Last checked at 19 Nov 2010 08:44
FOR IMMEDIATE RELEASE19 NOVEMBER 2010 Bisichi Mining Plc Interim Management Statement
Bisichi Mining Plc (Bisichi), the UK mining company with direct coal mining operations in South Africa, announces the following operational update:
As we notified shareholders earlier this month, Black Wattle Colliery ("Black Wattle "), our direct mining operation in South Africa, has entered into an agreement to contract mine and purchase Run of Mine coal from an opencast reserve contiguous to Black Wattle. Work has started on the new 3 million tonne high quality reserves which will have a significant effect on Black Wattle's earnings potential in 2011 for the following reasons:
* The stripping ratio of the new reserves averages 2.8:1 (the current Black Wattle average stripping ratios are 5:1) and so mining costs will be significantly reduced * The washing plant yield on these reserves is substantially higher than the yield on the reserves that we mined throughout 2010 * Much of the reserve comprises very low phosphorous coal, which we can sell at a premium into the domestic metallurgical industry and delivery of this coal is not reliant on the performance of the rail provider as the coal is supplied by road transport.
The challenging environment experienced by Black Wattle in the first half of 2010 has continued into the second half of the year, primarily due to the continued strengthening of the SA Rand against the US Dollar. As we have already reported, to overcome the effect of the strong SA Rand:
* We increased production in the year by expanding our washing plant and buying-in high quality coal. * Our railway siding was also expanded and markets were found for this increased production.
However the shortage of rail trucks to deliver this coal to our customers meant that during the second half of the year we built up unacceptable levels of stock. In order to reduce these stock levels we have had to stop buying-in coal which in turn has had a material effect on our earnings and will result in a loss for the year.
In the future, whether or not the state rail provider's performance improves, the new reserves that we are opening-up enable us to place more tonnage into the domestic market and so we will not have the same pressures of the rail performance, which is our primary transport for export markets.
Our relationship with Vunani Ltd, our new Black Empowerment partner at Black Wattle, is working well. As previously stated, Vunani is a leading, publicly-listed, black-owned and managed company.
Finally, income from Bisichi's UK properties remains steady, with no significant change in the second half of the year to date.
Mr Andrew Heller, Managing Director of Bisichi said:
`Following a number of high performance years, 2010 is proving to be a disappointing year for Black Wattle. However, the benefits of mining the new reserves in 2011, and our consequentially reduced reliance on the state rail system, means that we are confident of the mine's future performance and renewed contribution to earnings.`
For further information, please call:
Andrew Heller, Bisichi Mining PLC 020 7415 5030
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