More information about BISICHI ORD 10P

The overall performance of Black Wattle, our South African coal mining operation, was effected by both mining challenges and a supressed coal market for most of 2016. Looking forward into 2017, management will look to ensure production from our newly developed opencast areas is increased in order to benefit from the improved prices achievable for our coal. Production and operations For the first half of 2016 Black Wattle continued to supplement production from its own reserves with coal mined at Blue Nightingale under an agreement to purchase Run of Mine coal. Unfortunately, the quality of the Blue Nightingale coal deteriorated as the reserve came to an end and the higher Rand cost per tonne produced, along with supressed coal prices, impacted on overall earnings during the first half of the year. In anticipation of the Blue Nightingale reserve coming to an end, management plans were already in place to increase production from Black Wattle’s own reserves. Part of this plan entailed increasing the production from an existing opencast area at Black Wattle as well as the development of a new opencast area to replace the coal purchased from Blue Nightingale. In these new opencast areas we have had to deal with stone contamination issues which have affected both yield and mining production through the washing plant. This impacted on sales volumes and earnings in the second half of the year. We are pleased to report that management hav initiated various infrastructure improvements to the coal washing plant which will be completed by the end of the second quarter of 2017 and will deal with these issues. The new infrastructure will assist in reducing stone contamination through the plant and will allow Black Wattle to mine at a higher rate of production at our opencast areas and increase yield. As a result of the lower production in the second half of the year, overall Run of Mine production from Black Wattle decreased in 2016, with total production for the year of 1.26million metric tonnes (2015: 1.58million metric tonnes). As part of Black Wattle’s mining plan, the opencast areas that we began to develop in 2016 will be mined throughout 2017. We expect improved volumes of production to come from these reserves from the second half of 2017. Main trends/markets During 2016 management continued to sell coal into both the export and domestic market. Black Wattle’s export sales were via Richards Bay Coal Terminal and primarily under the Quattro programme, which allows junior black-economic empowerment coal producers direct access to the coal export market via Richards Bay Coal Terminal. We would like to thank Vunani Limited, our black economic empowered shareholders at Black Wattle, for managing and developing this opportunity. The general downturn in commodity and energy prices experienced in recent years continued for most of 2016. However, in the last few months of the year, a surge in international coal prices along with increased demand in both the export and domestic market, began to have a positive impact on the prices achievable for our coal. At the beginning of 2016, the average weekly price of Free on Board (FOB) Coal from Richards Bay Coal Terminal (API4) was $50. For the first half of 2016 the API4 price remained largely range bound between $50 and $60. In the third quarter of the year, improvements in the US Dollar linked export price were largely offset by a reversal of the depreciation of the South African Rand. However at the end of the third quarter, a shortage of coal on the international seaborne market resulted in a surge in the API4 price to new levels. API4 prices rose from around $65 in September 2016 to a peak of over $100 in November 2016, before stabilising at $85 by the end of the year. In the domestic market, a similar increase in demand in the last quarter of 2016 impacted positively on prices achievable for our coal going into 2017. These improved domestic prices are expected to remain stable as long as the shortage of coal in the domestic market continues. Overall, the decrease in group revenue, compared to the prior year, can mainly be attributable to the lower Run of Mine production at Black Wattle as explained above; offsetting the impact of the higher prices achievable for our coal in the last quarter. Looking forward into 2017, both the export and domestic coal prices have continued to remain stable at these higher levels and we continue to see strong demand for our coal in both markets. Sustainable development Black Wattle continues to strive to conduct business in a safe, environmentally and socially responsible manner. Some highlights of our Health, Safety and Environment performance in 2016: Black Wattle Colliery recorded one Lost Time Injury during 2016 (2015: Two). No cases of Occupational Diseases were recorded. Zero claims for the Compensation for Occupational Diseases were submitted. We continue to adhere and make progress in terms of our Social and Labour Plan and our various BEE initiatives. A fuller explanation of these can be found in our Sustainable Development Report on page 8. Prospects Looking forward to 2017, management will continue to focus on improving production from our newly developed opencast area and keeping our cost of production low. Although production in the first quarter of the year to date has been impacted by higher than expected seasonal rains, the various infrastructure improvements initiated at Black Wattle remain on track to be completed by the end of the second quarter of 2017. With strong demand and improved prices achievable for our coal, we believe the group is in a strong position to achieve significant value from our South African mining operations especially in the second half of 2017.