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Grootegeluk boosts Exxaro’s H1 coal output

Exxaro CEO Mxolisi Mgojo

Exxaro CEO Mxolisi Mgojo

Photo by Creamer Media

16th August 2018

By: Marleny Arnoldi

Deputy Editor Online

     

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JOHANNESBURG (miningweekly.com) – Diversified miner Exxaro Resources’ coal production volumes for the six months to June 30 increased by 7%, or 1.5-million tonnes, compared with that of the second half of 2017.

The company on Thursday attributed the increase in overall output to higher production volumes at the company’s Grootegeluk (GG) mine, owing to continued ramp-up at the GG7 and GG8 plants to supply the Medupi power station.

Exxaro CEO Mxolisi Mgojo said at a presentation of the company’s results that domestic trading conditions were favourable in the first half of the year as producers experienced strong demand for higher-quality product.

The metals and reductants markets remained stable amid stable international commodity prices, he added.

GG’s metallurgical coal production was 110 000 t, or 10%, higher compared with the second half of 2017, mainly owing to better yields at GG1 as a result of better geological conditions compared to 2017. Sales increased by 18 000 t, or 3%, owing to better demand.

Power station coal production from the company’s Matla mine, in Mpumalanga, which supplies coal exclusively to Eskom, was in line with that of the first half of 2017, despite equipment breakdowns and unfavourable geological conditions.

Power station coal production from Exxaro’s commercial mines was 2.1-million tonnes higher, owing to increased production at GG7 and GG8, and at Leeuwpan, as a result of higher plant availability.

This increase was partly offset by lower production at North Block Complex mine of 362 000 t owing to community actions, as well discontinuing production at Eerstelingsfontein, which is owing to the pending divestment to fellow coal miner Universal Coal.

Steam coal production decreased by 723 000 t mainly as a result of lower buy-ins from Exxaro’s Mafube joint venture of 616 000 t, which is owing to the ramping down of Springboklaagte and the ramping up of Nooitgedacht reserve.

Domestic steam sales decreased by 225 000 t as a result of lower sales at Leeuwpan of 407 000 t, owing to coal being diverted to the export market; lower sales at GG of 67 000 t, owing to lower product availability; and lower sales at Exarro Coal Central of 44 000 t.

Semi-coke coal production was 23 000 t, or 50%, lower owing to a fire incident in March at GG’s reductant plant. Sales were 14 000 t, or 30%, lower and in line with the lower production and stock availability.

Mgojo expects the domestic market demand for sized product will remain strong as supply remains tight.

Export markets are still reliant on demand from India for lower quality coal. However, Exxaro is actively diversifying its markets for lower-quality coal to minimise dependency on the Indian market.

Mgojo told Mining Weekly Online that Exxaro will focus on exporting more coal, as its projects come on stream.

Further, relatively stable commodity prices and global economic growth are expected. Over the next six months, the China–US trade tension and high oil price are anticipated to slow global economic growth momentum somewhat.

The rand/dollar exchange rate is expected to remain volatile and subject to ongoing event risk such as US Federal interest rate normalisation, geopolitical risks and emerging market sentiment.

Meanwhile, Exxaro’s GG6 expansion construction continues, while the GG2 plant shutdown is planned for the third quarter. The expansion will cost about R4.8-billion and will deliver between 1.7-million and 2.7-milllion tonnes of semisoft coking coal a year.

First production is anticipated in 2020.

Construction at the company’s R3.3-billion Belfast mine continues. The mine will produce 2.7-million tonnes a year of thermal coal. Production is scheduled to start in the first half of 2020.

Exxaro’s Thabametsi mine Phase 1 construction will start early next year, at a capital cost of R3.2-billion, to produce 3.9-million tonnes of thermal coal a year. First production is scheduled for 2021.

FINANCIAL RESULTS
Exxaro reported a net profit of R3.22-billion for the six months, compared with a net profit of R2.72-billion in the first half of 2017.

Revenues increased by 14% year-on-year to R12.26-billion, while headline earnings a share increased by 39% year-on-year to R12.22.

 

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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