Eskom Shops For More Coal - Export Prices Soar

The power utility’s renewed commitment to the cost-plus coal investment model has improved the prospects for the likes of Seriti Resources, which hopes to supply Eskom, and Anglo American.

- David McKay

Eskom’s drive to procure more coal has given the prospects of Glencore, Anglo American and South32 – some of the largest diversified mining firms listed on the JSE – a welcome boost mainly because it has stoked concerns of a supply deficit in the export coal market.

Eskom said earlier this month at its State of the System update that it had won National Treasury approval to embark on a major coal procurement drive as well as to recommit to the cost-plus financing model. All in all, it wants to lock in about 85% of its primary energy requirements, which is in excess of 100 million tonnes (Mt) of the fuel.

Former Eskom CEO, Brian Molefe, somewhat infamously ditched cost-plus funding – a system in which Eskom pays for the capital cost of mine development and resource replacement – claiming that the power utility wanted to own the bread (coal) not the bakery (the mine).