JOHANNESBURG (miningweekly.com) – Black-controlled diversified mining company Exxaro, which recorded a R3.2-billion net operating loss in 2014, expects challenging conditions to continue in 2015, the company said on Thursday.

The net operating profit of the JSE-listed company, headed by CEO Sipho Nkosi, fell 192% to a loss of R3 292-million in the 12 months to December 31, mainly as a result of the pre-tax impairment of its Mayoko iron-ore project in the Republic of Congo (RoC), which takes in the original investment as well as goodwill, property value, plant and equipment and project costs of R5.760-billion.

The company has declared a final dividend of 210c a share, bringing the total dividend to a 15% lower 470c a share.

The company recorded one fatality and kept its lost-time injury frequency rate at 0.19, which is 40% below the coal industry average.

Coal production at 39.1-million tonnes, was up 1%  and coal exports at 5.3-million tonnes rose 19%.

Headline earnings a share of 1 372c were 6% lower.

Cash flow generated from operations, which was 88% higher than in 2013, at R4.083-billion, was used to fund dividends paid of R2.055-billion, net financing charges of R248-million and taxation payments of R120-million.

Some R3.197-billion was spent on acquiring property, plant and equipment, of which R1.737-billion was invested in new capacity (expansion capital), with the remaining R1.460-billion applied to stay-in-business capital.

Of the funds spent on new capacity, R277-million was for the Grootegeluk Medupi expansion project and R759-million for the Mayoko iron-ore project, until its impairment in June.

After the receipt of dividends of R3.719-billion, primarily from Sishen Iron Ore Company and Tronox, the group had net cash inflow before financing activities of R2.280-billion.

Trading conditions in coal remained challenging with average prices closing the year 20%-lower at $66/t, with exports increasing from 4.5-million tonnes to 5.3-million tonnes at an average export price of $65/t compared with $80/t in 2013.

An average of 67% of export product sales was on the RB1 product, compared with 92% in 2014.

Overall coal production of 0.34-million tonnes was 1% higher and 1.47-million tons of sales 4% higher.

Grootegeluk’s metallurgical coal production of 212 000 t was 11% higher and sales of 357 000 t 19% higher, reflecting increased Transnet Freight Rail (TFR) train allocations to Richards Bay Coal Terminal (RBCT) as well as higher domestic demand from ArcelorMittal South Africa.

Tshikondeni production of 189 000 t was 55% lower and sales of 102 000 t 30% lower owing to the mine stopping production in September 2014 as it reached the end of its life.

Thermal power station coal production from the tied mines was higher at 48 000 t, mainly due to production at Matla which was 2% higher at 241 000 t.

The TFR performance rate was at a higher 72-million tonnes and Exxaro used 100% of its available RBCT entitlement.

Coal revenue of R2.814-billion was 21% higher and net operating profit of R3.297-billion was at an operating margin of 20% compared with a 21% operating margin in 2013.

Exxaro continues to actively liaise with the RoC government to finalise port and rail agreements for Mayoko. Iron-ore metallurgical testwork on the remaining drill samples on the impaired Mayoko iron-ore project will continue in the first half of 2015.

The second amendment to the Mayoko mining exploitation convention is under way and will be submitted to the RoC government in the second quarter of 2015,  after which it is expected to be submitted to the RoC Parliament.