Geological study and economic evaluation of the Paardeplaats Coal Exploration Project

Abstract

For a coal mining company the coal resources are an important asset, and they are acquired in a number of different ways, such as obtaining a prospecting permit from government or an existing permit from another entity and or purchasing an operating colliery from another entity. The Paardeplaats Project is a brownfields project located approximately 7 km south west of the town of Belfast in Mpumalanga Province, South Africa, on the far eastern edge of the Witbank Coalfield. The project is located adjacent to an operating mine, Glisa Colliery, owned by Eyesizwe Coal. Eyesizwe Coal was awarded the prospecting permit in 2006 by the Department of Mineral Resources. Subsequent exploration activities, which included airborne magnetic survey and borehole drilling, were conducted between 2008 and 2010. The results of the drilling confirmed the presence of coal resources, which are classified in the Measured, Indicated and Inferred categories. Mining and beneficiation methods from the adjacent Glisa Colliery, which has similar geology to the project area, were assumed in order to generate a coal reserve statement. The Coal Reserve qualities are suitable to the domestic market, particularly Eskom. South Africa's coal supply is demand driven, primarily from Eskom for electricity generation followed by the export market and thirdly by Sasol for synthetic fuel generation. The majority of Eskom's existing coal-fired power stations are located in the Mpumalanga Province, which provides a viable market for coal projects in Mpumalanga when considering existing transport infrastructure and transportation costs. Eskom's continued demand for coal in the Mpumalanga region, at least until 2040, provides a future market for advanced coal projects in the region. A valuation of the project using the Cash Flow Approach showed the project to be economically viable.