Condensed unaudited interim consolidated results
for the six months ended
31 December 2022
Minergy Limited
(Incorporated in accordance with the laws of Botswana) (Company Number: BW00001542791)
www.minergycoal.com
("Minergy" or "the Company")
This commentary relates to the six months ending 31 December 2022 ("interim period") and follows the voluntary market update of 25 January 2023, which should be read in conjunction with this announcement. The six-month period ending 31 December 2021 ("the comparative six-month period" or "previous interim period") is used to compare the performance indicators mentioned below.
Shareholders are also advised of the XNews announcements issued on 7 March and 16 March 2023 relating to the temporary stoppage of mining operations by the mining contractor, Jarcon Opencast Mining Botswana (Pty) Ltd ("Jarcon").
A separate announcement covering the resolution of the stoppage and for mining operations to resume, will follow this announcement.
This announcement, however, deals specifically with the Company's interim results as required by the Botswana Stock Exchange ("BSE").
Minergy demonstrates solid performance for the six months ended 31 December 2022
The Company's financial results for the six months ended 31 December 2022 showed markable improvement against the comparative six-month period. Notably, Minergy reduced its net loss before taxation by 37% from P91 million for the comparative six-month period to P58 million for the interim period, thanks to increased revenue. For the first time, the Company produced operating and EBITDA profit.
There was a remarkable improvement in revenue, with the high global demand for coal experienced during the interim period at higher sales prices supporting exports through Walvis Bay. Further details are contained in the Statement of Comprehensive Income.
01
Interim results 2023
Financial and non-financial highlights for the interim period
Financial | Operational | Health, safety and social |
Combined revenue increased with | ‣ Sales averaging >65,000 tonnes | ‣ Excellent safety record, with no |
146% to P330 million (2021: P134 | per month ("tpm") | lost time injuries during the period |
million). Pure coal sales (excluding | ‣ Product mix consistently achieving | |
transport recoveries) increased | targeted parameters minimising | |
from P115 million to P298 million | excess finer product | |
stemming from: | ‣ Coal for four vessels successfully | |
‣ 53% volume increases supported | dispatched to Walvis Bay for | |
seaborne export markets | ||
by ~147,000 tonnes exported via | ||
Walvis Bay | ||
‣ Pricing ~66% higher than | ||
the comparative six-month period | ||
‣ Transport recovery increasing | ||
with higher regional tonnes | ||
‣ P3 million claim settled on an | ‣ Consistently achieving a production | ‣ 99% of employees are either fully |
export vessel negatively impacted | capacity of ~125,000 tpm for | vaccinated or have received their |
the profitability, motivating the | mining and beneficiation feed | first dose of the Covid-19 vaccine |
move from Free-on-Board ("FOB") to | ||
Free-on-Truck ("FOT") basis of sales | ||
‣ Mining costs, specifically diesel and | ‣ Water resources proved sufficient | ‣ Corporate social responsibility |
explosives, increased >50% from | for increased production through | remains core to Minergy for |
the previous interim period, as a | effective water management, | communities in and around |
consequence of the global energy | including filter press operations | the mining area |
security crisis | ||
‣ Mining cost and cash flows were | ||
exacerbated by a higher mining | ||
strip ratio and additional fixed | ||
costs accompanying the ramp-up | ||
to full capacity | ||
‣ Operating and EBITDA profit of | ‣ 96% of the workforce is Batswana | |
P1.5 million and P15 million (2021: | ||
operating loss of P48 million and | ||
EBIDTA loss of P40 million) | ||
‣ Cash flow from operating activities | ‣ Various internships were undertaken | |
swung from cash utilisation to cash | ||
generation for the six months | ||
02
Interim results 2023
Health and safety
Following the historical trend, Minergy upholds an outstanding safety record, with no lost time injuries during the period. The Company is grateful to be fatality free on the back of strictly managed health and safety systems. Minergy is committed to providing its workers with a safe work environment.
Operational update
We are pleased to report that our mining operations and plant performance have consistently achieved full production capacity. Across the plant and mining operations, an average of 125 000 tpm had been achieved during the period. This is a significant milestone for Minergy.
In line with the growth in sales, mining and plant feed volumes increased by >50% against the comparative six-month period. Minergy has invested in work in progress (overburden removal or pre stripping) to increase production and access additional coal in anticipation of increased sales, which has now had an impact on cash flows in the absence of the export market volumes as discussed later.
Water management remains crucial, exacerbated by the abnormal dry weather experienced in January 2023. Drilling for additional boreholes was successful post the reporting period and will supplement water for the dry winter season. As previously announced, the approval received to connect the Masama Coal Mine to the North-South Carrier water system will support Minergy's current and future requirements for water and reduce the impact on local water resources.
