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INVESTMENT OPPORTUNITIES IN COAL
IN ZIMBABWE
A PRESENTATION TO THE 5TH ANNUAL
MINING IN AFRICA CONFERENCE
5TH August 2009
By O.J Maponga
1.0 INTRODUCTION
• The economic development of a country is
directly proportional to the production and use of
energy, particularly electricity.
• Zimbabwe, like the rest of the countries of the
sub-continent, has great potential for growth.
• Also like most developed and developing
countries, Zimbabwe’s fossil fuel remains and
will for a long time be a major source of energy.
Introduction (con’t)
• Zimbabwe is endowed with huge fossil fuelresources of world-class quality and is richin other minerals.
• The country has enabling infrastructuresupported by an excellent skills base,abundant labour and other criticalresources like water and arable land.
Introduction (con’t)
• These factors provide tremendousinvestment opportunities in coal inZimbabwe.
• Government provision of an enablingenvironment, setting of the priorities andmilestones right will provide impetus forthe envisaged national economic growth.
THIS PRESENTATION
This presentation:
• gives an overview of the geology of thecoal resources in Zimbabwe
• looks at Hwange Colliery operations in thepre- and post-independence era; and
• Looks at the opportunities arising in light ofthe new political dispensation.
1.0 THE GEOLOGY OF COAL
DEPOSITS IN ZIMBABWE
1.1 LOCATION OF COAL
DEPOSITS IN ZIMBABWE
LOCATION (CON’T)
Known coal deposits are found in two areasof Karoo rocks in Zimbabwe:
• The mid-Zambezi basin in the north andnorthwest; and
• The Sabi-Limpopo basins in the southand southeast.
Coalfields may yet lie undiscovered in theZambezi Valley.
Location of coal deposits (con’t)
• These basins contain subsidiary basins(intrabasins) of deposition in which thereare variations in lithology and succession,but the major ones can be correlated witheach other (see fig 2 below)
1.2 GEOLOGY OF THE COAL
SEAM
• The coal measures are an integral part ofthe Karoo Sequence.
• The seams occur at depths ranges of 10 –450m
• In all areas only one seam (Main Seam) iseconomic.
• This Main Sea is Permian in age and oftenshows a vertical variation in chemicalattributes
MOLTENO
BEAUFORT
ECCA
DWYKA
Fig 2: LOWER KAROO IN THE MID-ZAMBEZI BASIN (ZIMBABWE)
LUBIMBI LUSULU BUSI - SENGWA KAONGA SANYATI
UPPER KAROO
Tillite
Lower Hwange
Sandstone
Black Shale and
Coal Group
Upper Hwange
Sandstone
Madumabisa
Mudstones
Sidaga
Mudstone
Hankano
Beds
Clay - Ranch
Formation
Ridge
Sandstone
Tshale
Formation
Waterfall
Sandstone
Bira Coal
Measures
Lubimbi
Glacials
Upper
Sandstone
Upper
Coal-Shale
Central
Sandstone
Lower
Coal-Shale
Lower
Sandstone
Deweras
Wacke
UP
PE
R K
AR
OO
Tillites and
Varvites
K0
K1
K2
K4
K5T
K5R
K5C
K5H
K5d+e
K5c
K5b
+
K5a
K5d
K5c
K5b
+
K5a
Schematic columnar sections of key areas and their lithostratigraphic correlation
(Adopted from J. Lepper)
HWANGE
not to scale
2.0 THE HWANGE SECTION
• A western extension of the Mlibiziintrabasin (see Fig 3 below).
• Dichotomous – divided by the EntubaCrystalline Inlier into two:
� Hwange Concession and Western Areasto the northwest; and
�Lukosi –Entuba and Sinamatella to thesoutheast.
Fig.3 Mid Zambezi Intrabasins
The HWANGE SECTION (CON’T)
• The Hwange Concession is the only area that
has meaningfully been exploited for its coal
resources.
• The coal seam has been extensively drilled;
• The bottom part of the seam has excellent
coking properties and its ash as low as 5 to 7%.
Phosphorus is low too, while the mean value of
sulphur is approximately 1.3%
3.0 HWANGE COLLIERY
COMPANY LTD. HISTORICAL
PERSPECTIVE
3.1 PRE-INDEPENDENCE
• Mining claims pegged in 1893
• Main incline shaft (No.1 Colliery)completed in 1902 and productioncommenced with coal transported by oxwagon.
• Rail line from Bulawayo reached Hwangein 1903, enabling the Company to supplycoal at agreed quantity, quality and priceto mines, railways and industry.
HISTORICAL PERSPECTIVE
(con’t)
• Mining was essentially by the undergroundhand-got system.
