Botswana’s Minergy finds way to export out of S. Africa

Minergy is finding a way to ship nearly 20% of its high c.v. thermal coal out of landlocked Botswana to South Africa’s ports by using backhaul trucks to save on rising logistical costs.

Exporting all the way from its Masama coal mine, located near Botswana’s capital city of Gaborone, is one of the opportunities Minergy is exploiting to help turnaround the company, acting CEO Matthews Bagopi said.

The junior miner had previously seen its product exported through Namibia’s port of Walvis Bay, which for a limited time made economic sense when coal prices were at record highs in 2022.

“We had always said that our evacuation of product via Walvis Bay in Namibia has to be at free on-board prices above $125/t. But here we are well under that and able to move some of our production and sales through South Africa and onto the seaborne markets,” Bagopi said.

Last week, McCloskey assessed the weekly average price of Richards Bay 6,000 kc NAR at $106.46/t FOB.

To make trucking costs affordable, Minergy is employing trucks that were backhauling to South Africa empty after unloading material in Botswana. This helps cut normal trucking costs by a third, Bagopi said.

“We are able to take advantage of those backhauls to bring down logistics costs and remain competitive,” he said, noting Minergy also does not have dedicated vessels at the ports but shares loads.

“We haven’t been in that area before, but it has helped us ramp back up significantly.”

The junior is currently looking to collaborate with road freight operators to see where other routes and backhaul opportunities exist for its coal.

Logistics costs are a significant deterrent for mines as far-flung as Masama to move coal into export markets. At inception, the Minergy mine was always intended to service the inland industrial users market in South Africa.

Minergy has however lost market share of late.

This is in some part due to Minergy prioritising exports over local customers when prices boomed in the wake of Western sanctions imposed on Russia.

But the company has largely lost its inland industrial customers due to a major production halt caused by a dispute with the Masama mining contractor. While a new contractor is now in place, the company lost six months of production as a result.

Minergy is now slowly gaining back customers, especially in its traditional cement market, having gained a few “blue chip” companies back onto its order book.

“In addition, there’s several products, which previously we were not marketing that were more or less coming out as incidental products that went back into our rehabilitation effort,” Bagopi said. “We are now finding markets for those, niche markets for those.”

This includes a raw fines product, which is high in energy despite not being processed, and which is fetching a considerable premium in the inland market, he said.

Minergy is currently producing around 55,000 t of washed product per month, “which more or less 60% of where we want to be in terms of steady state considering that we want to drive towards 75,000 t at steady state”, Bagopi noted. Around 10,000 t per month is being trucked to South Africa’s ports.

In its annual results for the year ended in June 2024, Minergy reported a net loss of BWP187m ($14m) – some 35% higher than the loss reported in the previous year.

This was due to a significant decline in revenue caused by production losses and higher finance costs, which grew by 37% as the company took on more debt to help stabilise its operations.

With an eye for opportunities beyond the company’s stabilisation, Minergy is also engaged in early stage talks with major power producers in the Southern African region, as coal supply issues come to the fore as the sector continues to suffer underinvestment.

“There are some projects that we are working on currently at feasibility study level, with partners who are looking at taking our raw products, as well as some of our middling quality products into their processes to do beneficiation down the line. This is in terms of looking at gasification and then turning gas into power,” Bagopi said.