JSE-listed Exxaro on Thursday said that it would “definitely see much stronger” results for the second half of 2009, as it raised coal output by “a couple of million tons”.

Outgoing COO Mike Kilbride said that the company’s coal division, its biggest revenue source by far, would have a substantially better performance in the last six months of 2008, after having boosted production by 1,8-million tons in the previous half year.

This rise in output had contributed a record operating profit of R935-million to Exxaro’s results for the six months ended June 30.

CEO Sipho Nkosi said that the coal business had done “exceptionally well”.

Kilbride also said in a media briefing following the company’s results presentation in Johannesburg that the fundamentals for the coal mining industry were still “very good”, and that export prices would likely be sustained at current levels for the rest of the year.

However, in the longer term, he commented, “prices must come down at some stage”.

Coal from South Africa’s Richards Bay Coal Terminal was currently trading at levels of around $150/t, after having risen above $160/t.

In July, Wood Mackenzie senior coal analyst Xavier Prevost said that prices would fall to about $120/t by the end of the year.

Meanwhile, also lifting Exxaro’s numbers for the half-year was the after-tax earnings figure of R735-million from its 20% stake in Kumba Iron Ore’s (KIO’s) Northern Cape mines.

This contribution was also likely to rise in the current six-month period, after KIO’s ongoing price negotiations were completed, which could see it receiving up to 100% more for the steel-making ingredient.

OPERATING LOSS

Dragging down Exxaro’s results for the period, and resulting in its operating loss, was the company’s mineral sand and zinc businesses, after production problems and weaker zinc prices.

Kilbride said that there “is a case to be made” that there would be increases in the prices of its mineral sands products, particularly on increased demand for pigment from China, as more people used this lifestyle product.

Imara SP Reid analyst Steve Meintjies said that investors were “quite frustrated” with the mineral sands unit.

Another analyst who asked not to be named said that the zinc and mineral sands businesses had been disappointing, particularly the Australian operations.

“I am a little concerned that those operations are taking up to much management attention, which could rather be focused on the more profitable coal business,” he said in a telephone interview.

He said that these units were also underperforming when compared with market competitors.

Nkosi noted that Exxaro was “putting a lot of emphasis” on overcoming the challenges it faced at the KwaZulu-Natal and Australian mineral sand operations.

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