Reuters reported that South Africa's junior coal miners, some of them tiny producers, face intense pressure to consolidate, but the varying quality of their deposits and what are often poor locations will prevent many tie ups and may force some to simply shut up shop.

Battling escalating costs, aging mines, unclear regulation and woefully inadequate rail and port export capacity, smaller players face a stark decision join forces, combine with cash flush partners, as many have already done, or shut down.

Mr Nchakha Moloi, a former senior government official turned mining entrepreneur, said that "The mining black empowerment mining firms are too small to be sustainable. I would agree 100% that consolidation is necessary. Consolidation is a fundamental principle of business, the bigger you are, the more efficient you become."

South African coal production, mostly thermal coal used for power generation, is dominated by five big players, but a host of small time producers are also competing, a consequence of the shape of deposits in some areas and mostly of black empowerment deals over the past two decades.

The empowerment deals, which sought to right the wrongs of years of white minority rule, focused on ownership and not on sector growth, mining experience or funds of those taking charge. As a result, plots were split, and thousands of mining and prospecting licenses handed out. Many produce very small amounts, as little as a few hundred thousand tonnes a year.

(Sourced from www.reuters.com)