Manganese and Australia Manganese, with aluminium production increasing by 14% and manganese production increasing by 4%.

The company expects to increase low-carbon aluminium production by 12% in FY24 as Brazil Aluminium and Mozal Aluminium in Mozambique ramp up.

On how much time South32 is giving itself to transition away from carbon-intensive energy at Hillside, Kerr said in response to Mining Weekly that the current contract in place with Eskom runs to 2031.

Although South32 thus has time on its side in its climate change commitment, it is also acutely aware of Europe's particular preference for green aluminium and its need to ensure that Hillside has the option to sell into Europe and other green preference jurisdictions such as the Americas.

"So, we're doing a lot of work on this space," Kerr emphasised to Mining Weekly. Hillside plays an important role in keeping South Africa's national electricity grid stable and helping to manage loadshedding given its consistent level of electricity consumption and the interruptibility provision in its energy supply agreement. During times of high strain on the national grid, Eskom interrupts around 450 MW of supply to Hillside's potlines to support the grid, which means less loadshedding for other customers.

Taking into account Hillsides' linkages to numerous other sectors, the smelter's economy-wide contribution amounts to an estimated R25.8-billion, or 0.4%, of South Africa's gross domestic product (GDP). Hillside's economy-wide contribution to KwaZulu-Natal's GDP amounts to R10.1-billion, or about 1.3%.

Moreover, Hillside is one of the largest industrial employers in Richards Bay, directly employing close to 3 400 people in the 2022 financial year.

MANGANESE LOGISTICS

On whether the company's talks with Transnet on improving manganese logistics were enhancing confidence that efficient logistics would be restored, South32 COO Noel Pillay said the company was collaborating to arrive at concrete solutions. "My teams are hopeful that we can recraft some of the lost navigation," Pillay added.

Secure access to rail and port infrastructure is critical to South32 being provided with confidence for future investment decisions at the Wessels manganese mine in South Africa's Northern Cape.

Meanwhile, reliable supply of electricity at an affordable price is what will be required to take the company's Manganese Alloys plant in Meyerton, Gauteng, out of care and maintenance.

LOW-CARBON COMMODITIES

The Hermosa project in Arizona, in the US, is presenting an opportunity to produce low-carbon commodities for several decades, with a final investment decision at Taylor's zinc/lead/silver deposit planed towards the end of this calendar year.

Separately, the opportunity to produce batt...

Mining Weekly Editor Martin Creamer discusses DRDGold's 16th consecutive dividend and its move to solar energy; a best-of-breed approach to put South Africa on a competitive logistics path; and the launch of Thungela’s nursery and its hatchery which is breeding fish.

The decision of DRDGold to expend capital of R3.5-billion this financial year is based on the cash-flush Johannesburg- and New York-listed gold-from-dumps mining company firmly concluding that it is responsible to investment in South Africa amid seemingly unstoppable private sector turnaround momentum.

The board has given the nod for R2-bilion of this year's R3.5-billion capital expenditure (capex) to go into solar power and into long-term sustainability creating deposition facilities. (Also watch attached Creamer Media video.)

A big part of the R800-million expenditure in the Far West Gold Recoveries operation is for a tailings dam and, in the not-too-distant future, an amount not quite as high but similar will be invested at Ergo on the East Rand to expand the size and capacity of the Brakpan/Withok tailings facility.

Debt-free DRDGold, headed by CEO Niël Pretorius, had net cash of R2.47-billion as of June 30, after paying R515.3-million in dividends, re-investing capex of R1.1-billion and paying R314.8-million in income tax on a gold production of 169 820 oz in the 12 months to June 30 this year.

"A question that one has to pass when looking at these sorts of capex numbers is whether you are investing in an environment where it is responsible to invest this level of capital," Pretorius said during the presentation of 2023 results, covered by Mining Weekly.

"When we switch on the television we maybe wonder. You read the Fraser Institute's report and maybe wonder. You look at where capital is going and a lot of it is going away from South Africa and less is coming into South Africa.

