After facing significant headwinds in the six months ended December 31, 2023, Botswana-based coal miner Minergy has reported an attributable loss of P72.4-million and a loss a share of 15.42 thebe.

This compares with a loss of P44.9-million and 9.55 thebe a share in the six months ended December 31, 2022.

Minergy, which owns 100% of the Masama coal mine, in Botswana, says its financial performance during the period was challenged primarily by operational disruptions and a difficult trading environment.

The operational disruptions resulted from the suspension of activities by a former mining contractor in March last year, owing to outstanding trade payable arrears, which extended into the reporting period.

Minergy Coal acting CEO Matthews Bagopi says the reporting period was also characterised by depressed coal prices and increased inland inventories, which were further impacted on by logistical challenges in South Africa.

In response to these challenges, Minergy decided to replace the mining contractor in September, the transition of which halted production during the second quarter of the six months under review, with sales sustained by existing product inventory.

Bagopi confirms that the new mining contractor, Meropa Resources, was mobilised to site in January and first coal load and haul from the pit occurred in mid-March.

He anticipates coal supply to be stabilised by the end of April, with full-scale production by the end of June.

Meanwhile, Minergy secured P90-million in funding from its main funder Minerals Development Company Botswana (MDCB) in August last year to set in motion a strategic turnaround plan.

A further P299-million was secured from the MDCB in December, to provide short-term working capital and facilitate the transition of mining contractors.

Minergy had P29-million of cash on hand at the end of the reporting period and remains sufficiently funded for operational commitments.

As part of the transformative journey, Bagopi was appointed COO of Minergy, as well as acting CEO of Minergy Coal following the resignation of Morné du Plessis.

Owing to reduced production levels in the six months under review, Minergy’s cost of sales decreased by 67% year-on-year, with operations having been scaled back to align production with costs in the current market.

Additionally, more setbacks ensued once the former mining contractor stopped operating in September last year.

The company’s finance costs increased by 33% year-on-year, owing to its highly leveraged capital structure and additional debt.

Bagopi says discussions for capital restructuring are ongoing to support the group’s financial stability and sustainable growth going forward. He tells Mining Weekly that a roadmap for the company’s turnaround plan should be finalised in mid-April, following which an official turnaround plan will be finalised.

The company has given itself a five-year window to return to profitmaking but foresees stable and positive earnings within 18 months.

Commenting on market dynamics, Bagopi explains challenging trade conditions manifested in the second half of the 2022 financial year, with global coal prices dropping and stabilising from record highs.

The stabilised levels of prices are still nonetheless above the long-term average, but there has been a global decrease in demand, he adds.

Regional coal demand and prices remain under pressure while logistics and supply chain infrastructure challenges persist, which hinders coal export activity from South Africa despite relatively firm export prices.

Minergy’s outlook is “cautiously optimistic” about more South African industries considering self-generation of steam and electricity through small, customised coal-fired boilers.

This trend is evidenced by an increasing order book for such boilers with equipment manufacturers, driven by the growing dissatisfaction with Sate-owned power utility Eskom’s inability to provide reliable power.

Bagopi says many agrofood industries, including chicken farms, require steam in their operations, which is the main source of demand for smaller coal-fired boilers in the region, particularly South Africa.

He foresees the current 20-million tonnes a year of coal demand for these industries growing further.

Overall, Minergy continues to receive inquiries from regional and offshore markets for coal supplies, with some traditional customers expressing an interest in resuming and increasing offtake.

Bagopi confirms that the company remains focused on meeting inland market demand before turning to exports, as well as optimising its coal resources, extracting, processing, and logistics and market linkages to enhance productivity and sustainability.

He is confident Minergy will succeed in its operational stabilisation and business improvement measures, to transform into a low-cost producer.