Coal miner and supplier Buffalo Coal has narrowed its headline loss a share for 2018 to 17c, compared with the headline loss a share of 31c in the prior financial year.
Its headline loss for the period decreased to R70.7-million, from R124.1-million in 2017.
Revenue of R758.5-million was recorded for the period, representing an overall increase of 3% over the comparative period. This increase, Buffalo said, was mainly driven by higher sales prices, which more than offset the 14% year-on-year decrease in sales.
However, despite these positive movements, the TSX-V- and AltX-listed company’s ability to continue as a going concern and, ultimately, continue with long-term operations, will be dependent on its ability to realise short-term opportunities and secure funding for these and medium- to longer-term projects.
The company had, early in 2018, appointed Northcott Capital as its financial adviser to undertake a strategic review process to obtain funding for the company’s capital requirements.
Following a bidding process at the start of June 2018, the company received indicative offers by the end of the same month, following which shortlisted candidates were given the opportunity to obtain more detailed information in order to firm up their indicative offers.
However, uncertainty surrounding the mining services contract and future of the Magdalene mine, in South Africa’s KwaZulu-Natal province, resulted in the suspension of the Northcott process in September 2018 in order to allow for the closure of the mine.
The bidding process was reopened in November and concluded at the end of March this year.
The offers, which are currently being assessed, need to address the group’s outstanding debt obligations with Investec and RCF, as well as funding for new projects.
As at December 31, 2018, R105.3-million of the drawn Investec loan facilities was still outstanding and the company continued to be in breach of certain covenants with respect to its loan agreements with Investec.
The Group's asset retirement obligation amounted to R49.9-million as at December 31, 2018.
Buffalo also had a convertible loan to RCF of $27-million as at December 31, 2018.
Total run-of-mine (RoM) production for 2018 decreased by 22% year-on-year.
This lower production was primarily driven by a combination of lower RoM tonnes produced at Magdalena during the fourth quarter and the full-year period, with less bituminous buy-in tonnes obtained, and was partially offset by an increase in anthracite buy-in tonnes acquired.
The Aviemore mine, also located in KwaZulu-Natal, produced RoM coal volumes in line with that of 2017, as well as in line with budgeted levels.
Magdalena's RoM production for 2018 was 41% lower year-on-year, primarily as a result of difficult geological mining conditions and pit-room constraints that resulted in only three sections being mined during the year, compared with the four sections mined during the comparative period of 2017.
The lower production levels at Magdalena, along with safety concerns, were the major factors taken into consideration in the closure of Magdalena at the end of October 2018.
To mitigate the loss of production at Magdalena and to improve the overall cash flow of the group, Buffalo entered into an arrangement with a neighbouring coal miner during 2018, to buy-in about 6 000 t a month of anthracite coal.
The buy-in tonnes may increase, subject to an increase in production at the neighbouring coal mine.
Meanwhile, the overall saleable coal production for 2018 was 14% lower year-on-year, as a result of the lower RoM production for the year, which was partially offset by better overall yields achieved.
The overall yield achieved for 2018 improved by 9% year-on-year and was mainly the result of additional spirals added on the Magdalena wash plant cycles that resulted in better yields.
Overall sales for 2018 were 14% lower, while anthracite sales for the year were in line with that of 2017.
Bituminous sales for 2018 were 26% lower year-on-year, while calcine sales and anthracite high-ash sales fluctuated from quarter to quarter, based on the demand for these products.