State power utility Eskom has benefitted from reduced coal prices for years as part of a deal with BHP Billiton’s energy coal business. Global resources giant BHP Billiton said on Wednesday that BHP Billiton Energy Coal South Africa Limited (Becsa) supplied 19 million tons of coal to Eskom in 2012.
BHP Billiton was responding to the Zululand Observer following reports that the mining giant had not only assisted Eskom to absorb surplus electricity generated in the 1990s’ but also provided coal to the utility at reduced prices as part of the mutually beneficial arrangement. This comes in the wake of the confidential power deal struck in the 1990s between Eskom and BHP’s aluminium smelter business, which came to light earlier this year.
In terms of these contracts, the Mozal smelter in Mozambique was entitled to receive electricity until March 2026 and for Richards Bay’s Hillside smelter until 2028 at a lower rate than the standard tariff. The coal supply deal similarly falls under the onerous Duvha contract which extends to 2034. ‘For many years the sale price to Eskom has been below our operating cost and substantially below domestic and international prices, which places us under water in the order of $1.5-billion (R13.7bn),’ said BHP Billiton spokesperson Lulu Letlape.
‘We respect the sanctity of contracts and thus have continued to supply in accordance with the contract terms,’ Letlape said. Becsa produces energy coal for the South African domestic and export markets from mines near eMalahleni (Witbank) and Middelburg in Mpumalanga. Bayside Meanwhile, BHP Billiton still remains tight-lipped on possible frontrunners that may be interested in purchasing its Bayside smelter.
This after the Zululand Observer received reports that a BEE consortium in Richards Bay linked to interested French investors had reportedly submitted a proposal and business plan to salvage the plant which subsequently fell flat. BHP Billiton reiterated on Wednesday that it had ‘launched a comprehensive strategic review process at its Bayside aluminium smelter to assess potential ways forward for the operation given the outlook for the aluminium market’.
The mining giant would neither confirm nor deny speculations that international mining group Rio Tinto and mid-stream aluminium semi-fabricator Hulamin were possible purchasers in the mix. Earlier this year, Transnet also hinted that it would be interested in purchasing the land at the Bayside smelter if operations came to a halt. The state-owned freight logistics company wants to use Bayside’s land to stockpile coal as part of a proposed coal export terminal for black empowerment coal miners.
‘All options are being considered but the process is at an early stage and no decisions have been made about the future of the plant. This has been communicated to employees,’ Letlape said. Bayside, which employs approximately 500 employees, is the only producer of primary aluminium products in southern Africa, which are used by the local market.
