Bloomberg News

LontohCoal Targets China, India Power Plants With Low-Grade Type

February 21, 2012

Feb. 20 (Bloomberg) -- LontohCoal Ltd., the first African miner to sell shares in Hong Kong, plans to start shipping lower grade coal to China and India to take advantage of demand for the less expensive type at power plants.

The Sandton, South Africa company plans to start exporting 70,000 metric tons a month later this year from a mine in South Africa, Chief Executive Officer Tshepo Kgadima said in an interview in New Delhi. Supplies from the Johannesburg-based company will have a heat value of about 5,500 kilocalories and 20 percent ash content, he said.

“Large coal producers in the world are interested to see the demand fundamentals of China and India,” Kgadima said. “The power sector is driving demand in Asia.”

China, the world’s biggest coal consumer, surpassed Japan as the largest importer of the fuel in 2011, according to customs data from both countries. India, which uses the mineral to fire more than half of its power plants, imported 81.1 million tons of the steam type last year, according to shipping data from New Delhi-based Interocean Group.

Lontoh may boost output of the steel-making, or coking, and power-plant, or steam, varieties of coal to 46 million tons by 2017 at the Lubimbi mine project in Zimbabwe, he said.

The $8 billion project includes a coal-to-liquids plant, a 1,200-kilometer (746-mile) pipeline and a port in Mozambique, he said. The company will ship the supplies by reducing the coal to a watery mixture called a slurry and pumping it through the pipe and then on to customers in China and India, Kgadima said.

China Market

“China will be our biggest supply market for coking coal while India will likely be for thermal coal,” Kgadima said.

Steam coal output at Lubimbi will be around 26 million tons and will have a heat content of more than 6,500 kilocalories per kilogram. Australia’s Newcastle coal grade, a benchmark type for Asia, releases about 6,700 kilocalories of energy and has a typical ash content of 10 percent to 12 percent.

Lontoh is in the midst of a capital-raising process, which is expected to close in the middle of March, ahead of its initial public offering in Hong Kong, said Kgadima.

Coal export prices at South Africa’s Richards Bay decreased to the lowest level in three weeks to an average $104.83 a ton in the week ended Feb. 10, according to data on Bloomberg from IHS McCloskey.

--Editors: Christian Schmollinger, Mike Anderson

To contact the reporter on this story: Dinakar Sethuraman in New Delhi at dinakar@bloomberg.net

To contact the editor responsible for this story: Christian Schmollinger at christian.s@bloomberg.net


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