THERE was understandable excitement when the first shipment of coal from the Elitheni Mine left East London for China at the beginning of last month, given the impact the mining of coal will have not only on the lives of the people of Emalahleni, but also on the future of the Port of East London and the economy of the Eastern Cape.
At the celebration to mark the departure of the first shipment, port manager Jacqueline Brown pointed to the impact the export of coal from East London would have when she stated: “The volumes of coal that will be exported in the years to come, strengthen the business case for investment in the port and will without doubt change the face of a port that is now poised for significant growth”.
Given the investment planned by Transnet that includes a dedicated coal terminal and the deepening and widening of the entrance, there is every reason to celebrate, as it would not be unkind to state that East London has to date been the runt of the litter of ports in this country in terms of investment.
At one stage, it was even suggested that the port might be closed, although that was before the appointment of Brian Molefe as Transnet Group CEO.
Recognising the importance of the development of infrastructure in bringing the Eastern Cape into the mainstream economy, Molefe ensured that substantial capital investment was earmarked for the province.
There does, however, appear to be some cause for concern about the future of Strategic Natural Resources (SNR), which owns 74% of Elitheni, and one wonders whether there is not an opportunity for the Industrial Development Corporation (IDC) to consider becoming the strategic investment partner that SNR is seeking or for the Eastern Cape Development Corporation to consider what assistance it might be able to offer.
On September 27, SNR issued a statement saying it had received payment for the first shipment of coal, an odd announcement to make and one that suggests that an injection of cash was required urgently if the company was to remain operational.
SNR chairman Andy Brennan acknowledged as much in his comments on the audited results for the 16 months to June 30 this year, saying the company was “currently facing acute working capital constraints”, adding that the situation would be “alleviated in the short term” by the first export consignment.
The announcement of the first payment, however, did little for the share price – the company is listed on the London AIM – and by the end of trading on the day of the payment announcement, the share had shed 2.35% and was at a 52-week low.
Since then it has tracked even lower.
That would indicate a distinct lack of confidence in the market and clearly SNR is aware of this with its deputy chairman Don Nicolson spelling out in a video the opportunities that lay ahead, and his confidence in the future of the company.
In an earlier statement, SNR announced that the “period of exclusivity” accorded a “well-known international coal trader” had lapsed and the company was now pursuing negotiations “with several other interested parties”.
SNR also had to repay a loan from Land Consultants Limited (LCL) at the end of last month but stated later that LCL has extended the loan until December 31 which allowed SNR a little more time in which to find a strategic investor.
It was the second time that the loan had been extended.
There is, however, clearly doubt about the company’s future in the market, although to some extent this may be due to unease about the immediate future of the mining industry in South Africa in the wake of Marikana and the subsequent industrial action in the sector.
The company’s share price has dropped by more than 60% since October last year prompting CEO Gabriel Ruhan to state that the board believed the current share price “is in no way representative of the significant value potential of the SNR business”.
Ruhan added: “The board is optimistic that once appropriate funding is secured, regular coal shipments achieved and operational efficiency improves, then the market will appreciate the value proposition and respond accordingly”.
A deal, however, has not yet been concluded, and Brenan said with the release of the audited statements that if an agreement could not be reached, the company “will need to find alternative funding sources to fund its continuing operations and meet its liabilities as they fall due”.
The market is clearly waiting to see what happens.
It would be more than tragic if the promise that the mining of coal at Elitheni holds, both in terms of employment creation in Emalahleni and elsewhere in the province, but also in strengthening the business case for the ongoing expansion of the Port of East London, were not to materialise.
It is necessary but to point to the upgrading and resuscitation of railway links between East London and the North Eastern Cape and the possibility of these being extended further into the former Transkei, so providing an exit specifically for agricultural produce to realise the economic benefits that could accrue.
Raw produce from the former Transkei could not only be exported through East London providing additional volumes, but could also result in the expansion of the agro-processing sector within the East London Industrial Development Zone (ELIDZ).
Just how SNR sets about addressing the financial problems that it now clearly faces, needs to be watched carefully by the Eastern Cape government and development financier, the Eastern Cape Development Corporation (ECDC), as this is an opportunity that will bring enormous benefits to the eastern part of the province.
It will allow it to participate and benefit from the economic growth in the Eastern Cape rather than be a spectator watching the largesse flow from Nuclear 1, the manganese export terminal, the container trans-shipment terminal, possible oil refinery and resultant downstream investment and a host of other projects into a city 300 km away.