"So, one has to reflect on this level of investment carefully before you commit your shareholders.

"We believe that it is responsible to invest in South Africa. We do believe that South Africa doesn't stand or fall based on the quality of political governance in the country. There is a private sector and there's a society which, when they join forces, become unstoppable and can really turn things round.

"Increasingly, in order to assess whether or not it is responsible to invest, one looks not so much at the kind of challenge that we face, but also at what the response is to those challenges, and the responses to some of those challenges have been remarkable.

"Firstly, what we are seeing is that the face of political leadership is systematically changing. We're seeing a different kind of leader emerging, younger, dynamic with lots of energy, firm values. At the moment, maybe more at local and provincial level, but increasingly I think we'll start seeing those faces and those profiles finding their way into the national leadership as well.

"People who are externally focused are genuinely wanting to deliver into the well-being of the constituency, so that certainly is changing. It's going to take a while before it changes completely, but we are seeing very positive first indications of a change of face of political leadership.

"A second thing that's really encouraging is that it seems private capital has found its voice. We're seeing less in the way of nuanced utterances on the part of business leaders and more and more very prominent leaders are becoming involved in initiatives that contribute towards some of the very pressing challenges that we are faced with, like crime and logistics," he said.

But amid all that, he noted that very recognisable groups and influential people, with command over vast capital, are activating the capital over which they have custodianship quite quickly to bring about positive change.

Very encouraging, he added, was the way private capital is being mobilised, exemplified by the volume of energy being generated from rooftop solar panels reaching the 4.4 GW level, which is equivalent to two phases of loadshedding.

"The private sector has come to realise that sitting around and waiting is not going to be the solution. We've got to jump at it and they are jumping at a rate that is catching us by surprise. Generating suc...

Once short-term and medium-term rail restoration has been achieved, a best-of-breed approach should be adopted to put South Africa on a competitive logistics path, says thermal coal exporter Thungela.

"We need to develop a model that allows a best-of-breed to be able to run some of the critical infrastructure so that our national logistics are much more efficient," said Thungela CEO July Ndlovu, who questioned the sustainability of the traditional South African model of the State providing all critical infrastructure and highlighting the distinct 'swim lanes' that need urgent attention in restoring this country's broken rail logistics infrastructure.

"We continue to work tirelessly with the industry, government, and Transnet to find sustainable solutions for the logistics challenges that continue to bedevil South Africa, the industry, and our company.

"We're encouraged by the setting up of the national logistics committee to tackle some these issues on an urgent basis," Ndlovu added.

Mining Weekly: What needs to be done by Transnet in the short, medium, and long term and is that being matched by what is being done in the short term for the medium term and long term?

Ndlovu: The best metaphor for this is swimming and swimming lanes and the swim lanes that we ought to be looking at. Secondly, what we also have to accept as business and as stakeholders in South Africa is that this problem has become bigger than merely Transnet, and our expectation that Transnet must do everything themselves. That horse has bolted.

My standpoint is, firstly, what we've got must be made efficient by fixing the rail infrastructure, improving maintenance, enhancing planning scheduling and working to ensure that security incidents are managed at an acceptable level, and when security incidents happen, we can we recover with speed - and I've seen significant improvement following incidents. We had two significant derailments in May and we recovered from both in record time.

Secondly, I spoke to all of you about the state of the rail infrastructure in the North and Northeast Corridor and the speed restrictions and I pointed out that there was roughly 273 km of speed restrictions. All those have more or less been removed, except for about 38 km, so progress continues. That is one swim lane.

The second swim lane relates to the fact that we will not be able to get Transnet back to its capacity of railing more than 70-million tonnes of coal a year unless we bring back both the long-term standing locomotives and the new locomotives, and the new locos can be sourced from the Chinese that was supposed to supply them or from somebody else. I'm personally encouraged by the continues discussions that we're having with the Chinese to ensure that we find a solution to that, whether through the Chinese or somebody else. We need that capacity to be able to go beyond 60-million tonnes.

