Rand appreciation propped Minergy's sales up
Recovery of the South African Rand at a critical time resulted in exchange gains on payments received from the Botswana coal miner’s South African customers.
During the six months ended 31 December 2020, Minergy Limited reported total revenue of P75.8 million compared to P34.6 million for the previous corresponding period, the miner’s financials show.
This was after total sales volumes for the interim period amounted to 175 000t compared to 85 000t in 2019 - sales volumes in the comparative six-month period related to Minergy’s first period of operation following the commissioning of the washing module of the plant during September 2019.
According to the miner, cost of sales increased to P119.4 million, resulting in a gross loss of P43.6 million for the reporting period. The group made a net loss of P57.3 million during the interim period, compared to a net loss of P43.9 million in the comparative six-month period of 2019.
“Sales order activity increased and has remained constant for the interim period, with customers again confirming orders as well as their satisfaction with the quality of coal delivered,” Minergy says, adding that due to the use of a mobile crusher, the sales mix for most of the interim period was geared to a finer, less profitable product. “The majority of the product for the interim period was sold into the cement market in South Africa,” the group says, adding that recovery of the South African Rand (ZAR) during the interim period resulted in exchange gains on payments received from South African customers.
After being severely affected by COVID-19 lockdowns in the last quarter of FY20, Minergy says sales volumes recovered with steady increases in sales volumes seen in July and August 2020. This also coincided with the official opening of its rail siding and Minergy successfully sending the product via rail to South Africa (10 trains for the six-month interim period). Following a record sales month in August 2020, sales volumes reduced in October 2020 due to depletion of stockpiles, reduced pre-stripping of overburden to expose coal resulting from a reduction in contractor operations due to funding delays, excessive rain hampering the evacuation of coal by road from October 2020 and COVID-19 related delays at borders.
Minergy says the easing of COVID-19 border restrictions assisted with collection of coal, albeit with intermittent delays still occurring at border crossings from newly introduced restrictions in December 2020. “An off-take agreement with a new cement customer in South Africa is imminent, further diversifying the group’s customer base beyond the three years off-take agreement already in place with another customer,” the company says, adding that various trials for the more profitable product are progressing well.
Minergy has been shortlisted by Eskom to supply Tutuka Power Station in South Africa with thermal coal. A due diligence process is currently underway and Minergy says it will update the market on developments. It is understood that the process will take up most of the 2021 calendar year.
Minergy has since inception raised a gross amount of P165 million in equity and accessed approximately P253 million of debt. The cash proceeds from these raisings and facilities were utilised for the establishment of the Masama Coal Mine, its mining infrastructure, and related operational costs.
The company announced that additional convertible debt funding was secured through Mineral Development Company Botswana (MDCB) amounting to P125 million. Of this amount, 50 percent was drawn down in December 2020 and the balance was subject to conditions which were described in a circular to shareholders dated 19 January 2021. An EGM took place on 18 February 2021, with all special and ordinary resolutions passing with the requisite majority of shares voting in favour. “This paves the way for Minergy to access the additional tranche of debt and any other capital raised with the primary goal to stabilise the business to nameplate production, including required CAPEX and working capital,” the company says, adding that any excess funding obtained will be applied in reducing the gearing position on the balance sheet, thereby also limiting equity conversions in order to maximise existing shareholders’ ownership.