Minergy eyes first profits from Masama
Local coal producer, Minergy, expects that the current financial year will record its first period of operational profitability since its establishment, after strong results in the last quarter of the just-ended financial year.
Minergy, which owns Masama Coal Mine at Medie, kick-started operations in 2019 but has yet to produce profits due to both operational and market issues.
However, after three depressed quarters in the year to June 30, CEO Morne du Plessis said the last quarter of the reporting period had produced the first operational profit. The last quarter, running from April to June, was helped by record global demand for coal after Russia’s invasion of Ukraine sparked an energy crisis in Europe and other countries.
“We had a challenging first three quarters followed by an exceptional turnaround in the fourth quarter, as many European and Asian countries looked for alternative sources of supply,” du Plessis said.
“As a result, Minergy’s high-quality coal became a sought-after commodity.”
As coal export prices remain high on the back of the Ukraine war, Minergy continues to capitalise on viable export opportunities through Walvis Bay and Maputo through the establishment of new sales agreements with coal traders.
“Overall, the outlook for the coming year is positive and is forecast to be operationally profitable, as demonstrated in quarter four, which would be the first year for such an achievement after challenging startup years,” the CEO said.
For the year to June, Minergy realised an after-tax loss of P131 million compared to P107 million for the previous corresponding period.
Minergy endured challenging market conditions in the first nine months of the financial year, resulting in total operating losses of P74 million worsened by additional interest arising from debt restructuring. The company’s sales into the regional market suffered due to an oversupply of coal as Transnet Freight Rail failed to support coal dispatches into the export market through Richards Bay.
The company’s overheads also increased due to hyperinflationary-like price increases in explosives and administered prices, such as diesel, which rose by 57% and 127% respectively.
“This situation was exacerbated by diminishing offtake from contracted key customers from unscheduled breakdowns and plant maintenance.
“Given this, mining and coal processing rates were reduced to manage stock levels and to avoid coal losses through spontaneous combustion,” du Plessis said.
Output was also impacted by operational interruptions from unexpected rainfall in April and intermittent power outages.
The CEO said looking forward, Minergy’s strategy remains to operate at production capacity and maximise sales. Minergy is operating at a full production capacity of 125,000 tonnes per month and achieving better pricing and planned product mixes.
“Historically, plant and market factors limited us from operating at optimal capacities, but fortunes have now changed,” du Plessis said.
“This turnaround supports the expansion of mining operations to produce additional coal, and the mining fleet has been increased to capitalise on this.
“Opportunities to exceed production capacity and the resultant additional saleable production are being pursued.”