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Minergy experiences exceptional turnaround in fourth quarter FY22

Loss-making trend replaced with profitability and positive cash flows

Minergy, the coal mining and trading company, today released results for the year ended 30 June 2022. The Group achieved combined revenue of P425 million (2021: P193 million), with cost of sales of P484 million (2021: P256 million). Pure coal sales, which exclude transport and Free-on-Board (“FOB”) cost recoveries, amounted to P297 million (2021: P167 million). Notably, for the first time since inception, Minergy extracted and processed over a million tonnes of coal in a single financial year at the Masama mine.

According to Minergy CEO, Morné du Plessis, the year under review was “historic”. “We had a challenging first three quarters followed by an exceptional turnaround in the fourth quarter, as many European and Asian countries looked for alternative sources of supply. As a result, Minergy’s high-quality coal became a sought-after commodity.”

Du Plessis said that the year had also been marked by several key events and trends, including the pay out of the final tranche of debt funding early in the financial year, and the conclusion of debt restructuring in support of stabilising the business.

“A highlight was the successfully commissioning of Stage 4 of the processing plant – the rigid screening and stock handling section –in October 2021, ending construction on the plant. The fully functional plant contributed significantly to a steady production environment, albeit restricted to available sales demand which did not support full capacity for the first nine months.”

In terms of market trends, du Plessis said that demand had been constrained for most of FY22 as the result of an oversupply of coal into the regional market because Transnet Freight Rail (“TFR”) failed to support coal dispatches into the export market via Richards Bay, a fact that has been widely publicised. “This situation was exacerbated by diminishing offtake from contracted key customers plant maintenance and breakdowns. Given this, mining and coal processing output rates were reduced to avoid coal losses through spontaneous combustion and limit cash-absorbing inventories. Outputs were further challenged by operational interruptions from freak rainfall in April 2022 and intermittent power outages.”

Then it all changed. Globally, the war in Ukraine created high coal prices at the end of the third quarter of FY22, as the energy markets came under severe security of supply pressure. “This led to extraordinary demand facilitating access to previously uncompetitive and uneconomical exports into the seaborne market during the fourth quarter. Reciprocally, with plant and mining capacity available, production was ramped up to meet this new burgeoning demand.”

Du Plessis said that hyperinflationary-like price increases of explosives and administered prices, such as diesel, had unfortunately reduced the positive effects of increased revenue. “Diesel and explosives increased by 127% and 57%, respectively, which was exacerbated by double-digit inflation in Botswana.”

“It must be noted, however, that the recovery recorded in the fourth quarter is setting the tone for profitability for FY23.”

FINANCIAL REVIEW

Operating costs continued to show a decreasing trend and amounted to P19 million (2021: P23 million).

An operating loss of P74 million (2021: P85 million) was recorded, primarily due to the Group achieving breakeven in the last quarter, including individual month profitability, cementing a good foundation for the future. The cash or EBITDA loss was P58 million (2021: P74 million), representing an improvement of 22% from 2021 and a 39% improvement from 2020.

Net cash used in operating activities increased to P110 million (2021: P37 million) on the back of increased working capital investment, which contributed a swing of P91 million for growth in the fourth quarter.

Finance costs remain a challenge as a result of the skewed capital structure totalling P93 million (2021: P51 million), bringing the net loss after taxation to P132 million (2021: P107 million).

COAL SALES AND MINE PERFORMANCE

Pure coal revenue (ex-transport) increased by 77%, driven by a 40% volume increase, with average sales prices increasing by 26%.

A monthly sales volume record in excess of 75 000 tonnes was achieved in May 2022 on the back of destocking and FOB export sales.

Better product mixes supported sales into the seaborne thermal coal export markets, and Minergy successfully delivered two FOB vessels from Walvis Bay as well as exported coal via Zimbabwe to Maputo by rail.

