Coal mining and trading company Minergy Coal has resumed production at its Masama coal mine, in the Mmamabula West coalfield of southern Botswana, after successfully entering into a mining contract with a new end-to-end services mining contractor, Meropa Resources – a consortium of four Botswana companies – following an unplanned shutdown in early 2023.

Having started production in 2018, Minergy Coal encountered various challenges at Masama. Less than a year into its operation, the mine was affected by Covid-19-related challenges, crippling initial efforts to raise more capital as intended in the business case. The setbacks were further compounded by a general retreat of capital from the coal sector, says Minergy Coal CEO Matthews Bagopi.

The resulting shutdown in early 2023, with a unilateral cessation of mining operations by the previous contractor in March 2023, led to a loss of customers and strained relations with the previous mining contractor.

However, it presented an opportunity for Minergy Coal to shift its strategy and explore various available options, says Bagopi.

As part of the strategy, Minergy Coal sought a new mining contractor, along with a new type of contract. The revamped contract structure ensures that business risks and opportunities are properly identified and allocated to the most relevant party for their optimal management. A key priority of the contract is continuous improvement to consistently challenge the teams to do better, he elaborates.

A significant aspect of the company’s strategy is its emphasis on partnering with local companies. This approach aims to rectify the disproportionate representation in the mining contractor landscape, which had previously overlooked locally-owned companies. The shift also aligns with broader economic empowerment initiatives, emphasises Bagopi.

Production successfully resumed in February this year, after a five-month transition period.

This restart is supported by robust support from stakeholders, particularly from investment company Mineral Development Company Botswana, development finance institution Botswana Development Corporation, and Minergy Coal’s shareholders, says Bagopi.

“It is important that the turnaround plan we have embarked upon benefits our partners, communities and the market,” he notes.

Repositioning Focus
As part of its efforts to become a low-cost producer, Minergy Coal, in collaboration with research institute Botswana Institute for Technology Research and Innovation, is conducting a detailed coal characterisation study to strategically reposition its coal products.

Bagopi highlights the unique qualities of the company’s coal – notably its low ash and sulphur content, along with a maceral composition of highly reactive vitrinite in its lower seam, with the study aiming to define the coal as being closer to metallurgical grade, rather than purely steam-raising coal. This repositioning is expected to help achieve optimal pricing in the market.

Minergy Coal regards the introduction of heavy-haul export lines, capable of transporting up to 24-million tonnes a year through the Lephalale Rail Link, as an opportunity for the coal in Botswana to establish its own benchmark.

This would enable the coal it mines to compete on the global stage alongside other internationally-traded coal indices. The ongoing coal characterisation efforts at Minergy Coal are a critical step towards developing this benchmark, explains Bagopi.

Minergy Coal is now poised to solidify its position as a low-cost coal producer, leveraging the high-quality coal and extensive resources at the Masama site, along with its strategic market proximity.

Meropa Resources is an integral component of establishing Minergy Coal as a low-cost coal producer, he adds.

“The mining commodity cycle is a ‘boom and bust’ cycle, which periodically tests the wit and smarts of a mining company and the people who run the operations.”

This ongoing cycle underscores the importance of strategic planning and innovation in maintaining a competitive edge in the mining industry.

Bagopi emphasises that mining companies must develop agility and strategic foresight in navigating the inevitable fluctuations, particularly where resource life is not a limitation, as is the case with Minergy Coal.

The company's current focus is on embedding practices that enhance its cost efficiency, marketing acumen and logistical capabilities. This includes strengthening relationships across all facets of the operation, entailing financing and community engagement, as well as stakeholder and customer relations.

Further, the company is actively exploring opportunities to diversify its business portfolio, thereby mitigating the risks associated with coal market price volatility and logistical challenges.

Discussions are ongoing with potential partners interested in establishing related industrial activities to broaden the company’s economic impact and stability.

Through these strategic initiatives, Minergy Coal aims to adapt to the dynamics of commodity cycles, and position itself as a resilient and innovative roleplayer in the coal industry.