Patrick Cull is an Eastern Cape journalist
Future of Elitheni, port depends on SNR success
At the celebration to mark the departure of the first shipment, port manager Jacqueline Brown pointed to the impact the export of coal from East London would have when she stated: “The volumes of coal that will be exported in the years to come, strengthen the business case for investment in the port and will without doubt change the face of a port that is now poised for significant growth”.
Given the investment planned by Transnet that includes a dedicated coal terminal and the deepening and widening of the entrance, there is every reason to celebrate, as it would not be unkind to state that East London has to date been the runt of the litter of ports in this country in terms of investment.
At one stage, it was even suggested that the port might be closed, although that was before the appointment of Brian Molefe as Transnet Group CEO.
Recognising the importance of the development of infrastructure in bringing the Eastern Cape into the mainstream economy, Molefe ensured that substantial capital investment was earmarked for the province.
There does, however, appear to be some cause for concern about the future of Strategic Natural Resources (SNR), which owns 74% of Elitheni, and one wonders whether there is not an opportunity for the Industrial Development Corporation (IDC) to consider becoming the strategic investment partner that SNR is seeking or for the Eastern Cape Development Corporation to consider what assistance it might be able to offer.
On September 27, SNR issued a statement saying it had received payment for the first shipment of coal, an odd announcement to make and one that suggests that an injection of cash was required urgently if the company was to remain operational.
SNR chairman Andy Brennan acknowledged as much in his comments on the audited results for the 16 months to June 30 this year, saying the company was “currently facing acute working capital constraints”, adding that the situation would be “alleviated in the short term” by the first export consignment.
The announcement of the first payment, however, did little for the share price – the company is listed on the London AIM – and by the end of trading on the day of the payment announcement, the share had shed 2.35% and was at a 52-week low.
Since then it has tracked even lower.
That would indicate a distinct lack of confidence in the market and clearly SNR is aware of this with its deputy chairman Don Nicolson spelling out in a video the opportunities that lay ahead, and his confidence in the future of the company.
In an earlier statement, SNR announced that the “period of exclusivity” accorded a “well-known international coal trader” had lapsed and the company was now pursuing negotiations “with several other interested parties”.
SNR also had to repay a loan from Land Consultants Limited (LCL) at the end of last month but stated later that LCL has extended the loan until December 31 which allowed SNR a little more time in which to find a strategic investor.
It was the second time that the loan had been extended.
There is, however, clearly doubt about the company’s future in the market, although to some extent this may be due to unease about the immediate future of the mining industry in South Africa in the wake of Marikana and the subsequent industrial action in the sector.
The company’s share price has dropped by more than 60% since October last year prompting CEO Gabriel Ruhan to state that the board believed the current share price “is in no way representative of the significant value potential of the SNR business”.
Ruhan added: “The board is optimistic that once appropriate funding is secured, regular coal shipments achieved and operational efficiency improves, then the market will appreciate the value proposition and respond accordingly”.
A deal, however, has not yet been concluded, and Brenan said with the release of the audited statements that if an agreement could not be reached, the company “will need to find alternative funding sources to fund its continuing operations and meet its liabilities as they fall due”.
The market is clearly waiting to see what happens.
It would be more than tragic if the promise that the mining of coal at Elitheni holds, both in terms of employment creation in Emalahleni and elsewhere in the province, but also in strengthening the business case for the ongoing expansion of the Port of East London, were not to materialise.
It is necessary but to point to the upgrading and resuscitation of railway links between East London and the North Eastern Cape and the possibility of these being extended further into the former Transkei, so providing an exit specifically for agricultural produce to realise the economic benefits that could accrue.
Raw produce from the former Transkei could not only be exported through East London providing additional volumes, but could also result in the expansion of the agro-processing sector within the East London Industrial Development Zone (ELIDZ).
Just how SNR sets about addressing the financial problems that it now clearly faces, needs to be watched carefully by the Eastern Cape government and development financier, the Eastern Cape Development Corporation (ECDC), as this is an opportunity that will bring enormous benefits to the eastern part of the province.
It will allow it to participate and benefit from the economic growth in the Eastern Cape rather than be a spectator watching the largesse flow from Nuclear 1, the manganese export terminal, the container trans-shipment terminal, possible oil refinery and resultant downstream investment and a host of other projects into a city 300 km away.
Patrick Cull is an Eastern Cape journalist
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