Mining overburden moved and coal extracted increased by 82% and 54%, respectively. Processed volumes increased with increased mining volumes also supporting feed in excess of a million tonnes in a single year. “Pleasingly, water utilisation is improving, and we’ve achieved a 33% savings in litre per tonne consumption, justifying the investment in the dewatering screen, filter press and rigid screening section,” said du Plessis.

He added that mine rehabilitation is an ongoing process, with 4 million m3 rehabilitated in FY22. “This is exceeded the total volume rehabilitated since the start of mining operations.”

HEALTH, SAFETY AND CORPORATE CITIZENSHIP

Minergy continues to uphold an outstanding safety record, having had only one minor lost time injury during FY22. “We are grateful to be fatality free on the back of strictly managed health and safety systems. COVID-19 remained a threat during the full year, with a total of 138 cases reported since the start of the pandemic. Thankfully, all staff have fully recovered. High vaccination rates limit business interruptions.”

Minergy is committed to providing its workers with a safe work environment. As of the end of FY22, 97% of employees – 96% of which are Batswana – had been vaccinated.

“Corporate social responsibility remains core to the Group for communities in and around the mining area, as does supporting the Botswana economy. P488 million was spent on local registered company procurement this year, with P9 million paid in royalties and P5 million in local taxes. Minergy also has an active Citizen Economic Empowerment Plan in place, which yielded the utilisation of 22 local transporters. We continue to have a strong ethical base in place, which include a Whistleblowing Hotline.”

OUTLOOK

Looking towards the future, du Plessis said that Minergy is operating at production capacity of 125 000 tonnes of Run-of-Mine (“ROM”) with stable plant performance and export opportunities favouring a better product mix and pricing.

“Our strategy remains to operate at production capacity and maximise sales. Historically, plant and market factors limited us from operating at optimal capacities, but fortunes have now changed. This turnaround supports the expansion of mining operations to produce additional coal, and the mining fleet has been increased to capitalise on this. Opportunities to exceed production capacity and the resultant additional saleable production are being pursued.”

As coal export prices remain high on the back of the Ukraine war, Minergy continues to capitalise on viable export opportunities through Walvis Bay and Maputo through the establishment of new sales agreements with coal traders.

“Overall, the outlook for the coming year is positive and is forecast to be operationally profitable, as demonstrated in quarter four, which would be the first year for such an achievement after challenging start-up years.”

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Business

Food prices continue to rise, but at a slower rate

28th November 2022

Prices for cereals or staple foods in Botswana and other Southern African countries continue to rise at a slower pace, following trends in the global markets, according to the latest November 2022 Food Price Monitoring and Analysis by Food Agricultural Organization (FAO) of the United Nations.

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Business

Still doing business the old way?

18th November 2022

It’s time to get business done better with MTN Business Botswana’s ICT Solutions.

Running a digital businessMTN Business Solutions Botswana, popularly known as MTN Business is an Internet Service Provider. We are a subsidiary of MTN Group Limited, a multinational telecommunications Group headquartered in South Africa, which operates in 19 markets across Africa and the Middle East.

More and more, clients are looking for ways to keep their staff productive in a dynamically changing business environment. Whether your people are working from home, the office or abroad, there is a growing recognition that digitising your operations can offer unprecedented commercial value in flexibility, productivity and growth. This new, digital reality means that it is more important than ever to stay agile – if there is anything that can slow a business down, it is being burdened by othatld technology.

Having made substantial investments in fibre technology, high-speed terrestrial and undersea networks and new frequency spectrum across the markets wherein it operates, MTN is perfectly positioned to respond to this shift in the market.

A few years ago, MTN also made the decision to build an IP capable radio network for its mobile services, giving its core network the ability to seamlessly integrate with enterprise IP networks. The mobile towers deliver services to enterprise clients absolutely anywhere it has a network, shortening the last mile and removing complexity and cost.

