- Anticipates upswing in growth and profitability due to strategic turnaround plan
- Change of mining contractor halted production and causing financial strain
- Crucial MDCB funding has stabilised operations with focus on becoming low-cost producer
GAZETTE REPORTER
Despite recent financial turbulence and a shift in mining contractors, Minergy’s Masama Coal Mine is on track to achieve full production capacity by November 2024.
This is according to the company’s acting Chief Financial Officer, Julias Ayo, in Minergy’s Integrated Annual Report for 2024, that outlines a revitalised growth strategy backed by substantial new funding and market stability, positioning the Botswana-based coal producer for profitability in the upcoming year.
Domestic and export sales
“Despite the challenges experienced in the current financial year, Minergy is well-positioned for growth and profitability in the new financial year,” Ayo said.
He attributed the anticipated upswing to a strategic turnaround plan and stronger coal market conditions, which could help the company capitalise on both domestic and export sales.
One of the key elements in Minergy’s resurgence was its transition to a new mining contractor, Meropa, a shift aimed at stabilising and maximising output.
Stabilised
This contractor change, completed earlier in 2024, temporarily halted production, causing significant financial strain. However, Minergy now anticipates full production by November, following current trends in market offtake.
“Production has been stabilised, followed by a conscious sales and marketing drive to engage new and old customers,” Ayo noted, adding that new offtake agreements and customer trials are already in place.
The strategic plan to reinvigorate operations relied on crucial funding from the Minerals Development Company Botswana (MDCB), allowing Minergy to resume operations with a focus on becoming a low-cost producer.
Notable mark on financials
“Minergy’s strategic turnaround plan involved securing substantial funding from MDCB to stabilise operations and ensure Minergy is positioned as a low-cost quartile operator into the future,” Ayo noted.
However, the impact of the production stoppage during the contractor transition left a notable mark on Minergy’s financials.
Revenue took a sharp 81 percent dip year-on-year, a decline driven by the disruption in coal sales activity and the delay in resuming full-scale production.
“The loss of major customers and the delay in resuming full production under the new contractor further exacerbated the situation,” Ayo said, describing the toll these operational challenges took on the company’s cash flow.
Favourable market conditions
The decreased revenue forced Minergy to seek additional borrowing to cover fixed costs during the transitional period. Yet, with coal prices forecast to remain high, Minergy is poised to seize favourable market conditions.
Although global coal prices retreated from last year’s record levels, they still sit above historical averages. Prices have recently hovered around USD 114 per ton, with benchmarks predicting a potential peak of USD 140 per ton.
“This will provide a favourable market environment for Minergy to capitalise on both inland and offshore markets,” Ayo said, noting that opportunities for offshore exports have become more attractive as South African producers prioritise international markets.
Tender opportunities
In addition to balancing local, regional and seaborne sales, Minergy has set a robust pipeline of tender opportunities, targeting both new and returning customers.
“New customers are undertaking coal trials to test the quality of Minergy coal,” Ayo said, expressing confidence that strengthening coal prices will improve profitability and sustainability.
As Minergy nears the end of its transition phase, Ayo remains optimistic about the company’s future, citing stabilised production and an expanding customer base as indicators of a promising rebound.
With a restructured cost base, rising coal demand, and new agreements in place, Minergy aims to move beyond its recent setbacks, ready to enter a new era of growth in Botswana’s coal sector.