The third swim lane is a more macroeconomic policy environment. What this has demonstrated very clearly is that the model that we've had in South Africa of the State providing all critical infrastructure may not be the most sustainable model. We need to develop a model that allows a best-of-breed to be able to run some of the critical infrastructure so that our national logistics are much more efficient. That is a separate swim lane and that means we have to continue to work on the others. The White Paper that came through is quite encouraging. That work has become urgent but deregulating a broken piece of infrastructure is not good enough so we've got to fix it as we do the others. Those would be the three that I see.

I raise the issue of best-in-breed to make a point that globally what we are seeing is that nation states budgets and fiscus are stretched to the limit by the need to provide services to people and there are private players who've got the skills and the capital to be able to provide critical national logistics.

COAL EXPORTS LOWEST SINCE 1993

As reported by Mining Weekl...

To navigate the considerably softer coal prices, as well as inflationary pressures and the underperformance of Transnet Freight Rail, export coal-mining company Thungela has enhanced its business resilience by reducing the number of geology-challenged underground sections and ramping up production at the opencast Khwezela colliery.

Khwezela, 22 km southwest of eMalahleni in Mpumalanga, was formed in 2016 through a merger of the mining operations of the Kleinkopje and Landau collieries.

Board approval has been obtained for the capital investment of R2.4-billion into the Zibulo North shaft, which is expected to extend the life of Thungela's flagship Zibulo operation by 10 to 12 years.

The anticipated completion of the Elders and Zibulo North Shaft projects, with R3.8-billion yet to be invested, is integral to uplifting portfolio quality and competitiveness and extending the business, Thungela stated in declaring a R10-a-share interim dividend worth R1.4-billion from 33% of operating free cash flow.

First coal from the Elders production replacement underground operation is expected in the first half of next year and the close of the acquisition of Australia's Ensham coal mine for R4.1-billion is due on August 31.

"Our focus to increase our competitiveness by improving productivity will produce superior results for our shareholders," Thungela CEO July Ndlovu predicted in a release to Mining Weekly.

The half-year profit of R3-billion was well down from R9.6-billion in the same period in 2022, owing to the sharp decrease in thermal coal prices. Net cash of R13.6-billion was on the balance sheet as of June 30.

A R156-million distribution is being made to employees through the Sisonke Employee Empowerment Scheme and Nkulo Community Partnership Trust. The company contributed R896-million to these trusts in 2022, with the total since listing approaching the R1.4-billion level.

FATALITY REPORTED

Although the total recordable case frequency rate safety measure improved in the half-year from 1.59 last year to 1.33 this year, a fatality was recorded in the period when Breeze Mahlangu passed away in February following complications from an accident in December.

The most notable external factor of the period was the sharp fall in the benchmark seaborne coal price as European buying slowed after a mild winter.

In addition, global inflation management resulted in slower growth and a related reduction in demand for energy.

Following a particularly poor first quarter, Transnet rail performance stabilised in the second quarter, notwithstanding two derailments that cost Thungela at least 340 000 t in rail capacity. Improvements in rail performance during the second quarter were the result of intensive collaboration between Transnet and the South African coal industry, including Thungela.

"A consistently performing and well-managed bulk rail infrastructure is critical to the coal mining industry and the South African economy," said Ndlovu.

Through ongoing collaboration with Transnet, Thungela is dedicated to optimising the performance of this critical infrastructure, benefiting its own operations and those of the broader South African coal industry.

Based on first-half operations - and excluding Ensham until the transaction has been completed - the company's operational outlook for 2023 for export saleable production for the year has been revised to between 11.5-million and 12.5-million tonnes.

The free-on-board cost per export tonne guidance for 2023 has also been revised. This cost, excluding royalties, is expected to be between R1 120/t and R1 200/t. Including royalties, the guidance range has been revised to between R1 170/t and R1 250/t, based on a forecast benchmark coal price of $100/t.