• Opencast mining was intermittent andlimited to small pits to supplementunderground mining operations duringperiods of increased coal demand.
• Increased demand led to the Companycommissioning No.2 and No.3 Collieries in1927 and 1953, respectively.
PRE-INDEPENDENCE (con’t)
• Regrettably a major disaster occurred atNo.2 Shaft in June 1972, and the shaftwas closed.
• To make up for the lost coal production,No.4 Shaft was commissioned in 1976.
3.2 POST- INDEPENDENCE
Two major developments took place soon
after independence:
a) Completion and commissioning of the950MW Hwange coal-powered station onthe Hwange Coalfield; and
b) The commissioning of the Main OpencastMine which employed the “Dragline withSupplementary Stripping Method” tosupply the new Thermal Plant with coal.
POST-INDEPENDENCE (CON’T)
• Production (No.3, No.4 and Opencast)increased reaching a peak of 5.915million tonnes total coal per year in 1991
• Since then production has been on adownward trend to the 2008 low of justunder 2 million per year (see graph below).
Historical Coal Production Graph
Coal Production 1980 to 2008
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OPENCAST HPS OPENCAST HCC UNDERGROUND HCC TOTAL HCC TOTAL COAL
POST INDEPENDENCE (CON.T)
Decline in production rates are mainly due
to the “smart sanctions” that the country has
been slapped with and this resulted in the
following challenges:
• HCCL’s inability to source funds forrecapitalisation and refurbishment ofageing equipment most of which hasoutlived its useful lifespan;
Declining Production (con’t)
• Perennial shortage of forex – aggravatedby the fact that Hwange Colliery Companyis not a net exporter.
• Loss of critical skills to the sub-region andbeyond.
• Reduced production itself also spirallednegative cash-flow.
4.0 OUTLOOK
OPPORTUNITIES
With the growing interest in Zimbabwe
shown by external investors since the
advent of the Government of National Unity,
what opportunities are in coal in Zimbabwe?
4.1 HUGE COAL RESOURCE
BASE
Zimbabwe is endowed with huge coalresources. These are estimated at 26 500million tonnes in situ, an estimated 10 500million of which is potentially extractable.
The zonal distribution of these resources
is as shown below.
Estimate of Coal Resources in
Zimbabwe.
• Limpopo Basin : 60 million
• Save (Sabi) Basin : 684 million
• Zambezi Basin:
� Eastern Area : 14 million
� Middle Area : 23 766 million
� Hwange Area : 1 976 million
COAL RESOURCES (CON’T)
All the known coal deposits in the country,expect the Hwange Colliery Concessionpart of the Hwange Area, are yet to befully explored and developed.
THE HWANGE AREA
• Home to four coal-bearing areas legallyknown as Coal Concessions:
�Hwange Colliery Concession
� Western Area
� Entua-Lukosi
� Sinamatella
HWANGE CONCESSION
• As stated earlier, this is the only coalconcession that has been fully developedand exploited for its coal.
• Data from this area is used for referenceand bench-marking.
• It is owned by the Hwange CollieryCompany and is approximately 22 000hain extent (Fig 4).
Fig 4 : HWANGE CONCESSION
HWANGE CONCESSION (CON’T)
• The coal seam occurs at depths ranging from
outcrop to 350m.
• Coal is won by Opencast and Underground bord
and pillar mining methods
• The Concession has a remaining coal reserve
equivalent to a maximum of 30 years of mining
• Hwange Colliery has applied for new mining
concessions
THE MAIN COAL SEAM AT
HWANGE
The Main Seam at Hwange shows acharacteristic variation from base to top:
• Ash and phosphorus values increase,while volatile and sulphur contentsdecrease with distance above footwall.
• Reactive macerals (vitrinite and reactivesemi-fusinite) dominate at base, while inertmacerals are predominant towards the topof the seam.
Seam Modelling
• Based on this variation, the geologicalseam is modelled into three layers using acompositing procedure shown in Fig. 5below.
Fig. 5: Hwange Seam Compositing
ProcedureCompositing Diagram Moving Mean ASH from footwall
Moving Mean ASH from top of HCC
Moving Mean VM from footwall
Moving Mean VM from top of HCC
VM ASH23.5%
0 15% 24%
H
C
C
H
P
S
1 : HCC VM Cut - Off
2 : HCC ASH Cut - Off
3 :HPS ASH Cut - Off
1
2
3
Bo
reh
ole
Tra
ce
The Seam Subdivisions
The resulting subdivisions are:
• A basal layer with coking properties and isreferred to as Hwange coking coal (HCC)except in the Chaba area where it is non-coking and is referred to as industrial coal(HIC).
• A middle layer of power coal or HPS.
