JOHANNESBURG (miningweekly.com) – Diversified miner Exxaro Resources has posted headline earnings of R2.79-billion for the six months ended June 30, compared with headline earnings of R1.10-billion in the first half of 2016.

Revenue rose 10% year-on-year to R10.74-billion, while group net operating profit increased by 35% to R2.91-billion.

Speaking at a presentation of the company’s financial results, in Johannesburg, on Thursday, CEO Mxolisi Mgojo said the increases were mainly owing to a higher contribution from the coal operations, driven by improved coal sales prices, as well as higher volumes from the Grootegeluk mine sold to State-owned Eskom, based on demand for the Medupi power station.

“The average price per ton achieved on exports was $65. This was offset by a stronger average spot exchange rate of R13.20 to the dollar recorded for the period and lower export and domestic volumes,” he said.

Group operating expenses of R7.83-billion for the first half of this year remained almost flat compared with the previous period, owing to the ongoing efforts to reduce costs and improve efficiencies.

However, the group’s net operating profit was negatively impacted by a R37-million loss on the fair value adjustment relating to the contingent consideration which arose on the acquisition of Total Coal South Africa, a coal operation now called Exxaro Coal Central.

It was also affected by the R75-million loss on dilution of Exxaro’s shareholding in chemical company Tronox, as well as by a R27-million write-off of the receivables associated with the miner’s Mayoko iron-ore project, in the Democratic Republic of Congo.

Coal revenue of R10.67-billion was 10% higher than R9.72-billion earned in the same period last year.

“Higher revenue from the commercial mines was attributable to the higher selling prices, as well as an increase in Eskom volumes. This was partially offset by exports and domestic sales,” said Mgojo.

Total capital expenditure for first half of the year increased by 12% year-on-year, comprising a R112-million increase in expenditure on sustaining and environmental capital and R30-million on new capacity.

Net debt was R4.35-billion, compared with R2.28-billion as at June 30,  2016. This equates to a net debt-to-equity ratio of 12%, below Exxaro’s internal target of 40%.

OUTLOOK
Mgojo said that policy uncertainty in South Africa would have a negative impact on investment in the second half of the year, pointing out that the Chamber of Mines’ application to the High Court to prevent the implementation of the reviewed Mining Charter would also have an impact on investment.

He added that the sovereign credit rating remained at risk, and that the volatile exchange rate could negatively impact the sector.

“The global economic outlook, however, remains upbeat. International coal markets will remain relatively stable in the second half of the year, but political and policy uncertainty remains,” he said.