Exxaro, SA’s largest coal miner, expects its earnings for the year to end-December to drop as much as 30% due to lower realised prices for its coal exports.
In its facts and figures report for 2023, published in February, the Minerals Council of SA said there was a 55% decline in dollar-based export coal prices from $276 per tonne in 2022 to $122 per tonne in 2023.
Lower export sales prices were “partially offset by higher prices achieved in the domestic market, and the impact of a weaker rand-dollar exchange rate at our coal operations”, Exxaro said.
The group said it expected a higher contribution from its Cennergi wind power business due to improved wind conditions compared to 2022. It was also expecting higher income from our equity-accounted investment in Sishen Iron Ore.
Headline earnings per share (HEPS), a profit measure commonly used in SA, is expected to decrease between 16% and 30%, down from R60.16 in the previous year to between R42.11 and R50.53.
According to the Minerals Council the value of SA coal sales was down by roughly 22% in 2023. This was partly due to the lower prices, but coal exporters have also been badly affected by the deterioration in rail services.
Record volumes of coal were transported by truck to ports for export because of a dramatic decline in volumes railed on the Transnet Freight Rail (TFR) coal line — adding to the cost of sales incurred by mining companies.
Transporting coal to port by rail costs about R230 a tonne, but when trucked via road these costs can easily increase almost threefold to about R750 a tonne.
Coal exported through Richards Bay Coal Terminal (RBCT), a privately operated facility that handles most of SA’s coal exports, fell to 48-million tonnes in 2023, the lowest level since 1992 and down from the 76-million tonne peak in 2017.
As previously reported by Business Day, total coal exports for 2023 were, however, expected to reach 73.7-million tonnes, a slight recovery from 2022.
Given that RBCT, which is served by the TFR coal line, only handled 48-million tonnes, the Minerals Council estimates that trucks have been used to transport about 26-million tonnes of coal to various ports during 2023, the highest level of road transport in the coal sector yet.
Exxaro will publish its full-year results for 2023 on March 14.
On Thursday morning the share was down about 2.5% to R178.15 on the JSE.
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