Minergy may revive rights issue as coal price breathes new life into struggling juniors

THERMAL coal producer Minergy is hoping to resuscitate a rights offer launched last year following an improvement in coal prices.

Morné du Plessis, CEO of Minergy said in a recent Financial Mail article that his company was on course for producing profits in the current financial year and that investors could earn themselves “a nice chunk” in the business if they subscribed to the offer

A P125m (R168m) rights issue was approved by Minergy’s shareholders in February 2021. Aimed at funding working capital, repay overdue creditors and help extend the mine’s output, the offer was shelved after Minergy shares fell below the 65 thebe offer price. The Botswana-based firm is currently trading at 40 thebe per share in Gaborone.

“There’s a lot of talk, people get excited, and then walk away,” said Du Plessis of previous investor interest in the company. “But for the first time we’ve been approached by international investors for an opportnity to invest. It’s not a stampede yet, but it’s dribbling through and these are a bit more serious,” he said.

Funds would enable Minergy to double production. The coal price – which leapt from below $250/t to over $400/t earlier in the year before easing – enables Minergy to profitably export coal through Namibia’s Walvis Bay port. The company is also trucking coal to Maputo port in Mozambique through Zimbabwe. Both of these routes remain viable provided the coal price stays above $250/t.

Du Plessis also wants to revive ambitions for a second listing of Minergy, potentially in Australia as well as its long-term London aspiration.

Minergy mines the Masama mine, 60km northeast of Gaborone which is closer to end-users, typically lime and cement manufacturers, than South Africa’s coal miners in Mpumalanga province. However the regional coal market has become flooded as exporters struggle to get sufficient volumes through Richards Bay Coal Terminal (RBCT).

Nonetheless, the improvement in the coal price has put a spring in the step of several other previously struggling coal producers.

Buffalo Coal, a Johannesburg-listed anthracite miner operating in KwaZulu-Natal has trundled along uninspiringly for years, largely bankrolled by its Canadian investor Resource Capital Finance. In June, the company attracted a new majority shareholder – Belvedere Resources – which is also shouldering a $27m convertible loan – while a debt agreement with Investec has also been refinanced.

And after funding iterations that taxed the patience of four CEOs and resulted in a recent management coup, MC Mining is on the way to securing the outstanding funds it requires for its Makhado thermal and metallurgical coal mine. Last month, the company unveiled a $40m (R720m) rights issue on the back of a 266% gain in its year-to-date share price.