• The remainder high ash material isdiscarded as overburden (see Fig. 6).
HWANGE MAIN SEAM DIVISIONS
Fig 6
Coking / Industrial Coal
Power Coal
Black Shale / Overburden
Floor
Economic Significance of the
Vertical Parameter Variation
This variation makes the seam at Hwangesuitable for a variety of applications:
• Power generation
• Steam raising
• Coke Making
• Heating and cooking
• Chemical industry - fertilizer manufacture
• Transport and agriculture (tobacco curing)
4.2 Coal-Bed Methane
• Recent studies on the Karoo areas ofZimbabwe have revealed that the countryis also endowed with huge coal-bedmethane gas deposits.
• These include Entuba, Lubimbi, Lupaneand the Western Area coalfields.
• Hwange Colliery is currently one of theleading companies exploring for CBM.
Benefits of CBM Use in Zimbabwe
• Availability of an alternative to coal forpower generation, is more environmentallyfriendly and has a more flexible usepattern; a 330MW gas-fired power plantcan be established in 25 -30 months.
• Provision of a new feedstock to replacethe electricity intensive hydrolysis of waterin fertilizer production at Sable
Benefits of CBM Use (Con’t)
• Opening up of the petrochemicals sub-sector to a major new phase ofdevelopment, e.g. production of wax
• An alternative to diesel and petrol – gascan be used as motor fuel, either incompressed form or liquid form throughconversion as gas based diesel, gasolineor ethanol.
4.3 ENABLERS
Exploitation of the coal and the associated coal-
bed methane is supported by a number of
factors:
� good railway system
� Abundant water resources
� Interstate Power Line
� An excellent skills base and abundant labour
� Tourism
a) RAILWAY SYSTEM
• Zimbabwe has an excellent railwaynetwork which connects all the major citiesin the country (see map below).
• The system connects with theneighbouring countries of Botswana,South Africa, Zambia and South Africa.
• Ultimately the landlocked nation is linkedto the sea via these countries.
b. Abundant Water
• Zimbabwe’s mature drainage systemcomprises Zambezi and Limpopo whichare fed from the Zimbabwean side bytributaries that cascade from the country’snorth east- southwest trending watershed.
• These, plus dams built on them, offerabundant water supplies to support coaland related resources exploitation andutilisation.
c. Interstate Power Line
• The interstate power line linking Botswana,Zambia and through Katima Mlilo toNamibia under construction will passthrough Victoria Falls.
d. Excellent Skills Base
• One of Zimbabwe’s sterling postindependence successes is education andskills training.
� The syllabi at School of Mines in
Bulawayo have a strong coal component
� Hwange Colliery has a big Training
School for artisans who are an envy of the
sub-region and the world beyond.
Excellent Skills Base (con’t)
�The country’s universities have strongEngineering syllabi and produce excellentengineers and the coal mining industrydraws it mining, mechanical, civil andelectrical engineers from these institutions.
�The country’s policy of “Education for All”has provided a trainable labour force evenin the semi-skilled bands.
e. Tourism
• The country has a well developed touristindustry:
�Hwange town is adjacent to the HwangeNational Parks and approximately 100kmfrom the scenic Victoria Falls.
f. Government’s Policy Fossil Fuel
Exploitation
• Mining of coal and CBM currently falls under the
Mines and Mineral Act.
• Government regards the two commodities as
resources of strategic value to the nation and
thus feels compelled to be actively involved in
the exploitation of the two resources.
• Partnership with Hwange Colliery Company and
any other coal operator in Zimbabwe, like Rio
Zim, can be negotiated with equity ratio flexible.
Hwange Colliery Current Share
Structure
Those interested in the Hwange CollieryCompany profile please visit our website:www.hwangecolliery.co.zw
HWANGE COLLIERY COMPANY
STOCK REGISTRATION
• The Company is currently registered theZimbabwe, Johannesburg and Londonstock exchanges, with the main register inHarare.
• The organisation is considering registeringon the proposed African Stock Market inJohannesburg.
5.O CONCLUSIONS
• Zimbabwe has huge fossil fuel resourceslocated on either side of the country’s maingeographical watershed.
• All expect those in the Hwange Colliery’sConcession are yet to be fully developed forexploitation
• The existing infrastructure, abundant waterresources, excellent skills and abundant labourwill lend themselves to the exploitation of theseresources.
Conclusions (con’t)
• The coal seams have attributes that offer
tremendous opportunities for power generation
and coking coal for both local use and export.
• The Huge CBM deposits will offer alternatives to
coal, motor fuel and imported raw materials for
fertilizers and other petrochemical feedstocks.
• THERE HUGE INVESTMENT
OPPORTUNITIES IN COAL IN ZIMBABWE