Diversified resources company Exxaro Resources expects to report a 6% decrease in export coal sales volumes to 2.51-million tonnes for the six months ended June 30, compared with 2.67-million tonnes for the six months ended December 31, 2022, as a result of Transnet Freight Rail's (TFR's) poor rail performance to the Richards Bay Coal Terminal (RBCT) and lower export prices, which negatively impact on exporters' ability to truck coal economically to alternative ports.
FD Riaan Koppeschaar notes in a pre-close statement to shareholders that TFR had railed 19.95-million tonnes of coal the RBCT during the five months ended May 31, which is equivalent to an annualised rate of 46.46-million tonnes.
"Various challenges, including poor locomotive availability, train derailments, and instances of cable theft and vandalism continue to impact negatively on export performance.
"TFR and the coal industry continue to collaborate on efforts to improve rail performance. Industry has supported various initiatives during the past six months and continues to engage to support improvement initiatives," he points out.
The average benchmark API4 RBCT export price for the first half of this year is expected to average US$127/t – a significant decline from the $265/t achieved in the six months to December 2022.
"Seaborne thermal coal prices have remained under pressure due to weak demand in Europe and Northeast Asia. Both thermal coal and gas prices declined significantly to levels last recorded two years ago.
"Europe remains very well stocked for both gas and thermal coal. Stronger renewables availability also boosted baseload generation, further reducing the role of gas and thermal coal in the European energy mix," Koppeschaar says.
Meanwhile, coal sales to power utility Eskom are expected to decrease by 6% in line with the utility's demand.
Exxaro expects to report a 7% decrease in thermal coal production as a result of lower demand from Eskom at the Grootegeluk mine, in Limpopo.
Domestic thermal coal sales are expected to decrease by 10% owing to the slower diversion of export coal into the local market, mainly at the Mpumalanga mines.
Metallurgical coal sales are, however, expected to increase by 24%, as alternative transport arrangements are enabling supply to Exxaro's local customers.
Exxaro's metallurgical coal production is expected to increase by 57% as the Grootegeluk 6 plant has fully ramped up.
"Our coal business' performance continues to be impacted by logistical challenges, persistent inflation and low coal prices. Our optimisation programmes focus on reducing cost and improving efficiencies across the value chain, thus protecting our business from these external factors," Koppeschaar points out.
CAPEX
Capital expenditure (capex) for the six months to June 30 is expected to reach R809-million – 8% lower than the R880-million spent in the six months to December 2022. Sustaining capex is expected to be 9% higher at R736-million, but expansion capital is expected to decrease by 64% to R73-million as a result of the Grootegeluk 6 project having been concluded.
Exxaro forecasts its full-year 2023 capex to reach R2.28-billion, compared with the previously guided R2.5-billion.
During the six months under review, Eskom approved the Matla Mine 1 relocation funding of R1.4-billion and the project is now expected to be completed in the first half of 2026.
At Moranbah South, a prefeasibility study to determine the way forward for the project is being re-scoped. Exxaro plans to start with the revised scope in the second half of this year.
ENERGY
Exxaro's renewable energy subsidiary Cennergi’s operating wind assets are forecast to have generated 318 GWh of electricity by June 30, compared with the 364 GWh generated in the six months to December 2022.
The Tsitsikamma operation experienced an Eskom distribution line fault, resulting in 15 GWh of lost generation over a one-month period of the fault.
Overall, Exxaro has noted an improvement in wind conditions for the period under review, compared with the prior year.
The average plant availability is forecast to be above the contracted availability of 97%, it states.
