HomeEnergy MineralsGrootgeluk mine expansion costs rocket

Grootgeluk mine expansion costs rocket

Exxaro’s Grootgeluk
coal mine
Johannesburg, South Africa — MININGREVIEW.COM — 26 February 2010 – Diversified South African-based resources group Exxaro Resources Limited says the cost of expanding its Grootegeluk coal mine to supply Eskom’s Medupi power plant have jumped by R500 million because of delays in completing an agreement.

“The cost of boosting production from the mine, in South Africa’s Waterberg region, rose to R9.5 billion due to a review of the terms of the supply contract,” Exxaro revealed here in a stock exchange statement. “The higher costs are related to the temporary suspension of its funding programme and the delay in awarding additional contracts,” Exxaro added.

Power utility Eskom announced in December that a lack of funding meant it would be delaying some projects and could cancel others.

Exxaro added that it expected the review of its supply agreement to be completed in the first quarter of this year.

Earlier, Exxaro said its net income for the 12 months to 31 December 2009 had fallen 70% to R1 billion because of lower coal prices and a R1.4 billion impairment charge related to the closure of a mineral sands mine.

“Earnings were affected by lower international coal prices and above-inflationary increases in the cost of electricity, rail tariffs and labour costs,” Exxaro CEO Sipho Nkosi said in the statement.

Prices for thermal coal will average US$59.28 a metric tonne this year “’ 41% more than last year’s low in April, according to the median of 11 analyst estimates in a Bloomberg News survey. Stockpiles at utilities swelled last year after a mild summer and the economic recession reduced power demand.

“Coal exports this year may also be affected by the availability of rail and port allocation at Richards Bay Coal Terminal,” Nkosi said.