Shumba upbeat on Sechaba project

Botswana’s junior coal explorer Shumba Coal’s Sechaba project has brought comfort for the company that is operating in a distressed environment.In the company’s results for the 12 months operating period ended 30 June 2014, Shumba Chairman Alan Clegg said they have seen the historical bottom of the resources investment market achieved and beyond. During the year, the Asian benchmark price dropped to $67.05 (P536) a tonne in July, the lowest since September 2009.

A tonne is currently estimated at an average of $74.08 (P625). “Fortunately the development of our flagship project, Sechaba, has underwritten investors’ confidence in Shumba,” said Clegg. He said the confidence has translated into Shumba having additional capability to execute bids for further acquisition of resources. Clegg said that the conditions are seemly harder for the mining junior as currently major thermal coal exporters in established markets are making a loss, with the current commodity prices due to high production costs up to $65 per tonne (P520) in Australia. The financial results indicate that the Group recorded a loss of $840,000 compared to $312, 800 recorded last year. To meet their project requirements the company resorted to cost reduction, contraction and suspension of operations to secure survival.

Despite the harsh operating environment, Clegg noted that the mining junior has thrived and has been able to raise $3.1 million (about P24.8 million) during the year from financial activities. The revenue is manly for the group’s plan to develop the Sechaba area into an Energy Complex (consisting of four projects) producing coal and power for both domestic and international markets. During the year under review the group spent $488,196 on exploration and evaluation. Their net assets stand at $4,068 million. Cash equivalents of the Group are estimated at $1,931 million. The company’s future looks bright as they will look at taking advantage of the power deficit that is expected to increase in Southern-Africa. “Hence the Shumba CFPPs will enter a readymade high demand market for security of return on investment for the long term.” The group also aims to bring a 1.5mtpa coal mine by 2016, after which the mine’s capacity will be doubled to cater for a 300MW power station by 2017.