Diversified miner Exxaro Resources expects to increase its production by 3% year-on-year for the 2018 financial year.
FD Riaan Koppeschaar reported in an update to shareholders on Wednesday that its thermal coal production from the Waterberg is likely to increase by 15% year-on-year, in line with demand from power utility Eskom, as well as strategic stockpiling for the implementation of the Grootegeluk 6 (GG6) expansion project.
Production at the Mpumalanga commercial mines is expected to be 14% lower year-on-year, mainly as a result of the sale of the North Block Complex (NBC) operation, the Mafube Springboklaagte reserves being depleted and Mafube Nooitgedacht ramping up, as well as production challenges experienced at Exxaro Coal Central (ECC).
Metallurgical coal output is expected to increase by 9% year-on-year, after a stacker incident hampered production at Grootegeluk in the fourth quarter of 2017.
Coal buy-ins are expected to be 105% higher as a result of the unavailability of sufficient own coal, mainly at Mafube and ECC to fulfill contracts.
Export sales volumes are expected to be marginally lower than in the 2017 financial year as a result of reduced availability of export product from Mafube and ECC, which were offset by higher product from Leeuwpan.
Export volumes are also expected to be 5% lower than the previous guidance as a result of sluggish Indian sales during August and September following the Chinese import ban on Australian and Indonesian coal, which were then diverted and competed with South African coal and adverse weather conditions affecting the operations at Richards Bay Coal Terminal (RBCT) during October and the first half of November, causing severe disruptions to the loading of vessels.
Sales to Eskom are expected to increase by 5%, driven by higher sales from Grootegeluk, but partly offset by lower sales from NBC owing to the delay in the renewal of the Eskom contract and the subsequent sale of the mine at the end of October.
Domestic thermal coal sales, excluding sales to Eskom, are expected to show a net decrease of 1%, mainly owing to sales volumes from Leeuwpan being diverted to the export market, as well as lower sales from ECC, partly offset by higher sales from NBC as a result of some Eskom product sold in the domestic market. Mpumalanga domestic sales are expected to be lower than previous guidance as a result of Leeuwpan product diverted to the export market, which, in turn, was affected by the adverse weather conditions at RBCT.
Meanwhile, Exxaro expects its capital expenditure (capex) for the coal business to increase by 42% year-on-year, mainly as a result of the timing of the GG6 expansion and Belfast projects, the timing of the Leeuwpan OI pit and higher sustaining capex, mainly at ECC.This will, however, be offset, so some extent, by the optimisation on sustaining capital at Grootegeluk.