BOTSWANA thermal coal producer Minergy is looking to a maiden operating profit in the current financial year as offshore markets previously closed to it become viable.
“Overall, the outlook for the coming year is positive and is forecast to be operationally profitable as demonstrated in quarter four, which would be the first year for such an achievement after challenging start up years,” said Morné du Plessis, CEO of Minergy.
Minergy, which operates the Masama mine, announced a deepening in the year-on-year net loss after tax of P132m (P107m) ended-June. This was owing to constrained offtake related to an over-supplied domestic market regionally as exporters sought to offset limited freight capacity by selling to local buyers.
Unseasonal rains in April also impacted offtake. Minergy responded to these twin forces by limiting production in order to avoid unnecessary costs and the risk of spontanous combustion of stockpiles.
The operating loss was also a function of cost inflation of consumables. “Diesel and explosives increased by 127% and 57% respectively which was exacerbated by double-digit inflation in Botswana,” said Du Plessis.
He added, however that “the recovery recorded in the fourth quarter is setting the tone for profitability for FY23” on the back of a 150% year-on-year coal pricing lift.
The catalyst for the improvement in thermal coal prices was Russia’s invasion of Ukraine. “This led to extraordinary demand facilitating access to previously uncompetitive and uneconomical exports into the seaborne market during the fourth quarter,” said Du Plessis.
Minergy subsequently ramped up production to meet the increased demand with Masama finally bursting through its one million tons a year run of mine target.
Du Plessis said the company was considering further expansion of the Masama plant. “Opportunities to exceed production capacity and the resultant additional saleable production are being pursued,” said Du Plessis.