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SACMH halts mining for three months
Ines Schumacher & Allan Seccombe
Posted: Mon, 30 Mar 2009
[miningmx.com] -- South African Coal Mining Holdings (SACMH) has placed all its mines on care and maintenance for three months, knocking the share price down to a 12-month low of 20 cents on the JSE, a 65% decline.
"Significantly reduced coal prices and difficult operational conditions have resulted in the board of SACMH resolving to cease operations of the company with immediate effect," the company said in a statement on Monday.
During this period, the board will review its mines, including their capital requirements and cost structure, with a view to deciding on the future direction of the business.
The junior coal company completey closed the operations for that period, terminating the services of some 140 workers employed by a contractor as well as 18 staff on its own payroll, said CEO Grant Scrutton.
"There are layoffs. We are cutting our costs to the
absolute minimum," he told Miningmx.
The prices of export coal and the exchange rate have moved unfavourably for SACMH since he started at the company at the beginning of February, he said. The price when he started was $80/tonne and the exchange rate R10.50/dollar.
This has swung to a coal price of $51 and an exchange rate of R9.41/dollar.
"We have embarked on a review of the business model that is more viable for current shareholders," Scrutton said. "The primary focus is to make the mine profitable. We're a small mine and the mining costs for a smaller miner are just that much bigger than large-volume mines. It's been the obvious pincer movement of costs and selling price."
Asked if the three months is enough to turn the business around, he said: "It's just got to. I can raise just sufficient funds for us to apply our minds. It's not something you want to procrastinate on for too long. It's enough opportunity for anything from corporate
action to rebuilding mining cost models."
The warnings have been clear that SACMH was running into problems, putting out two warnings to its shareholders in recent months.
Europe moving into summer, the resumption of gas flows from Russia into Europe, lots of water from melted snow to drive hydroelectric plants and lower oil prices have all fed into the lower coal prices from South Africa.
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