Reuters: Deals: Vitol takes stake in South Africa coal miner CIC

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Vitol takes stake in South Africa coal miner CIC Mar 27th 2012, 19:08 By Jacqueline Cowhig MOSCOW | Tue Mar 27, 2012 3:08pm EDT MOSCOW (Reuters) - Energy trader Vitol is taking a 9.1 percent stake in South Africa miner CIC Energy Group as part of its strategy to develop a substantial coal business for the long-term, a Vitol executive told Reuters on Tuesday. Falling coal qualities in South Africa's Mpumalanga coal heartland and a lack of access to export capacity have forced coal players to look to the north of the country, to Botswana, the Waterberg and across the border to largely-undeveloped Mozambique for investments, industry sources said. "This (the CIC deal) is about Vitol securing access to large-scale exports in the future," the executive said, speaking on condition of anonymity. CIC has three coal blocks in development, one for domestic coal and two for export. Vitol will market 60 percent of any future export grade coal, he said. "Vitol is trying to develop an upstream strategy to support the Maputo terminal (in which it bought a stake) and to increase it," he said. "We see the future of South African coal from greenfield areas, the Waterberg, Botswana and beyond." CIC wants to build rail lines to new or expandable points of export, which could go through Botswana, Zimbabwe and Mozambique but is more likely to run from Witbank to the Waterberg and then east to Maputo. "This is not Vitol saying we don't like South African risk, most coal will go through South African transport systems such as the expanded Transnet line through the Waterberg," he added. Vitol in January paid $67.7 million for a 35 percent stake in Maputo terminal operator Grindrod (GNDJ.J), giving Vitol access to 6 million tonnes a year of export capacity. And earlier this month, Vitol announced it will market 2 million tonnes a year of thermal and coking coal produced by Beacon Hill Resources (BHRB.L) from its Minas Moatize mine in Mozambique. "This is a Vitol transaction, not part of the Grindrod deal at the moment," he said, although Vitol's aim is to export via Maputo, where it has a joint venture with Grindrod. CIC's immediate project is to develop the first block to supply South Africa's utility Eskom with 4-8 million tonnes a year of coal and to be producing export coal by the time the planned Maputo expansion is completed in 2016, he added. CIC's coal fields are geologically similar to those of the Waterberg and quite unlike the coal seams of Mpumalanga. The washed coal quality is slightly lower than the standard South African export grade but this would be ideal for the Indian market, he said. (Editing by William Hardy) Link this Share this Digg this Email Reprints

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