EXXARO Resources confirmed it would continue to operate its mines in order to supply Eskom, South Africa’s power utility, but it would also endeavour to export coal.
It said in an update to the Johannesburg Stock Exchange today that there was a “… need for energy security to ensure the availability of essential services during the lockdown and hence we will maintain our coal supplies to Eskom and other energy generating customers”. Exxaro produced 45.3 million tons in its 2019 financial year of which about nine million tons was exported and most of the balance supplied to Eskom.
Coal exports would help the company minimise the economic impact of the 21-day national lockdown announced by the Government on March 23 in order to limit the spread of the COVID-19 virus. They would generate foreign exchange earnings which would “… provide the financial capacity for the state to respond to the the crisis,” the company said.
The continuation of coal exports during the lockdown was made subject to the discretion of the Government after mines and energy minister, Gwede Mantashe, said on March 25 that applications for essential service status – required by mining companies in order to continue operating – would be judged upon their merits.
“Exxaro will be able to continue with its production activities subject to the approval of an application that demonstrates that these activities are essential and that the necessary measures have been taken to prevent possible corona virus infections,” it said.
Anglo American also announced that parts of its Anglo Coal division would continue to operate through the lockdown, although it also said forecast coal production would be 1.5 million tons to two million tons lower for 2020 provided the lockdown was not extended.
Exxaro said the proviso on continuing operating was to reduce the number of employees involved in the process. Employees at its Centurion corporate office near Pretoria were all working from home.
Exxaro reported a 3% year-on-year increase in core headline earnings for its 2019 financial year, an improvement largely driven by income from its one fifth stake in Sishen Iron Ore Company (SIOC), the subsidiary of Kumba Iron Ore. But earnings from its coal operations were under pressure in the period. Group core earnings before interest, tax, depreciation and amortisation (EBITDA) dropped 20% to R5.8bn (R7.3bn).