Together with industry, government and Transnet, Thungela is continuing what Ndlovu describes as a relentless journey to find sustainable solutions to the logistics challenges facing South Africa.

Ndlovu expressed confidence that strategy and resilience wou...

Kinetiko reports reserve at pilot field

ASX-listed Kinetiko Energy has announced a maiden gas reserve of 3.1 BCF over its pilot gas production field in South Africa.

An independent gas reserve and resource report has also resulted in a 20% increase in the 2C contingent resource to 3 TCF over the company's' granted exploration rights, with the expectation of further significant upgrades from adjacent application exploration rights.

"This is one of the most significant and exciting moments in Kinetiko's corporate journey to date in South Africa. It should be well understood that the maiden gas reserve was issued on the basis of a very small project. The area considered is minute by comparison to our overall geography (about 0.2%) and yet the economics work out to be substantially positive with 2P certification for the project at about 6.4 BCF of gas," said CEO Nick de Blocq.

"Each time Kinetiko adds commercial production plans within its exploration rights, it will be able to grow reserve certifications by eventual orders of magnitude, with assumptions based on increasingly positive economics driven by deeper wells in the south with potentially higher flow rates, and larger gas contents and better geophysical properties of the sediments to the north," he said in a statement on Monday.

"The company also requested an updated resource assessment due to the results and consistency of recent exploration. The new resource assessment has reflected the upside of the sand-driven gassy reservoirs and returned a substantial 20% increase in 2C contingent resources to just over 6 TCF. It has also added a similar level of prospective resources which will move into the contingent category as further exploration confirms the geological potential."

The report certified 5.8 TCF of prospective resource on the two exploration rights where work is continuing.

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Probably by the middle of next year, if things go well, Exxaro will likely achieve financial close on a renewable energy project, which, from a sizing perspective, will probably be north of 100 MW,and located in Mpumalanga.

This was made clear by Exxaro MD for Energy Leon Groenewald in response to Mining Weekly on progress being made by the Johannesburg Stock Exchange-listed company in its partnership with independent energy company Enertrag.

Last month, financial close was achieved for the 68 MW Lephalale solar project to supply renewable energy to Exxaro's Grootegeluk coal mine in Limpopo. This was announced by Cennergi, a subsidiary of Exxaro Resources, Grotegeluk's owner and operator. Cennergi will supply renewable energy to the flagship mine for 25 years through a power purchase agreement.

Of the Mpumalanga project, Groenewald added: "We're working very hard at it. It's an interesting and tough project, but we're looking forward to that and the good part is that the work is very complementary to the solar profile, so that helps a lot in terms of saving electricity, plus electricity cost and also having Scope 2 reductions. We'll keep you posted as that progresses."

As reported by Exxaro in April, its partnership with independent energy company Enertrag aims to develop wind and solar solutions for the mining industry in Mpumalanga.

"We've basically done all of the permitting exercises, so now we're in the conversation regarding offtake and financing.

"Just to give you some idea, the project per se is a bit more complex than the 68 MW Lephalale solar project because we're looking at multiple offtakers with different life-of-mines and then project financing.

"Where Grootegeluk was one project with a long power purchase agreement, a single off taker and able to be project financed, here we're looking at a different configuration, so it's interesting and we're looking forward to that," Groenewald added.

On Thursday, August 17, Exxaro reported that worsening electricity shortages are presenting opportunities for its renewable energy business, which delivered improved 17% higher half-year revenue. This was on a 28% overall decrease in earnings before interest tax depreciation and amortisation (Ebitda) to R7 661-million for the coal-mining company.

Mining Weekly: Is that wonderful 80% margin that you report on your renewables business sustainable?

