Coal coming off the bottom – Exxaro

JOHANNESBURG (miningweekly.com) – There are indications that the coal market, which suffered heavily depressed prices last year, is beginning to come off the bottom.

“I think we’re through the trough,” Exxaro FD Wim de Klerk said of the demand for export thermal coal in particular. (Also watch attached Creamer Media video).

Responding to Creamer Media’s Mining Weekly Online during a media roundtable at the Johannesburg Stock Exchange on Thursday, De Klerk noted that coal price increases were coming through.

“Will that last? We don’t know the answer to that. But at least from a South Africa perspective, you’ve seen the numbers – in the midst of this international crisis and the lowest prices in many, many years, we’ve increased our margin of 35%,” he told journalists after the company reported 5% higher coal sales at 43-million tonnes in the 12 months to December 31.

Following its acquisition of Total Coal South Africa in August last year – a coal operation now called Exxaro Coal Central or ECC – the once heavily locally orientated, black-controlled diversified mining company now has a 9.37% effective equity interest in the Richards Bay Coal Terminal (RBCT) for the exportation of its coal.

A major supplier to State power utility Eskom, the company’s core coal net operating profit for the period was a 29%-higher R4.3-billion from operations, split between commercial coal operations and Eskom-tied coal operations.

While Exxaro's main Grootegeluk mining complex is in the Waterberg, it is very active as both an operator and developer in the Mpumalanga province, where it owns half of Mafube with the divesting Anglo American.

Exxaro CEO designate Mxolisi Mgojo told journalists attending the media roundtable that product and market diversification and optimisation were the company’s new approach.

Whereas in the past the company had invariably depended on a couple of major customers in a handful of segments, it was now following customers in Pakistan into Africa.

“When they build plants in various parts of the world, they’re looking to us as a reliable supplier with the right product mix for their requirements,” Mgojo said, adding that in the past year, new Exxaro coal operations executive head Dr Nombasa Tsengwa had intensified the approach.

Three different coal products were now emerging from the newly acquired ECC, compared with one in the past, and exportation through RBCT was smooth.

Tsengwa pointed out that India, which takes a variety of coal specifications, was becoming very important to the company.

“We’ve done quite well with our products from the ECC operations and we’re understanding the Indian market more and more,” she said.

With sourcing from Indonesia declining, South African coal had become a coal of choice.

“The truth of the matter is that the market is on the move. It’s a dynamic market. It’s not like it used to be.

“Once upon a time China was the flavour of the month. Now China doesn’t take anything from South Africa.

“So if your strategy was dependent on just China, you’d have been in trouble,” Mgojo added. (Also watch attached Creamer Media video).

Exxaro, which declared a 60%-lower final dividend of 85c a share, saw its share price rise by 3.48% to R73.65 after the presentation of its 2015 financials.