JOHANNESBURG (miningweekly.com) – South Africa’s fourth-largest coal exporter, Optimum Coal is expecting a better second half, after it posted “somewhat disappointing” financial results for the six months to the end of December, CEO Mike Teke said on Thursday.

Half-year profit fell 46% to R148-million, from R274.64-million a year earlier, after industrial action at Optimum Collieries materially affected production and costs performance.

The weaker first-half performance at Optimum Collieries prompted the company to lower the mine’s export production guidance to between 4.6-million tons and 4.8-million tons for the full year to the end of June.

The 2012 export production guidance for Koornfontein was kept at 1.7-million tons.

Group saleable coal production slumped 16% to 5.9-million tons in the six months, including a 20% drop in export coal production to 2.9-million tons.

Optimum Collieries produced 4.4-million tons of saleable coal, including 2-million tons of exportable product, compared with 5.4-million tons of saleable coal and 2.6-million tons of exportable product produced in the corresponding period, last year.

The Koornfontein mine produced 1.5-million tons of saleable coal, including 900 000 t of exportable production in the period. This is slightly lower than the 1.6-million tons of saleable coal and one-million tons of exportable product produced in the corresponding period, last year.

Railings to the Richards Bay Coal Terminal (RBCT) declined 19% to 2.16-million tons. The company explained railings were lower than targeted mainly owing to a shortage of exportable product. At December 31, 27 000 t of export stock was available on-mine for railing to the terminal.

Revenue increased by 13% year-on-year to R3.04-billion in the six months, while earnings before interest, taxes, depreciation, and amortisation was up 11% year-on-year to R641-million. The increase included a record R382-million contribution from Koornfontein.

The higher revenue was achieved despite a 9% decrease in coal sales volumes.

Meanwhile, Teke said that while thermal coal prices out of RBCT had softened to $105/t on the back of economic uncertainties in Europe, inventory restocking is expected to be supportive for near-term API pricing.

He also said that the domestic market remained strong with robust demand.

State-owned power utility Eskom’s coal demand remained an important and compelling opportunity for local coal suppliers, Teke said, adding that the company was currently in discussions with the national electricity supplier regarding supply opportunities.

He stated that Eskom’s return-to-service programme, in addition to its capital growth projects, continued to bode well for domestic coal suppliers, especially empowered miners which were located close to Eskom power stations and had coal of the requisite qualities.

“The country’s current power generating capacity of 40 000 MW is planned to increase to 80 000 MW by 2025, and this fact alone is expected to maintain an increasing demand for coal from local suppliers,” Teke noted.

Despite growing attention on the development of renewable energy sources in South Africa, with Eskom aiming to reduce its reliance on coal to 70% of the total energy mix by 2025, he believed that coal-fired energy generation would continue to remain the fulcrum of South Africa’s energy needs for the foreseeable future.
 

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