Month of inactivity hurts coal mine’s reputation
It was only for a month, but the decision to halt operations at Masama Coal Mine (MCM) back in March has had far-reaching effects for the Minergy-owned mine.
Although the coal mine was up and running again by April, albeit on a much smaller scale due to a global dip in demand for the black rock, the damage to the mine’s reputation was already done.
“The stoppage of operations damaged Minergy’s reputation and credibility to supply sustainably. To exacerbate matters, a local competitor [Gemecs, expected to start production by the end of the year] entered the market, which doubled the blow with customers either moving to the alternative supplier due to availability of their coal or split orders to hedge security of their supply,” notes the company’s 2023 audited financial report, released last week.
The figures certainly make for worrying reading.
Coal extraction in H2 of 2022/23 (January – June) was down by 41 percent from the previous six months, while monthly sales fell from an average of 67, 000 tonnes to 40, 000 tonnes in that time
This includes 174, 000 tonnes of coal which were successfully dispatched on four vessels from Walvis Bay for export markets.
June 2022 – June ‘23 proved a mixed 12 months for Minergy, starting with an unprecedented sales boom but ending with a drastic drop in prices due to a massive excess of the black rock in Europe.
Highlighting the company’s contrasting fortunes over the year, outgoing CEO, Morné du Plessis said, “In the second half of the year, there was a sudden and significant drop in coal prices due to excess product in the European market, caused by voracious buying.”
Insisting it was not all doom and gloom, with prices slowly recovering as China and India drive demand, he added, “Although the size of operations at Masama Coal Mine is being reduced to balance production levels and costs in this current market, Minergy strongly believes that the quality of its products, its loyal customer base, and logistical advantages will set the tone for a solid future.”
In the end, total revenue for the year stood at P512 million, a 21 percent increase from the P425 million raised in 2021/22.
Pure coal sales accounted for P459 and P297 million of these respective yearly totals, with H1 of 22/23 standing at P298 million and H2 P161 million.
Despite the increase in revenue, Minergy ultimately suffered a loss of P138 million, due to high cost of sales driven by mining costs and doubling of royalties paid to government.
As a result, Mineral Development Company Botswana (MDCB) extended a P90 million funding to Minergy, with the money allocated to the trade payable arrears of the mining contractor.
Since inception in 2019, Masama Coal Mine has sold 1.84 million tonnes of coal, with each of the four active sales years improving on annual basis.