The Government of Botswana has formally confirmed that they will be sharing costs through a Public Private Partnership in tarring the Lentsweletau-Medie gravel road. This will eradicate dust pollution, increase truck turnarounds, and simplify product evacuation from the mine.
Financial review
The commentary and results are to be read with the following as background:
- The exceptional demand for coal created by the war in Ukraine and impact on Minergy's performance started early in March 2022. Minergy reported the initial impact on its Q4 2022 results from the first two coal export vessels, done on an FOB basis. The first vessel was concluded at breakeven pricing to establish the route. The second vessel, albeit at higher prices, was dogged with a late claim from shippers, which was only resolved late in 2022 post the full-year results announcement. The claim cost Minergy approximately P3 million and is recognised in the profit for the interim period.
- The interim period includes the change from selling FOB to FOT, where Minergy, in managing risk and cash flow, accepted good FOT pricing. These prices are not at the full and lucrative FOB price levels, which includes various intermediaries and offers greater profitibility.
- To sell the additional coal supported by buoyant export markets, mining had to be ramped up. This came with further investment into work in progress (refer inventory increases and mine development investments), as shown on the Statement of Financial Position, and increases in contract mining and other services trade accounts.
- Pre the advent of the Ukraine war, Minergy already had carried significant overdue trade balances, most of which were owed to the mining contractor. The account was serviced with increased payments during the interim period. In addition, additional cash generated was utilised to fund the increased working capital for the expected increased capacity. The mining contractor was comfortable with the build-up in anticipation of liquidating work in progress and decreasing overdue balances.
- Our planning assumed a market with extended increased demand and pricing lasting for at least 12 months and associated full capacity, which was the general market consensus. Based on the investment made to produce and sell the additional coal, Minergy could substantially pay back arrears. Please note that the trade indebtedness to the contractor is at the same level as at the beginning of the interim period.
As a result of the abrupt and unexpected export price decrease, it has been difficult for Minergy to generate seaborne sales volumes which consequently impacted the basis for operating at full capacity. This has led to high work-in-progress levels resulting in sterilising inventories and its monetisation.
03
Interim results 2023
Statement of financial position
As at 31 December 2022
Figures in Pula | 31 Dec 2022 | 30 Jun 2022 |
Assets
Non-current assets
Property, plant and equipment | 482 269 721 | 457 309 038 |
Deferred tax asset | 117 964 272 | 105 299 204 |
600 233 993 | 562 608 242 |
Current assets
Inventories | 125 077 335 | 76 277 729 |
Trade and other receivables | 79 121 234 | 95 392 892 |
Cash and cash equivalents | 22 311 985 | 9 156 322 |
226 510 554 | 180 826 943 | |
Total assets | 826 744 547 | 743 435 185 |
Equity and liabilities
Capital and reserves
Stated capital | 165 563 026 | 165 563 026 |
Accumulated loss | (421 324 294) | (376 420 873) |
Other reserves | 30 578 264 | 30 578 264 |
Equity attributable to owners of the parent | (225 183 004) | (180 279 583) |
Total equity | (225 183 004) | (180 279 583) |
Non-current liabilities | ||
Rehabilitation provision | 165 949 697 | 161 665 560 |
Borrowings | 615 272 753 | 565 017 069 |
781 222 450 | 726 682 629 | |
Current liabilities | ||
Borrowings | 50 500 000 | 17 826 904 |
Trade and other payables | 220 205 101 | 178 389 654 |
Current tax liabilities | - | 815 581 |
270 705 101 | 197 032 139 | |
Total liabilities | 1 051 927 551 | 923 714 768 |
Total equity and liabilities | 826 744 547 | 743 435 185 |
Property, plant, and equipment ("PPE") increased due to mine development activities aimed at expanding the pit, including box cut activities, to meet the forecasted growing market demand, net of increased depreciation.
Inventories increased from P76 million as of 30 June 2022 to P125 million as of 31 December 2022 due to increased work in progress to support increased sales.
Debtors balances are lower on 31 December 2022 from payments received and processed before the interim period cutoff.
Borrowings have increased due to capitalised interest on existing loans and the expansion of the mining contractor's debt restructuring deferral facility. No new facilities were incurred.
The higher trade and other payables can be attributed to increased operations, particularly the expanding mining and diesel trade accounts.
04
Interim results 2023
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Minergy Ltd. published this content on 31 March 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 31 March 2023 11:54:06 UTC.