JOHANNESBURG (miningweekly.com) – State enterprises Transnet and Eskom have come to the party for black-controlled Exxaro Resources in the half-year to June 30.
More coal trains from State rail company Transnet to the Waterberg coalfield and a coal supply settlement with State power utility Eskom at the delayed Medupi power station project in Limpopo have given the JSE-listed company a twofold boost. (Also watch attached Mining Weekly Online video).
Exxaro, headed by CEO Sipho Nkosi, saw its headline earnings per share increase 11% in the half-year, which coincided with an 11%-higher interim dividend declaration of 260c a share for a shareholding that benefits mainly previously disadvantaged South Africans.
Half-year coal production of 18.8-million tons allowed coal exports to soar 43% higher to 2.7-million tons on 31%-lower dollar coal prices but only 7% lower rand coal prices.
Exxaro’s coal exports benefitted from 86 Transnet trains serving its Grootegeluk colliery in the Waterberg in the six months to June 30, 44% more than the 52 trains in the same period of 2013.
“These are very important numbers to understand where Exxaro will be heading in the next half and the next few years,” said Exxaro CFO Wim de Klerk, who added that the number of trains might have exceeded 86 were it not for the power outage at Richards Bay Coal Terminal (RBCT) and the Transnet maintenance shutdown in May. (Also see attached Mining Weekly Online video).
The purchase of Total Coal South Africa increases Exxaro’s coal-export potential significantly further and the company, which used 100% of its available RBCT entitlement in the half-year, is poised to become South Africa’s fourth-largest coal exporter when RBCT capacity reaches 91-million tons a year, with some 12-million tons a year.
“There’s a push now to get the export tons out on the good performance of Transnet,” De Klerk told Mining Weekly Online, adding that the company had also managed to reach the supply settlement with Eskom on a R888-million income shortfall a day before its half-year presentation.
“[It is] a great settlement for Exxaro but also a good settlement for Eskom and for South Africa, something that makes sense to all the parties as a result of the lateness of the Medupi power station project,” De Klerk told investment analysts and journalists.
Exxaro would have delivered 6.2-million tons of coal to Medupi from its Grootegeluk Medupi Expansion Project, the capital cost forecast of which remains fixed at R10.2-billion, but the latest settlement is now only for the delivery 3.1-million tons to Medupi.
Eskom must take-or-pay on a total of 15.5-million tons over a period of years, calculated on fixed costs plus a profit margin, and the utility will not be charged for the variable cost that Exxaro would have incurred in producing the 6.2-million tons, which in reality it does not have to do.
Exxaro’s coal operations, situated largely in the Waterberg and Mpumalanga regions, are split between commercial coal operations and tied, captive coal operations that produce thermal, metallurgical and semi-coking coal.
The company’s half-year coal sales totalled 766 000 t, which was 4% above the sales in the first six months of 2013.
The metallurgical coal production from the Grootegeluk mine was a 23%-higher 214 000 t, mainly as a result of the greater number of Transnet trains.
Grootegeluk sales to ArcelorMittal South Africa increased 2% to 11 000 t and power station coal production from the tied mines was 6% up at 361 000 t.
The Matla colliery produced 384 000 t, which was 8% higher than the first half of last year, owing mainly to improved cutting rates at the short walls as well as timing of short wall moves.
Difficult geological conditions resulted in the Arnot mine producing 3% less coal at 23 000 t.
The commercial mines’ power station coal production was 3% lower at 311 000 t, hit by a lower burn rate at Matimba power station owing to the shutdown of units for maintenance and stacker/reclaimer problems.
A bankable feasibility study has begun for the first phase of Thabametsi, a prospective multiproduct greenfield opencast mine, which is planned next to Grootegeluk.
This mine is expected to coincide with the establishment of a 600 MW coal-fired baseload power station owned and built by independent power producer GDF SUEZ.
The Exxaro board has approved R3.8-billion for the development of the greenfield opencast Belfast mine in Mpumalanga. The project encompasses one of the last high-quality coal reserves in the province and presents the company with an opportunity for excellent returns, Exxaro said.
It will produce at a rate of 2.2-million tons of quality export coal and 0.5-million tons of power station coal over a 16-year period after commissioning in the second half of 2017.
Exxaro also half owns, with Anglo American, the Moranbah South greenfield mine project in Queensland, Australia, which will have an expected production of 10-million tons of hard coking coal a year through a dual longwall operation.
Group consolidated net operating profit was R557-million higher at R1 774-million and cash generated from operations was R1 555-million, more than double that of last year.