By Dineo Faku
JOHANNESBURG - EXXARO Resources yesterday said it expected both total coal production excluding buy-ins and sales volumes to increase 5 percent due to the increased Eskom demand at Medupi power station and the ramping up of production at Belfast.
Chief financial officer, Riaan Koppeschaar, said in a pre-close statement for December that thermal coal production from the Waterberg was expected to increase 4 percent against 2019 in line with increased Eskom demand from Medupi.
Koppeschaar said production at the Mpumalanga commercial mines was anticipated to be 4 percent higher than a year earlier due to the ramping up at Belfast, partly offset by the negative impacts of the pandemic on production and markets at Leeuwpan, Exxaro Coal Central (ECC) and Mafube.
He said while Exxaro anticipated an increase of 27 percent in export volumes, it expected a weaker dollar sales price per ton to be realised, in line with the weaker API4 coal export price index, cushioned somewhat by a weaker rand dollar exchange rate.
“The expected 27 percent year-onyear increase in export sales volumes is driven by the availability of additional export products from our own operations and buy-ins,” said Koppeschaar, adding total sales to Eskom were expected to decrease 1 percent compared to 2019 as a result of lower sales from Leeuwpan and ECC, where the new coal supply agreements have still not been concluded, partially offset by higher off-take from Grootegeluk.
“Our domestic thermal coal sales volumes are expected to decrease by 9 percent, mainly due to lower demand from ArcelorMittal South Africa (Amsa) and the cement industries, at Grootegeluk and ECC, partly offset by higher availability of product for the domestic market from Leeuwpan and Belfast,” he said. Exxaro has a 20 percent stake in Sishen Iron Ore, a subsidiary of Kumba Iron Ore.
The rand touched a historical weak point of R19.20 to the dollar in April, and has somewhat recovered, reaching R15.11 against the dollar last month helping to buffer the effect of the API4 index price which has surged to highs of $70 (R1 072) a ton after falling to $66 per ton during the six months to June compared to $74 a ton a year earlier.
The diversified mining group said capital expenditure for 2020 was expected to be 47 percent less than a year earlier, mainly due to project delays linked to Covid-19 and the completion of key projects.
The national lockdown to control the spread of the Covid-19 pandemic has resulted in a record decline in real gross domestic product for the second quarter of 2020 in most of the world’s economies including South Africa.
Anchor Capital investor analyst Seleho Tsatsi said that despite coal sales volumes being largely flat, the strong iron ore price would be a big driver of earnings.
“The iron ore price has moved up above $130 a ton because Vale, the biggest iron ore producer in Brazil, has lowered its guidance which is obviously positive for iron ore prices,” said Tsatsi.
“The movement in the share price was a reflection of that the report was in line with expectations.”
Exxaro shares rose 1.70 percent on the JSE yesterday to close at R130.99.
BUSINESS REPORT