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Gold/Mining/Energy : Mining News of Note -- Ignore unavailable to you. Want to Upgrade?

To: LoneClone who wrote (41908)	8/20/2009 7:16:21 PM
From: LoneClone	Read Replies (1) \| Respond to of 193948

Tough times ahead for Exxaro Brendan Ryan \| Thu, 20 Aug 2009 09:01 miningmx.com [miningmx.com] -- EXXARO Resources reported a 12% rise in attributable earnings to R1.4bn for the six months to end-June but is expecting worse results in the second half of its financial year. Main reason is management anticipates sharply lower domestic steam and coking coal prices during the six months to end-December. Exxaro also expects lower iron ore prices, continued depressed conditions in the zinc market and further pressure on its mineral sands business because of the depressed economic environment and the impact of a stronger Australian dollar. Conditions look particularly unfavourable for Exxaro’s KZN Sands operations which reported a net loss of R110m (six months to end-June 2008 – R27m loss) because of lower sales volumes. That was despite KZN Sands turning in its best operating performance ever with both furnaces fully operational for the entire period producing more than 100,000t of titanium slag. That loss eradicated profits from Exxaro’s other heavy minerals sands operations at Namakwa Sands in the Northern Cape and Australian Sands in Western Australia. As a result of the poor economic conditions in the heavy minerals sands business Exxaro is considering putting on hold projects that would extend the economic life of the KZN furnaces at the Fairbreeze C extension and Port Durnford. According to Exxaro CEO Sipho Nkosi, “the approval of the mining right for the Fairbreeze C extension portion of the Fairbreeze project, which in the past prevented this project from proceeding, was granted. “However, in the light of prevailing market conditions the project is currently under review. The feasibility study of the Port Durnford project located to the south-west of Hillendale mine was completed during the first half of 2009. “ This mine could supply the KZN furnaces for longer than 20 years however current economic conditions are impacting negatively on the financial viability of the project. This project is therefore currently also under review.” Nkosi also said Exxaro had decided not to go ahead with its Toliara Sands project in Madagascar and was in the process of exiting from the option agreement. Turning to coal Nkosi reported a 10% increase in net operating profit to R1bn but that came from the group’s commercial operations because the “tied collieries” - which get all their business from Eskom - level-pegged. Main reason for that was a sharp drop in output at Matla colliery which produced 802,000t less coal because of operating problems including flooding of the operations. He pointed out coking coal production was lower because management cut back on output from the Grootegeluk colliery in response to lower market demand. Nkosi said Exxaro was on track with plans for the R9bn expansion of the Grootegeluk colliery to supply Eskom’s Medupi power station in the Waterberg. The project is in the detailed engineering design phase. The first coal is expected to be mined in the last quarter of 2011 with full production to be reached from 2014. Exxaro has two other projects in the Waterberg. The first is a potential greenfields mine – to be called Thabametsi - to be developed adjacent Grootegeluk which will supply both power station and metallurgical coal. A prefeasibility study should be completed by the end of 2009. The second is a potential new coal mine to supply Sasol’s potential coal-to-liquids project dubbed Project Mafutha. Nkosi said this is at the prefeasibility stage. A bulk sample should be mined before the end of 2009 for large scale testing at Sasol’s Secunda synfuels plant. Exxaro has declared an interim dividend of 100c a share.