Saturday, October 31, 2020

Minergy lures Gov’t funders amid losses

The country’s only operating private coal miner, Minergy,  has seen its losses spike in the first year of  production, Still, the coal miner has attracted government linked funders to expand the mine and ramp up production.

The Australian explorer listed on the Botswana Stock Exchange released its full year financials for the year ended June 2020, giving insight into the company’s first year of production. Minergy earned P80 million in revenue, which was overshadowed by P149.9 million in cost of sales, leaving the company with gross loss of P69 million.

With other additional expenses that added to P31 million, Minergy recorded a loss before income tax of P117 million, up from a loss of P36 million in June 2019. Last year August, Minergy began production at Masama Coal Mine, exposing about 340,000 tonnes of coal, which was enough for three months production- the mine is expected to churn out 110,000 of coal monthly, and this equates to 70,000 to 80,000 tonnes of saleable coal.  

“Sales volumes gradually increased in line with ramp-up operations between October 2019 and March 2020. Covid-19 lockdowns impacted the group from the third week in March 2020, with the most severe effects being felt in April 2020 and May 2020 when sales were limited to certain “essential supply” customers from stockpiles existing at the end of March 2020. 90 percent of the target market was shut down during this period,” said Morné du Plessis, the chief executive officer at Minergy.

Du Plessis disclosed that sales volumes showed a slow recovery in June 2020 as customers started to return to operations following easing of lockdown restrictions applicable in South Africa. Despite border restrictions between South Africa and Botswana, Minergy, in its first year of operations, sold approximately 198 000 tonnes for the financial year.

“Subsequent to year-end, July 2020 and August 2020 have seen further recoveries in sales volumes, including record sales levels achieved in August 2020. To put this into perspective, post the year-end to the end of August 2020, Minergy has already sold 40 percent of the year-end 2020 volumes. Targeted average pricing was not achieved and was exacerbated by a weakening of between 8 percent and 15 percent in the South African Rand between the end of March and June 2020 affecting back on mine converted pula prices,” the veteran mining chief said.

Minergy has secured various sources of debt finance from government linked funders in order to continue funding the operational ramp-up and further mine development. The Botswana Development Corporation (BDC) which advanced P40 million to Minergy in 2019 has extended another P40 million during the current year, which has been converted into a new six-year P80 million secured, convertible preference share facility with interest at 18 percent.

The Mineral Development Company Botswana (MDCB) advanced a total of P110 million to Minergy during the 2020 financial year. These secured convertible debentures have a six-year term and accrue interest at 15 percent. The MDCB’s equity conversion option into Minergy on this facility required a split between debt and equity for accounting purposes, with P16 million being created as an equity reserve.

Furthermore, Minergy received an advance of P4.6 million from Botswana Railways (Botrail) toward the upgrade of the Tshele Hills rail siding. This facility is interest-free and will be repaid on a per tonne of coal loaded basis for rail transport from this siding, according to the company.

Minergy proudly announced the export of Botswana’s first coal by rail to South Africa on 17 July 2020. The coal from Masama was loaded onto trucks and transported 60 km to the rail siding at Tshele Hills, marking the first of three trains bound for an industrial client in the cement sector in South Africa. The initial train consisted of 50 wagons, with each wagon carrying approximately 53 tonnes of coal product, equating to roughly 2 650 tonnes in total.

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