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Minergy suspends operations as key markets extend lockdown

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Minergy suspends operations as key markets extend lockdown

Despite the mining industry being declared an essential service during the lockdown period, local coal producer, Minergy has suspended operations.

The organisation was granted permission by the Department of Mines to undertake certain mining, plant and maintenance activities.

However, last Friday the coal producer saw fit to temporarily stop all its mining activities.

The decision was in part prompted by the company’s desire to protect its staff.

The drop in demand was also a decisive factor, with the majority of Minergy’s clients currently inactive due to the lockdown.

Roughly 90 percent of the company’s market – in terms of volume – is based in South Africa. The bulk of these consumers were declared non-essential by Cyril Ramaphosa’s government and thus halted activities when the country went into lockdown on Friday 27 March. South Africa has since extended its lockdown until the end of April.

In a communiqué addressed to shareholders this week, Minergy Chief Executive Officer, Morne du Plessis was quick to point out the company would still be supplying customers during the period.

“Where sales are permitted to South African and Namibian essential services customers, primarily in the food processing and energy generation sectors, product stockpiles at the end of March 2020 are sufficient and are being utilized for this supply,” reads part of the statement.

Du Plessis further noted Minergy has enough exposed but unblasted coal stocks to immediately restart mining operations in May should lockdown rules be relaxed in both Botswana and South Africa.

“The effect on May 2020 volumes and results are dependent on how quickly customers can restart and take delivery, which is in-turn dependent on border operations too,” continued the CEO.

Meanwhile, Du Plessis announced that the development of the rail siding, which is financed by Botswana Railways, is progressing well, with the necessary work permissions in place.

He revealed preparations are such that the first loading of trains bound for South Africa should take place next month, subject to lockdown being lifted.

The company, which is listed on the Botswana Stock Exchange Limited (BSEL), says balancing cash flow and cost implications as a start-up business in the ramp-up phase, with minimal sales and cash generation opportunity, is proving extremely challenging.

“Minergy recently reported that it received funding to alleviate historical working capital shortages and that future estimated cash flows were subsequently considered adequate to sustain the company,” declared Du Plessis, adding this is no longer the case with the company losing a minimum of one month’s sales while still having to carry fixed cost burdens.

To this end, he says Minergy has been liaising with its government-linked funders and has requested additional funding and assistance during the lockdown period.

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