050910 Electricity pylons carry power from Cape Town's Koeberg nuclear power plant July 17, 2009. South Africa will need 20 gigawatts (GW) of new power generation capacity by 2020 and would require double that amount a decade later to meet rising demand, the country's power utility said September 7, 2009. Picture taken July 17, 2009. REUTERS/Mike Hutchings (SOUTH AFRICA ENERGY BUSINESS)

Unprotected strikes that could threaten the coal supply to Eskom power stations are under way at two of Exxaro’s mines in Mpumalanga after workers who did not meet performance targets demanded performance bonuses.

Exxaro made no payments of performance bonuses at the Matla and Arnot mines as the operations had not achieved the performance targets.

Mxolisi Mgojo, Exxaro’s executive general manager for coal, said yesterday that employees were kept informed regularly of performance levels and bonus payments.

“No production is taking place at the mines because of the strike. It’s important for us to resolve the strike to avoid a blackout,” Mgojo told members of the media on the sidelines of Exxaro’s financial results presentation yesterday.

Mgojo said meetings with the leadership of the National Union of Mineworkers (NUM) were planned to end the strike. The Matla coal mine produced 1 million tons a month, while the Arnot colliery produced 2.2 million tons a year, he said.

“The Matla mine has 19 days’ supply available and the Matla power station has two days’ supply on hand. At Arnot there is no risk to supply of coal,” Wim de Klerk, Exxaro’s finance director, said.

Eskom had not responded to requests for comment at the time of going to press.

The company said the NUM and Solidarity were the recognised unions at the operations.

Exxaro has not been immune to the strikes that rocked the mining industry last year.

Exxaro posted a 33 percent decline in headline earnings a share to R14.01 for the year to last December. Net operating profit declined 32 percent from a year earlier to R1.73 billion.

Exxaro chief executive Sipho Nkosi said last year had been the most challenging year for the diversified mining firm.

Revenue slid 23 percent to R16.1bn in the year under review, and the company declared a final dividend of R1.50 a share, taking the total dividend to R5.

State-owned power utility Eskom has been experiencing delays in the completion of the Medupi coal-fired power station, which is placing strain on Exxaro’s Grootgeluk Medupi expansion project.

The revised capital expenditure budget has increased by R700m due to a combination of factors, including cost escalations, labour unrest, steel shortages and the additional scope that was added to the project.

Exxaro was also meeting with Eskom to discuss how problems at the Medupi power station was affecting its colliery expansion project, the company said yesterday.

The power utility, which had agreed to penalties in terms of take-or-pay agreements for coal already supplied to the station before the strike, had declared a force majeure when the unprotected strike at Medupi started last month.

Meanwhile, Exxaro said it was expecting regulatory approval from the Republic of Congo for its Mayoko iron ore project by August.

In terms of the company’s outlook, Exxaro said it expected its financial results to be affected by commodity price volatility, rand/dollar exchange rate fluctuations and the availability of trains in the export coal business.

The shares fell 0.66 percent to close at R168.88 yesterday.