Minergy making strong progress on Masama project

07th September 2017
OPTIMISTIC:Andre Boje Source:The Midweek Sun

Botswana Stock Exchange (BSE)-listed coal mining company, Minergy Limited, yesterday (Tuesday) released its inaugural results for the year ended 30 June 2017, reporting a loss per share of 6,76 thebe. The company embarked on a capital-raising exercise in the first quarter of 2017, raising P70 million via a private placement prior to listing on the main board of the BSE in April this year. Minergy CEO, Andre Boje commented that, “A lot of work had been done and continues to be done since inception.

Our focus shifted to coal production for supply to the regional and export markets rather than coal for power generation. “We believe the narrative around South Africa requiring imported power will not come to fruition in the foreseeable future, if at all. This is supported by the announcement that there is a surplus of 9,000 MW capacity and that South Africa has signed off-take agreements with Botswana and other SADC countries.” The demand for coal in the southern African region continues unabated with prices escalating on an ongoing basis.

The July 2017 McCloskey Coal Report highlights that South African domestic prices were 51 percent higher than the same period in 2016 and that there is strong demand from the cement, industrial and paper industries. Boje said this situation is driven by demand exceeding supply as producers are focused on fulfilling their take or pay export agreements together with the lack of investment in new projects or expansion of existing production facilities.

“The climate of under-investment in South Africa is blamed partly on political interference in the mining sector and the rise of resource nationalisation,” he explains. Initial production at Masama is earmarked to be 1.2 million tonnes of saleable coal per annum ramping up when required, as the project will have a capacity to process 3 million tonnes of run-of-mine coal per annum from first commissioning.

Whilst the initial project plan focused entirely on the 1.2 million tonnes to the regional market, Boje emphasises that attention must be paid to the export market as the API4 index price for seaborne thermal coal has risen 67 percent since 2016 and currently trades at $82.00 to $84.00 per tonne. In addition to the projections, he said “the international traders forecast that this trend could continue, albeit at slower rate, due to production cutbacks in China and delayed investment in Greenfield coal projects.

“Noteworthy is significant investment by large multinationals in coal projects in Australia which highlights their bullish view on coal going forward.”Boje added that Botswana has a significant role to play in the seaborne thermal coal market due to its large untapped coal resources and proximity to the South African coal export infrastructure. Meanwhile, it is understood that various requirements and obligations relating to the submission of a mining licence application are also being attended to, with the target date for submission being the end of September 2017.

The company has engaged extensively with the various government departments and the response has been most encouraging. It is believed that the licence will be granted by the second quarter of 2018.Requests for information (RFI) have been issued to identify qualified suppliers of the processing and wash plant and for mining contractor. This process is expected to be complete by the end of October 2017.

Talking about the industry, Boje said that renewable energy has a role to play, but it has been proven unreliable for base lzoad electricity supply with the only alternatives being nuclear, hydro and coal. This is the first year that the group expensed certain operating expenditures, which were mostly incurred at the holding company level, which acts as an investment and holding company and sources funding for the group. Cash utilised in operations amounted to a loss of P9,4million with Exploration and Evaluation Asset Expenditure also showing a loss of P5,6 million.

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