As Govt Bails Out Minergy with P389 Million
The government through its investment arm, Minerals Development Company Botswana (MDCB) has bailed out Minergy Pty Ltd which was on the verge of banckrupty.
Minergy which owns the Masama Coal Mine in Medie has struggled with cash flow problems ever since production stopped last year, with reduction in international coal prices adding to the challenges.
MDCB has since bank rolled the Botswana Stock Exchange(BSE) listed entity with P389 million as a turnaround strategy to take Minergy to profitability and sustainability.
Minergy received P90 million in funding from MDCB in August 2023 with P299 million coming in December 2023 which was crucial for resumption of production this year.
In March 2023, production was halted following suspension of mining operations by the then mining contractor, Jarcon Opencast Mining, due to payment arrears-a predicament which had a huge impact on the coal sales.
Although, the halt in mining operations fell in the previous financial year, it has caused great damage on the long term company sales.
This, coupled with weaker coal prices has made the trading environment very challenging for Minergy.
The absence of production in the second quarter of the current financial year led to sales coming from stockpiled inventory.
However, Minergy has since roped in a new mining contractor; Meropa Resources.
The company is focused on optimizing its coal resources, extraction, and processing, developing logistical solutions, and establishing market linkages to enhance efficiency, productivity, and sustainability therefore ensuring a brighter future.
With coal production affected in mid-September 2023 and temporarily halted from October 2023, due to termination of the contract with Jarcon Opencast Mining and transitioning to Meropa Resources, this resulted in inconsistencies in coal supply to Minergy customers.
As a result, mining only started in February 2024 with full-scale production and sales expected by the end of June 2024.
“These strategic adjustments were essential to navigate the operational disruptions, as well as to position Minergy for future stability and growth as a low-cost coal producer. Minergy faced significant operational headwinds, due to the suspension of activities by the former mining contractor. This suspension resulted from outstanding trade payable arrears and impacted our sales performance, extending into the period and beyond,” said acting chief executive officer of Minergy Matthews Bagopi, adding that the period was also characterized by depressed coal prices and increased inland inventories, further compounded by logistical challenges in South Africa.
Meanwhile revenue for the period ending in December 2023, revenue declined significantly by 84 percent reaching P52.8 million against P330.3 million recorded in the previous year due to the operational challenges and the resultant loss of key customers and the halt of seaborne exports.
While operations were scaled back to align production with costs in the current market, the total loss for the period amount to P72.5 million, higher than the P44.9 million losses made in the previous period.
According to Bagopi, despite all the previous operational challenges, Minergy’s outlook is cautiously optimistic.
“Various South African industries are considering self-generation of steam and electricity through small, customised coal-fired boilers as evidenced by the increasing order book for such boilers with equipment manufacturers. Therefore Minergy continues to receive inquiries from regional and offshore markets for coal supplies, with some traditional customers expressing interest in resuming and increasing off take,” said Bagopi emphasizing that, the current phase marks the beginning of operational stabilization and continuous business improvement to position Minergy as a low-cost coal producer.