JOHANNESBURG (miningweekly.com) – Diversified miner Exxaro has added R700-million to the cost of expanding the Grootegeluk Medupi coal operations as labour unrest, scope expansion and steel shortages weigh on the capital expenditure of the project.
The Limpopo-based, 92%-complete Grootegeluk Medupi expansion project (GMEP) was now set to cost a total of R10.2-billion for the ramp-up to 14.6-million tons of coal a year for State-owned power utility Eskom’s Medupi power station by the second half of 2016.
To date, R7.1-billion had been injected into the project, which had initially been expected to cost R9.5-billion.
Exxaro, which met its initial contractual commitments on time with the delivery of first coal last year, would start ramping up coal supply during the first half of 2013.
The GMEP was further hit by a force majeure issued last week by Eskom, owing to the seven-week construction work stoppage at the Medupi power plant, where work resumed on Thursday.
The parties were currently in discussions to assess the potential impact of the notice on the JSE-listed group’s operations, Exxaro FD Wim de Klerk said on Thursday.
Exxaro would remain focused, however, on developing a clear ramp-up strategy for the three-phase GMEP and “incorporate the possible effects of the labour unrest at the Medupi power station.”
Eskom and its contractors were assessing the impact of the labour unrest and the strategies to mitigate further delays to the Medupi project’s timelines.
CONGO ENTRY
Meanwhile, Exxaro expected to execute its Republic of Congo-based Mayoko iron-ore project’s mining convention during August.
The mining convention was currently under review by the host country’s Parliament and the diversified miner expected a decision to be made during the second half of the year.
Exxaro and the government of the Republic of Congo entered into a memorandum of understanding detailing the principles of the final mining concession in December.
The diversified mining company planned to develop the iron-ore project, which reported an increase in reserves from 121-million tons to 685-million tons, in phases to produce and export ten-million tons of iron-ore a year by 2016/7.
The group aimed to prioritise its 2014 target of the two-million-ton-a-year in the initial phase, while developing access to critical rail and port infrastructure.
FINANCIALS
Exxaro on Thursday reported a 23% decrease in revenue for the full year to December, as the miner included its mineral sands and Rosh Pinah businesses for effectively only five-and-a-half and five months, respectively, of the year under review.
Group revenue fell from R20.9-billion in 2011, to R16.1-billion in 2012.
Exxaro’s net operating profit decreased 16% from R3.5-billion during the prior year, to R2.9-billion in the year under review; however, the operating margin widened slightly, reaching 18% during the year, from the prior year’s 17%.
Attributable earnings a share fell 35% to R13.06 during the year ended 2012, from R20.24 recorded the year before.
The group reported headline earnings a share of R14.01 – a 33% drop from the R20.98 recorded in 2011.
Exxaro declared a final dividend for the year of R5 a share.