Minergy sees signs of recovery after significant financial setbacks

editor1 month ago4016 min

The Botswana Stock Exchange (BSE)-listed coal miner, Minergy Limited, is poised to commence full production at its Masama Coal Mine by November 2024, aiming to recover from substantial financial losses incurred due to operational disruptions following the suspension of its mining contractor.

Minergy Limited successfully resumed operations at Masama Coal Mine in February 2024. The company has announced its commitment to unveiling a long-term resource development plan for the lifespan of Masama Coal Mine, a five-year corporate strategy for the period 2025-2029, and a new Business Operating Model (BOM) designed to achieve strategic targets.

According to Minergy’s most recent condensed group audited financial results, released on Wednesday, the company’s revenues plummeted by 81%, from P512.5 million in the year ending June 2023 to P97.1 million in the year ending June 2024. Concurrently, the net loss surged by 36%, escalating from P139 million to P189 million during the same period.

Minergy Limited’s management indicated that these financial results reflect a challenging operational year, marked by nearly six months of halted mining activities and significant sales disruptions. β€œThe transition to a new mining contractor is complete, with full production capacity expected by November 2024.”

Previously, Minergy’s mining contractor ceased production, resulting in operational disruptions that compounded financial challenges for the 2023/2024 financial year and led to six months of lost revenue, as stated by management. β€œThe stoppage of production during the transition has had a profound impact on the financial results for the financial year.”

Following the appointment of a new mining contractor, operations successfully resumed, and Minergy began selling coal on April 1, 2024. Management noted an optimistic outlook for achieving steady-state production, highlighting that the new mining contractor is expected to deliver significant cost savings, which are already materializing. β€œSteady state production was envisaged for June 2024 but this has not been achieved due to slower than anticipated market offtake. However, the production capability to ramp up to steady state is now in place. The new operational processes have resulted in efficiency gains that improve mining costs as planned, marking a critical step towards entrenching profitability. Cost efficiency has improved. New mining contract has reduced costs by 25%.”

Management also stated that coal marketing and sales activities are gaining momentum, with customer discovery and offtakes commencing in May 2024. The re-entry into the market has been gradual, especially within the cement manufacturing sector, which is the primary consumer of duff coal. Despite the initial slow pace, management is pleased with the significant progress in acquiring new customers and regaining its customer base, primarily supported by the quality and renewed availability of the coal product. β€œCustomers are resuming off-takes increasingly as the new financial year progresses, with an expectation of additional customers to re-engage. The combination of improved operational efficiencies and the development of new market opportunities positions Minergy for a stronger financial performance in the new financial year.”

Additionally, Minergy is engaged in discussions with long-term offtake customers in the regional power sector and project developers interested in utilizing unwashed Minergy coal products. β€œMinergy continues to ensure operational stability during this period to solidify these potential long-term supply agreements, which would significantly enhance the company’s market position.”

The management observed that global coal prices are on the rise, a development expected to benefit Minergy Coal Mine. Recent data indicates that global coal prices have trended above the long-term average price of USD85, creating favorable conditions for Minergy and other producers. As of August 14, 2024, globally traded coal prices have increased from an average of USD100/ton to USD117 (API4)/ton, reflecting a robust market resurgence. Minergy noted that this price increase bolsters confidence in offshore exports and positively impacts inland market prices, where the company primarily operates.

The company concluded that the combination of regaining key customers, securing potential long-term contracts, and benefiting from favorable global price trends provides a solid foundation for growth and profitability in the upcoming months.