Coal oversupply cuts back profits

COAL markets continue to be in oversupply‚ despite production cutbacks announced by some producers‚ Exxaro Resources finance director Wim de Klerk said yesterday.

He was giving an update of the group's expected operational performance for the year to the end of this month.

Exxaro is one of the largest South African-based diversified resources companies‚ with interests in coal‚ titanium dioxide‚ iron ore and energy.

Up to the end of last month the rand has weakened against the US dollar to an average of R10.88 compared with the R10.83 average the group realised in the first half of this year.

The API4 coal export prices dipped to below R63/ton‚ from the average export price realised of R68/ton in the first half‚ De Klerk said.

He said the planned acquisition of the Total Coal SA operations and Richards Bay Coal Terminal allocation of 4.1 million tons was a significant step towards optimising Exxaro's coal resource portfolio.

"Following the agreement with Eskom on Addendum 9 to the Medupi power station coal supply agreement‚ the Grootegeluk Medupi Expansion Project is ramping up to a planned supply of 3.1 million tons of coal for 2014.

"The independent review of the Mayoko Iron Ore Project investment process by KPMG was completed during the second half of 2014 and the findings are being implemented‚" he said.

Discussions with the Republic of Congo government had been positive‚ resulting in the extension of the mining convention by a further two years.

"Exxaro has proved resilient in the past and will rely on the same to endure the challenges presented by these tough trading conditions‚" he said. – BDLive