Coal miner Minergy, which recently started production at its Masama mine, in Botswana, is confident of growing demand for industrial coal in Southern Africa.

Reporting on the company’s financial and operational results for the financial year ended June 30, on Wednesday, CEO Morné du Plessis said that South Africa’s coal production was largely static and that no new significant greenfield operations were being developed.

In addition, embattled South African State-owned power utility Eskom was estimated to suffer a shortfall in coal supply of 474-million tons by 2030 and, as the utility could not be allowed to fail, pressure would be placed on existing larger producers to channel non-export capacity into the power generation market, thereby creating an expected shortfall of supply in the regional industrial market, he noted.

The regional industrial market, excluding power generation and synthetic fuels, had demand of 32-million tonnes a year, of which the market Minergy was targeting had demand of about 18-million tonnes a year.

“This market uses sized coal for energy generation and includes industries such as cement, steel and other industries, and . . . has shown compounded yearly growth of 17% from the start of 2016, despite having to be content with inconsistent supply over time.

“Demand for the correct coal size, quality and consistent supply remains high”, Du Plessis said, adding that Minergy would “focus on ensuring industrial customers across Southern Africa receive this steady volume and quality of coal”.

He stated that Minergy had “pioneered a process that will support the regional industrial demand for coal and, in so doing, benefit the people of Botswana through job opportunities and vital coal skills development.”

He also indicated that Minergy was “extremely proud” of its achievement of bringing the Masama coal mine into production, not only for the benefit of the company but also for the benefit of the coal sector in Botswana.

Subsequent to the financial year-end, Minergy successfully commissioned the beneficiation plant and, as at Wednesday, the plant had produced saleable coal to the expected qualities.

The group recorded its first commercial sales during September and the ramp-up of its operations is currently on track, with the target of mining 110 000 t a month of run-of-mine coal, resulting in between 70 000 t and 80 000 t a month of saleable coal.

Saleable coal output is expected to increase to 100 000 t a month in early 2020.

Minergy is in the process of concluding its first long-term customer contract, which represents about 15% of the estimated yearly nameplate saleable coal or 30% of current saleable production during the ramp-up phase.

Discussions are also under way with several other interested regional industrial customers, many of whom have already tested samples of Minergy’s coal. The group is therefore confident of securing additional customer orders.

Looking ahead, Du Plessis noted that Minergy's management had earmarked the next few months as a period to stabilise production and optimise efficiencies in the beneficiation plant. "The goal is to continuously produce consistent volumes and consistent qualities.”

Depending on economics at the time, opportunities to significantly increase production include increased supply to industrial customers, export opportunities and power generation. Increased production would require additional capital expenditure, primarily to increase the capacity of the washing plant and plant infrastructure, and completion of an additional boxcut.

Minergy is further exploring various options for offtake, ranging from longer-term agreements for the finer duff product to spot deals for the bigger fractions. Du Plessis confirmed that an offtake agreement with a South African cement producer was in place for a minimum amount of P240-million.

Meanwhile, Minergy had received support from shareholders and additional capital of P20.7-million was raised net of costs during the financial year under review.

Debt had been incurred for the first time to supplement funding for the development of the mine, while bridging finance was provided by the Botswana Development Corporation (BDC).

Subsequent to year-end, an additional P55-million was secured from the Minerals Development Corporation of Botswana (MDCB). Minergy is in the process of securing a further P15-million, also from the MDCB.

The funding will be sufficient to bring the mine into full production, the company noted, adding that the bridging finance provided by the BDC is in the process of being refinanced over a longer term.

No dividends were declared.

BOARD CHANGES

During the year, Minergy appointed Siyani Makwakwago as GM of mining and Julius Ayo as the group financial manager.

Former CEO Andre Bojé will remain involved in the company to retain oversight and strategic responsibility for group coal marketing and sales for one year. He remains part of the team tasked with ensuring the successful listing of Minergy on the London’s Aim.

Bojé will continue to serve as a nonexecutive director of the group until additional directors are appointed to the board.

Du Plessis, who was previously Minergy CFO, took over as CEO in August.

Jean-Pierre van Staden has been appointed to take over as CFO from January 2, 2020.