Optimum RBCT coal exports to fall

[miningmx.com] – OPTIMUM Coal Holdings, South Africa’s fourth-largest
coal exporter, said volumes through Richards Bay Coal Terminal (RBCT) would fall to
6.5 million tonnes (Mt) owing to disruptions at its key Optimum Collieries.

The company, which is subject to a takeover by Glencore International and
businessman, Cyril Ramaphosa, said saleable exports from its Optimum Collieries
business unit would decline to between 4.6 Mt to 4.8 Mt owing to a combination of
salary-related industrial action and the relocation of certain draglines.

“We are not happy with this performance,’ said Mike Teke, CEO of Optimum Coal
Holdings, which posted a 45.9% decline in earnings to R148m for the six months
ended December. The company passed the interim dividend.

Shares in Optimum Coal gained 1.4% to R37 by mid-morning trade on the
JSE. Glencore, which now owns 67.77% of Optimum Coal, said it would bid not less
than R38/share for the remaining shares in the company.

The transaction partly turns on an investigation by the Competition Commission into
the combined unit’s coal trading dominance in South Africa.

Teke said that the commission would not finish its investigation before the end of the
first quarter of 2012, but added he was unconcerned about progress. “I think they
are asking the right questions and doing a thorough job. I’m not concerned,’ he said.

On the positive side, Transnet Freight Rail had far improved the tempo of its
performance on the Richards Bay coal line, with Optimum Coal’s inventories falling to
105,000 tonnes from 503,00 tonnes. Teke said that with production ramping up at its
Kwaggafontein project, he did not expect Optimum to struggle to fill TFR trains.
Planned maintenance of the rail by TFR in May would also assist in helping Optimum
rebuild its inventory, Teke said.


Commenting on market prospects for coal, Teke said that Optimum had seen export
prices soften to $105/t owing to the ongoing European recession, “although likely
inventory re-stocking is expected to be supportive for near term API 4 pricing’.

“With Lunar New Year approaching at the end of January 2012, buying interest is
expected to be somewhat muted, although medium to long-term pricing will continue
to depend on economic growth developments in critical locations, notably India,
China, Korea as well as the European Union,’ he said.

For its part, Optimum said its average selling price for the interim period had been
R785/t from R648/t during the first half of the previous financial year. However, the
company’s 1Mt fixed-price supply agreement to BHP Billiton Energy South Africa –
which fixed export prices at $87/t – had come to an end, providing Optimum with
exposure to the floating spot prices.

Commenting on Eskom, Teke said the company was engaged in several new supply
agreement negotiations. One included the supply of 1 Mt to Eskom’s Komati power
station from Optimum Coal’s Koornfontein colliery.

Teke has been critical of Eskom’s pricing in the past, however with a shortfall of
some 40 Mt of coal to Eskom expected by 2018, it’s understood the electricity utility
is more flexible on competitive pricing.