Planning a 10-year overnight success

COAL players interested in turning Botswana into the world’s next energy hub agree that infrastructure development is the key to the enterprise but cooperation and a patient long-term strategy may be the only way to make it happen.
Planning a 10-year overnight success Planning a 10-year overnight success Planning a 10-year overnight success Planning a 10-year overnight success Planning a 10-year overnight success

Botswanan flag

Justin Niessner

Coal deposits in the landlocked southern African country are predicted to be more than 200 billion tonnes and while snowballing interest seems to tip the arrival of the next Mongolia, it is well known that unrestrained ambition can lead to economic overheating.

Growing inflation and infrastructure bottlenecks in Mongolia are a direct result of too much too soon, spooking foreign investors and unnecessarily pressuring the region’s coal producers.

At the recent Botswana Resource Conference, coal companies agreed that unlocking the landlocked country would require a big increase in infrastructure spending and a measured collaboration on its development would be the only sustainable approach.

To get an insider’s perspective on the long road to a Botswana boom, ILN spoke with Hodges Resources managing director Mark Major whose coal exploration company is developing two projects in the central-east region of the country.

“In Botswana, we’re talking about potentially 80 million tonnes [per annum] potentially coming out,” Major said.

“If you throw 80Mt into the world market overnight, what are you going to do to the coal price?

“No one is going to build a rail line which needs 80Mt on it tomorrow when you’ve only got one actual operating mine in Botswana.

“In my personal opinion, a designated coal rail line in Botswana is maybe 10 years away.”

In the Botswana coal scene, this long-range thinking is not the sound of pessimism but the only practical way of getting a giant on its feet.

While other regional producers experiment with tenuous test runs to the major export terminals of Mozambique via Zimbabwe, Hodges reminds us the build-up will be slow and exports in the meantime are best shipped through the existing low-volume links in South Africa.

“There is short-term potential through current infrastructure which will allow export to happen but it will be on a much smaller scale,” Major said.

“You won’t be talking 50-80Mtpa, it’ll be maybe between 20-30Mtpa – maybe a little bit more.”

The bottom line is, as it stands now, Botswana coal is only economically viable for local electricity production but this is a perfectly good starting point if the right strategy is employed.

Meaningful exports are going to take a decade, a collaborative effort among at least a half dozen or so operational mines and a little patience from the national government.

“The government isn’t looking at it as an economic thing,” Major said.

“They’re looking at it basically just as a solution, ‘Can these rails be built?’

“Yes, technically it can be built but will it run as a profitable business? This is where the grey areas appear.”

The best way to bring in the big infrastructure economically, Major says, is to gradually advance production in several mines simultaneously – a scenario he concedes is a bit of a chicken-and-the-egg dilemma.

“You can’t just build a rail and say everybody can jump on,” he said.

“If you already have a series of mines operating that have the potential to ramp up fairly quickly, that is going to be the best situation for a designated coal rail for Botswana.

“If you’re looking at the seaborne market, the current rail infrastructure that is in existence right now does not allow us to provide it to the port economically.

“That can be altered in the short term by reducing tariffs and by building small links which reduces the amount of haulage distance.

“The less capital that has to go into it, the better the potential to get the costs down per tonne, per kilometer.

“That’s the key to unlocking Botswana’s coal.”

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