Minergy Limited (Botswana) releases its 2020 Annual Report

Minergy Limited Integrated Annual Report 2020

CHAIRMAN’S REPORT

Minergy’s story is one of achievement, over a short period of time, in entrenching coal as a viable sector in support of the Botswana economy.

I have been involved with Minergy from when it was a green field project back in 2017 and when various studies were being conducted. This was followed by the listing of the Company on the Botswana Stock Exchange (“BSE”) in 2017, and the subsequent awarding of the mining licence in 2018, and the commissioning of the plant in the current financial year. Reflecting, I can say this has been a journey of remarkable achievement made in a very short period of time.

During the financial year for the period July 2019 to February 2020 substantial achievements and milestones were met. These are highlighted on page 25 of this report. Unfortunately for the remaining part of the financial year specifically the period March to June 2020, the global COVID-19 pandemic began to severely impact the business and pushed many of the milestones we had planned back by at least four to six months.

South Africa declared a State of Disaster on 15 March 2020 and an initial 21-day lockdown period was instituted on 26 March 2020, which was later extended to 30 April 2020. Botswana declared a State of Public Emergency on 2 April 2020 and a national lockdown, which resulted in coal volumes dropping dramatically to roughly 10 – 15% of volumes supplied.

More than 90% of Minergy’s target market for the sale of coal, in pure volume terms, is in South Africa. These businesses were not classified as essential service providers under South African regulations and were forced to shut operations, including purchasing coal from Minergy. Fortunately, coal stockpiles at the Masama mine were sufficient to cater for the limited demand during this period, and the mine was able to supply qualifying essential service customers.

The CEO Report contained on pages 24 – 26 gives more operational and production details.

DEVELOPING A VIABLE COAL SECTOR
Minergy continued to garner support and understanding from shareholders as well as from the Minerals Development Corporation of Botswana (“MDCB”) and the Botswana Development Corporation (“BDC”) during the year under review.

As previously announced, the Company successfully raised P70 million from the MDCB (as at September 2019). Minergy was able to conclude the refinancing of the BDC bridging facility into a six-year convertible preference share facility and obtained an additional P40 million of finance from BDC, which was paid out in February 2020. The MDCB convertible debenture facility was also
successfully renegotiated to a six-year term and increased, with an additional P40 million received in March 2020.

Minergy maintains a close working relationship with Governmental ministries. Aside from regular meetings and briefings, including liaising on compliance matters, Minergy hosted a substantial Governmental delegation made up of dignitaries from the Ministry of Minerals, Green Technology and Energy Resources, the Ministry of Transport and Communications and the area Member of Parliament and Assistant Minister of Education. The interaction included a demonstration of how Minergy has been able to develop a viable coal mining operation and how Government assistance has benefited job creation, skills development and training. A further example is that, in collaboration and with finance received from BotRail, Minergy has been able to develop a rail siding, where the first loading of trains was expected to take place in May 2020. Due to the COVID-19 lockdown, this did not happen in the financial year under review, but was completed on 17 July 2020. This was a truly proud moment for Minergy and for the Republic of Botswana.

Minergy remains committed to supporting the Government of Botswana through job creation, skills development, training, as well as ensuring a thriving coal industry in the country. By 30 June 2020, 95% of the 281 people in our team were citizens of Botswana.

COMMUNITY SUPPORT
The Medie village, the closest village to the mine, suffered greatly during lockdown. Minergy took the initiative to establish the Minergy Coal Community Support Fund (“the fund”). The fund, albeit small, is backed by contributions from the Company, the management team and some major contractors. It was initially decided, in consultation with the community and the village social worker, to utilise the fund to provide food parcels and sanitary products to households most in need. The beneficiary pool was later widened, and the fund continues to be supported by contributions from the Company, management and Minergy service providers.

It is Minergy’s belief that this pandemic requires as much of a humanitarian approach as it does a financial and economic one, and so we are pleased to have been able to support this community in which we operate.

Many more social investment initiatives are undertaken by Minergy and are discussed in the Corporate Social Investment and Community Development section on page 53 of this report.

APPRECIATION
The year began as one where Minergy would launch fourth and become recognised as a coal supplier of choice in the region – unfortunately, COVID-19 hit and delayed our path forward rather substantially. There is no doubt that the latter part of the financial year has been extremely challenging. I wish to thank the staff of Minergy, executive management team, my fellow board members, our funders, our customers as well as our sub-contractors, for their ongoing support and commitment during this time – these remarkable people spent a massive amount of time and energy in looking for solutions and adjusting processes so that we could make ends meet. For this dedication and often sacrifice, I thank you.

We remain grateful to our shareholders and funders for the continued support and faith they have in our operation.

This has been an unprecedented year for the world and indeed for our country given the COVID-19 pandemic, but I remain confident that the team assembled at Minergy will be able to ensure the sustainability of and a bright future for the Masama Coal Mine, as well as entrenching coal as a viable sector in support of the Botswana economy in the longer term.

Mokwena Morulane
Independent Non-Executive Chairman
24 September 2020

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