Now there is increasing demand from clients to connect their remote sites in all areas, including rural and semi- rural. MTN has assisted clients with overcoming this connectivity hurdle, enabling their staff to get the job done wherever they are.
MTN’s evolution

For MTN, the focus has shifted from just being a core telecommunications services provider, towards also becoming a technology solutions provider. The service offering now also includes Unified Communications, Data Hosting and Cloud Solutions, Security-As-A-Service and Managed Network Services. The scope has changed to being client and industry specific, so the requirements and service portfolio vary from one client to the next. The expectation is that a company like MTN must respond to these challenges, helping clients to get business done better as they shift from old to new technologies.

As many businesses continue to grapple with a digitally dynamic world, they face new challenges that have to be solved. This environment will benefit those that are more digitally enabled and agile. It is a brave new world that will favour online over on-site, wireless over wired and fluid over formulaic. Businesses will seek out partners and suppliers that are every bit as flexible and forward-looking as they are.
Ultimately, clients need partners like MTN Business that will invest in infrastructure, deliver the services they require, have market credibility, are financially sound and have a long-term commitment to their market presence.

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Business

BIE to vitalize the Dignity of Engineers

9th November 2022

Botswana Institution Of Engineers (BIE), has last week hosted a gala dinner in  which they appreciated engineers who worked tirelessly and with dedication for 10 years from 1983 to steer the BIE to its current status.

The event that was held at the Phakalane Golf Estate had brought together young, experienced and veteran engineers and was held under the theme “Vitalize the dignity and eminence of all professional engineers”.

Explaining the theme, the institution’s treasurer, Thanabalasingam Raveendran said that engineers were looked upon reverentially with respect as the educated but with time it seems to have deteriorated. He indicated that there is a need to change the narrative by all means.

“The BIE exists for the welfare and the betterment of us Botswana engineers, we need to recognize specialised units within our Institution. We Engineers strongly believe in Engineers make it happen” Raveendran said.

He indicated that under the theme they appeal to all engineers to energize, to attain quality of being worthy of honour and respect and to achieve recognized superiority amongst the Society.

Raveendran stated that engineers need to ensure their end product is of good quality satisfying the end users expectations and engineers must be honest in their work.

“Approximately 8000 engineers registered with Engineering Regulatory Board (ERB) are not members of the BIE, engineers need to make every effort to recruit them to BIE” he said.

He alluded that BIE being a society, it currently needs to upgrade itself at par with professional institutions elsewhere like the UK and USA.

He further stated that BIE has to have engineering units of specialised disciplines like Civil/Mechanical/electrical etc

“As President Masisi indicated in his inaugural speech, the young people, who make 60 percent of the population of this country, are the future leaders and therefore investing in them is building the bridge to the future” said Raveendran

Kandima indicated that BIE has a memorandum of Understanding with Engineers Registration Board (ERB), where BIE is a recognised provider of CPD training, mentorship programmes and more importantly IPD undertaking to upgrade the skills and know-how of our engineers.

“For us to achieve our mandate and make worthwhile changes to engineering in Botswana, we have to be totally focused and act with intent” said Kandima.

Furthermore, Stephen Williams, past president of the BIE from 1986-1988 told the engineers that  the BIE provides a fertile environment where they can meet, share ideas and grow professionally.

“The BIE is also a nesting place for graduate engineers to learn from their peers and seniors, it also cater for engineering technicians and technologists and so nobody in the technology field is left out” he said.

He further indicated that Botswana Government provides a conductive environment for growth of engineering professionals.

“It must be stated that the Botswana Government recognises the existence of BIE and it can further be stated that the government enables ERB to carry out its mandate as a regulator of engineering professionals” said Williams

He plead with engineering companies to recognize and support BIE as it is the only source of engineering personnel’s for various Industries .

Furthermore, when giving his farewell speech, Michael Pinard , a past president of the institution  said how they are viewed as engineers by the general public might be due to some lack of appreciation as to exactly what role they play in the development of the country.

“The BIE slogan is aptly coined-Engineers make it happen, in other words, what man dreams engineers create” Said Pinard.

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