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Heavy rains, Somkhele strike lower Petmin's interim profit by 36%
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4th March 2013
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JOHANNESBURG (miningweekly.com) – Production losses brought on by excessive rain and an unprotected strike at JSE- and Aim-listed Petmin’s Somkhele metallurgical anthracite mine, in KwaZulu-Natal, resulted in the company recording a 36% year-on-year fall in after-tax profit to R30-million for the six months ended December 31, 2012.

Petmin generated cash of R161-million in the period under review, up from R200-million in 2011. After-tax profit on a like-for-like basis from ongoing operations was down 16%, taking account of the sale of the SamQuarz silica operation in June for R281.1-million.

Earnings a share from continuing operations were down 16% at 5.22c, compared with the corresponding 2011 period.

Heavy rainfall prevented the loading and delivery of 192 000 t of exposed coal to the Somkhele wash plants. A total of 42 production days were lost, leading to a shortfall of 255 000 run-of-mine (RoM) tons or 107 100 saleable tons.

Sales volumes and prices at Somkhele were maintained as demand remained steady and deliveries to customers were made from stockpiles.

During the six months to December 31, the addition of the second wash plant enabled Somkhele to increase production by 44% to 293 765 t of saleable anthracite, compared with 203 425 t in the six months to December 31, 2011.

Anthracite volumes sold during the six months increased by 63% to 370 562 t, compared with 227 041 t in the previous corresponding period.

Although production increased by 44%, infrastructure and staff levels were geared for a 100% increase, which negatively affected profit margins.

However, by February, Petmin’s wholly owned subsidiary Tendele Coal Mining, which is the operator of Somkhele, had the mine operating at budgeted levels.

The Somkhele mine increased its RoM stockpile to 100 000 t outside the pit and at the plant head, enabling the mine to cope with further extreme weather conditions.

Petmin expected production from Somkhele to increase significantly in the six months to end June 30, 2013, with the anthracite market showing reasonable demand at prices better than the previous six months.

After continued heavy rains in January, Somkhele, in February, operated at forecast production levels of between 220 000 t/m and 250 000 t/m of washed RoM. The mine’s management was confident recent challenges had been largely overcome.

“The fundamentals of the Somkhele operation remain strong despite short-term weather and labour challenges…We have overcome these challenges and are well positioned to increase production and sales to budgeted levels during the next six months,” Petmin executive chairperson Ian Cockerill said.

The discard treatment plant at Somkhele started producing coal for the energy market in February.

“We are targeting between 200 000 t/and 220 000 t/m of discard that we will process at the plant,” Petmin executive director Bradley Doig told Engineering News Online.

Subsequent to December 31, Tendele signed a 50:50 joint venture (JV) agreement with its mining contractor Sandton Plant Hire. The JV has joint management and enabled Tendele to improve productivity and efficiency.

WHAT’S AHEAD

“We invested an enormous amount of capital; we have three very well run plants. We have resolved our JV with our mining contractor, so we have control over the mining process. We are comfortable with the labour relations on site,” Doig said.

“In terms of the rain, we will put a 100 000 t of RoM material on top of each pit and 30 000 t of RoM material at the plant at all times, so that if there is an extended period of rain, we can still feed those plants and continue to operate normally,” he added.

Doig further noted that other than inflationary issues around electricity prices, diesel prices and the rand/dollar exchange rate, as well as labour-related pressures with regard to wages, the company did not foresee significant operational challenges in the year ahead.

“Electricity prices are a small component of our total cost base…but we monitor this [and the other challenges] carefully. There is always pressure on wages and we need to manage that as well,” he stated.

Further, he expected local coal prices to remain firm in the year ahead, while pointing out that export prices could improve marginally towards the middle of the year.

Edited by: Chanel de Bruyn

 

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Somkhele mine
 

Somkhele mine