JOHANNESBURG (miningweekly.com) – Mining company Coal of Africa Limited (CoAL) on Wednesday forecast a funding shortfall of $15.7-million for the September 2013 quarter, citing negative cash flow from its thermal coal mines and increases in capital expenditure.
CEO John Wallington said that current pressure on thermal coal markets, which led to its two thermal coal mines reporting losses, was expected to affect the revenues of these operations into the first quarter of the 2013 financial year.
Despite increasing coal production from Mooiplaats, near Ermelo, and Woestalleen, near Witbank, a decrease in price, change in sales mix with a lower proportion of export coal sold, and higher port and rail charges had negatively impacted on the two thermal coal-producing mines.
CoAL said it was continuing discussions with various parties for further funding in addition to a $58.7-million Investec financing package secured last month.
The ASX-, LSE- and JSE-listed coal company produced 854 000 t of coal, comprising 621 167 t of export coal and 233 329 t of middlings coal, during the three months ended June.
Export sales fell 9.3% quarter-on-quarter to 411 005 t on the back of changes in the quality of run-of-mine (ROM) coal supply resulting from the transition from the south to north block at the Vuna colliery and no available third-party supplementary free on rail export coal.
Mining of the Vuna colliery south block at the Woestalleen complex was completed during the quarter and mining in the north pit started, increasing ROM coal production by 13.9% to 971 017 t, from 852 692 t during the third quarter.
A total of 518 307 t of saleable coal was produced during the three months to June – a quarter-on-quarter increase of 24.9% compared with the previous quarter’s production of 415 146 t.
Export-quality coal from the operation accounted for 362 845 t, a drop from 395 112 t in the quarter before, while middlings product and raw coal supplied to State-owned power utility Eskom accounted for 155 462 t, up from 20 034 t during the previous quarter.
Sales of lower-quality coal to Eskom increased from 103 456 t in the three months ended March, to 272 312 t, on the back of the delivery of crushed-one seam raw coal from the Vuna colliery north block.
CoAL’s Mooiplaats colliery achieved a new monthly record output of 140 996 t ROM in May, resulting in ROM production for the period reaching 344 832 t, compared with 317 531 t in the third quarter.
This was attributed to increased long-hole drilling cover, an expansion of the underground mining footprint, improved maintenance practices and the benefits resulting from the production improvement intervention project initiated in the previous quarter.
Production of saleable coal at the colliery rose 11.3% to 293 890 t, with export-quality coal and middlings product making up 216 023 t and 77 867 t, respectively.
The Vele colliery, in Limpopo produced 126 199 t of ROM coal during the fourth quarter, compared with the 39 135 t in the prior quarter.
Over 113 000 t of coal was processed during the quarter, producing 42 299 t of saleable export-quality thermal coal at an indicative yield of about 33.5% to 37.3%.
“Thermal coal yields are expected to improve during the following quarter and thereafter as the opencast pit advances and the proportion of weathered coal decreases,” Wallington commented, adding that, during the product testing phase, the mine would continue to produce an export thermal coal product to offset costs and avoid the build-up of semisoft coking coal product stockpiles not washed to a market specification.
Export sales from the Matola Coal Terminal fell 9.3% from 452 888 t, to 411 005 t, while inland coal sales dropped 8.7% to 187 500 t, from 205 432 t in the previous quarter.
Wallington pointed to the South African export thermal coal spot prices remaining under pressure during the quarter, declining 15.5% from $103/t at the end of March, to $87/t at the end of June.
“Over the six-month period, international thermal coal prices have declined from $106/t at the beginning of January and remain at current levels of approximately $88/t,” said Wallington.