Modern Mining December 2023

ENERGY

Minergy suffers knock-on effects of soft

Coal junior, Minergy, will find its way out of its current quagmire, which is underpinned by a cooled coal market and rising input costs, says outgoing CEO Morné du Plessis, who has served at the helm of Botswana’s pioneering coal mine for the past seven years. By Nelendhre Moodley .

D u Plessis was instrumental in taking the Masama Coal Mine from grassroots level to a producing entity and was quick to take advan tage of serendipitous high coal prices to make six lucrative shipments to international markets in 2022 and early 2023. Although Minergy’s business model was never designed for the export market, the company took advantage of the energy security crisis created by the Russia-Ukraine war to enter the export market, which subsequently earned the miner “profitability for the first time” in H1 2022. However, owing to recent weak coal prices and an oversupplied market, the company has suffered harsh losses, with Minergy reporting a 33% drop in coal prices since mid-December. Speaking of the year under review for the Botswana based coal miner, Du Plessis said that strong momentum in the first half of the year was eroded by year-end owing to changes in the inter national coal market, with H2 2023 experiencing a sudden and significant drop in coal prices due to excess product in the European market caused by voracious buying. “As good as it was up until around December

The Masama Coal processing plant.

last year, it’s been the opposite for the past nine months in terms of coal prices, which have been impacted significantly by the oversupply of product. It has become a buyer’s market. If a company has not secured long-term contracts, then it will have to compete on a spot basis and entertain extremely tight margins.” Du Plessis explained that despite the H2 2023 setbacks, when comparing annual statistics, there was an improvement from prior years - with four consecutive years of production and sales increases. He added that although the coal sector noted a slight improvement in some coal export prices recently, it was still not economical for Minergy to mine in large volumes again as “there needs to be some kind of stabilisation in the supply chain”. “I believe that excess stock has been used and don’t foresee a further drop in prices. Expectations are that the price of coal will pick up in the last quar ter of this year, but that is largely dependent on the key players - China and India.” Minergy was also caught on the backfoot as min ing costs were exacerbated by “a higher mining strip ratio, soaring fuel prices and additional fixed costs accompanying the ramp-up to full capacity”. Further to this, since the beginning of the year, competitor and state-owned open-cast Morupule mine, has become operational. According to Du Plessis, the new dynamic on

Du Plessis was instrumental in taking the Masama Coal Mine from grassroots level to a producing entity.

12  MODERN MINING  December 2023