Minergy Limited (Botswana) – HY 2021 sales tones increase 50% relative to year prior

By Published On: May 16th, 2022Categories: Corporate announcement, Earnings

Minergy Limited (MIN.bw) HY2021 Interim Report

This commentary relates to the six-month period ending 31 December 2021 and follows the commentary shared in the voluntary market update of 20 January 2022, which should be read in conjunction with this announcement. The six-month period ending 31 December 2020 (“the comparative six-month period”) is used as a comparative for performance indicators mentioned below.

ACHIEVEMENTS FOR THE INTERIM PERIOD INCLUDE:

  • Minergy short-listed for new 300 MW coal fired power plant in Botswana being the only bidder with an operational coal mine;
  • Record monthly mining and feed to plant tonnages were achieved, supporting nameplate capacity of 125 000 tonnes per month;
  • Stage 4 of the Processing Plant (Rigid Screening and Stock Handling section) successfully commissioned which completes all plant construction. The full plant now operates as designed;
  • 50% increase in sales tonnes against the comparative six-month period;
  • Better product mix was generated from the fully commissioned plant, with improved sales of the more economical fractions and overall average pricing increase achieved;
  • 22% improvement in the EBITDA loss against the comparative six-month period;
  • Continued Government support for the project, including implementing debt restructuring agreements; and
  • Sustainably employing Batswana constituting 95% of workforce.

CHALLENGES DURING THE INTERIM PERIOD INCLUDE:

  • Minergy’s target market was flooded with export destined coal due to the inability of Transnet Freight Rail (“TFR”) to manage cable theft and vandalism which impacted the evacuation of coal and created an oversupply in the regional market;
  • A new COVID-19 variant impacted the extraction of coal due to workforce availability and border access late in the period;
  • Rain interruptions experienced but not resulting in flooding or significant production interruptions as was the case in the previous period;
  • Untimely breakdowns at a key customer’s production facilities constraining offtake and reduced demand from another in anticipation of  kiln maintenance in early 2022; and
  • Cash flow constraints operating below breakeven.

OPERATIONAL UPDATE

Substantial progress was made toward reaching nameplate capacity during the six-month period. Production volumes reached the highest six-monthly volumes across all disciplines since the inception of the mine and nameplate capacity has been demonstrated.

Although nameplate capacity is now achievable, breakeven sales volumes were not achieved in the six-month period mainly due to:

  • Production potential of the fully commissioned plant was only available midway through the six-month period after the commissioning of Stage 4;
  • Lower sales from two key customers during the last two months of the period as highlighted earlier; and
  • Oversupply of product in the regional market.

The plant now supports the envisaged product mix, economical water use and can sustain nameplate capacity.

FINANCIAL REVIEW

The following items are highlighted in relation to the Statement of Financial Position:

  • Finished product inventories have nearly doubled from the 30 June 2021 year- end on the back of lower sales late in the period as well as increased investment in work in progress to support nameplate capacity;
  • Debtors remain well managed with no credit losses incurred to date and the period end includes early payments by customers on 31 December 2021 reflected in cash;
  • The increase in cash balances is mainly related to customers paying on 31 December 2021 and cash remaining in the bank over the Christmas shutdown. Payments to creditors in the New Year were delayed because of public holidays on 3 – 4 January 2022.
  • The increase in borrowings is explained as follows:
    • The bulk of the finance costs recorded in the Statement of Comprehensive Income is capitalised interest
    • Additional Minerals Development Company Botswana (Proprietary) Limited (“MDCB”) debt of P63 million received in July 2021; and
    • Trade debt converted into senior debt as well as deferral of a portion of current mining costs as part of the debt restructuring process to assist with cash flow.
  • Reduction in trade payables from settlements done out of funding and conversion to senior debt.

CONTINUED……


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