Groenewald: Yes, it's an industry norm, but what you must understand so that's an Ebitda margin. On a net profit margin, you've got to take the cost of debt into consideration and that's different, but we seeing 70% to 80% is not outside the norm. If you look at your cost levels, they are fairly low and most of them are CPI linked. It is true that in some cases, you have a bit of pushback in some of your operation and maintenance contracts that have a dollar or a Euro component and that makes it slightly challenging, but over the long term those numbers are, I think, fairly predictable, as 80% is not outside the norm and we see new projects we are testing as well looking to be okay.

As reported earlier by the black empowered diversified resources and renewable energy company Exxaro, the partnership with Enertrag has a potential pipeline of 700 MW. Furthermore, Exxaro is in discussion with various parties to acquire near-permitted sites to further boost its entry into the energy market. The potential pipeline ranges from 370 MW to 975 MW.

It so doing, the company is mindful of South Africa's electricity grid constraints, which remain a challenge.

There are around 9 GW of renewable energy projects under development in South Africa, of which the mining sector is said to account for 6.5 GW.

Having created renewable-energy company Cennergi in 2012, Exxaro built two wind farms with a combined capacity of 229 MW in the Eastern Cape in 2016, which is underpinning its foray into solar power.

By accelerating its d...

Mining Weekly Editor Martin Creamer discusses the green electrons now flowing into Harmony Gold mine shafts that will reduce carbon emissions by 65 000t; the first phase of Vedanta Zinc International’s renewable energy programme; and Glencore Alloys solar power project.

Decarbonisation of coal mining company Exxaro's operations and entire value chain is an urgent imperative to reduce carbon dioxide emissions, which will result in the additional benefits of avoiding market barriers, fines and the loss of social licence to operate.

Exxaro Resources CEO Dr Nombasa Tsengwa highlighted this on Thursday, August 17, when the Johannesburg Stock Exchange-listed company reported that worsening electricity shortages were presenting opportunities for its renewable energy business, which reported improved 17% higher half-year revenue.

Overall, the JSE-listed black-empowered diversified resources and renewable energy group reported a 28% decrease in earnings before interest, taxes, depreciation and amortisation (Ebitda) to R7 661-million.

"By accelerating our decarbonisation plan, we can also realise cost savings, partnership opportunities and favourable financing terms," Tsengwa said during the half-year results presentation covered by Mining Weekly. (Also see attached Creamer Media video.)

Decarbonisation is described as being central to the strategy of the company, which is looking to contribute "meaningfully" to the energy transition, through renewable-energy generation for its own operations and other customers, alongside the production of critical minerals, such as copper, manganese and bauxite.

Outlined was how the transition to clean energy hinged on clean energy technology supply chains to source critical minerals, as steel from manganese and iron-ore will be required for wind turbines, plus more copper for transmission lines and offshore wind power, and even more aluminium from bauxite to support solar photovoltaic plants.

"We are aware as well of the increasing scrutiny and pressure to which coal companies are subjected. This manifests through the exit of some international investors from the sector, while multinationals reorganised their portfolios.

"As a result, we are happy to report that we have revised our Scope 1 and Scope 2 emission targets to 40% by 2026. We have finalised our value chain Scope 3 analysis with the majority from our Eskom supply, very much around 97% of our Scope 3. Hence we need to pursue other Eskom suppliers to partner with us in dealing with Scope 3 emissions," said Tsengwa.

DEVASTATING WAR

The challenges presented by the prolonged and devastating war in Ukraine, together with its knock-on implications for broader Europe and energy security across vulnerable economies softened volatile commodity prices, and high inflation, were having a significant impact on the mining industry, hurting margins and cash flows.

The 28% decrease in half-year Ebitda to R7 661-million was driven by lower thermal coal prices, which slipped by over 60% from the highs of 2022, and lower production volumes owing to sub-par rail performance and lower offtake from Eskom arising from equipment unavailability.

The company's resilient performance despite lower export sales prices and volumes, and ongoing logistical challenges, has been reported amid:

added uncertainty around the intensity and the duration of global macroeconomic volatility;

the much-anticipated tailwinds from the Chinese economic recovery not yet being realised; and

the continued increase in interest rates by the US Federal Reserve contributing to the lingering retreat of global markets and the softening of commodity prices

Securing a sustainable future remains a key priority for governments and businesses around the world, which translates into intensified opposition to coal mining and coal-fired power generation.

So, too, however, has the need to ensure that the future supply of critical minerals is secured to meet the rush to the net-zero emissions target by 2050.

Given all the market dynamics in play, it is essential that companies have the balance sheet strength to navigate the volatility and uncertainty, which means adopting a bias towards cash preservation in anticipation of headwinds.

"The preservation results in under-...

Platinum-enabled hydrogen fuel cell technology is taking the pollution out of the city of Berlin, as it may in time also do in Johannesburg given the local projects that are under way.

By hailing a fuel cell electric vehicle (FCEV), more than 100 000 customers have chosen to desist from adding to the world's unhealthy transport fume problem.

First launched at the end of 2022, H2 Moves Berlin is Germany's largest FCEV fleet, and forms part of Anglo American's strategy to help accelerate zero emission transport through the deployment of platinum-enabled hydrogen FCEVs.

When used in a fuel cell, platinum serves as the catalyst to generate electricity through a chemical reaction between hydrogen and oxygen. This is then used to power the motor of an FCEV, which can be refuelled in five minutes and drive 650 km without needing to refuel - and it's all squeaky clean.

This has all been brought about by Anglo, Toyota Germany and taxi operator SafeDriver Group-ENNOO.

H2 Moves Berlin, which is leveraging Berlin's existing hydrogen refuelling infrastructure and the Uber ride-hailing platform, currently has 115 Toyota Mirai vehicles in use, with the fleet looking to expand to as many as 200 vehicles in the coming months.

"The last few months have shown that our passengers are very enthusiastic about the sustainability and comfort that FCEVs can provide," SafeDriver Group MD Thomas Mohnke stated in a release to Mining Weekly.

"Our drivers meanwhile appreciate the driving performance of an electric car with the range and refuelling speed of a combustion engine. As a fleet operator looking to minimise cars' downtime while delivering zero emission mobility, FCEVs simply make sense," Mohnke highlighted.

The Mirai's long range and short refuelling times have proven popular with both drivers and users, with the FCEV fleet providing significantly more rides per vehicle than other zero emission ride-sharing options. Beyond the Uber platform, the project has also been supporting Berlin's public events calendar by providing shuttle services at high-profile events such as the Berlinale, Greentech Festival and the Special Olympics.

"H2 Moves Berlin proves that alternative drivetrains and everyday use go hand in hand. In more than 100 000 trips across the capital, the Mirai taxis have easily covered more than a million kilometres. This milestone underlines the reliability of hydrogen-powered vehicles," Toyota Germany president and MD André Schmidt stated.

Initiatives like H2 Moves Berlin help the uptake of FCEVs both by aligning end-user demand locations with the supply of vehicles and infrastructure access, but also by providing passengers with the opportunity to directly experience the benefits and convenience of hydrogen-powered mobility. In addition to its existing activities in Berlin, Anglo is identifying future light-duty FCEV deployment opportunities in Europe, China and the US.

Anglo market development head Benny Oeyen described hydrogen fuel cells as critical technology for zero emission electric vehicles. "We believe that FCEVs are particularly well suited to vehicle fleets, such as taxis and buses, as well as to heavy duty trucks that require the range and rapid refuelling times without the weight of batteries. At the same time, we are also seeing that FCEVs offer relief to increasingly pressured battery minerals supply chains and hence can contribute to the stability and sustainability of electric vehicle supply.

"As a leading producer of the platinum needed for fuel cell technology, we have been an early supporter of the potential for a hydrogen economy and will continue to actively support the emerging ecosystem of hydrogen-powered transport in Germany, and beyond," Oeyen added.