SASOL’S shares plunged 6 percent to close at R260.15 a share on the JSE yesterday after cutting in synfuel (synthetic fuel) output due to lower-than-expected coal availability and quality from its Secunda operations.
Sasol trimmed its production volumes to between 6.7 and 6.8 million tons for the financial year 2022 at Secunda after shortfalls in its own mines and that of its external supplier, Thungela’s Isibonelo mine.
Speaking to investment analysts, Bernard Klingenberg, the executive vice-president operations, said coal supply from the group’s long-standing commercial supplier was interrupted as a result of wet weather, significantly impacting the supplier’s ability to provide contracted off-take quantity.
“One external supplier, Isibonelo, which is mine linked to us via a conveyor belt system, is an open-cast mine and they normally supply between 20 000 and 25 000 tons a day, which is a significant part of our daily utilisation. They had significant difficulties in November with some of their equipment,” Klingenberg said.
Compounding the woes, last month was the worst rain they had seen in the past 19 years in Mpumalanga. Klingenberg said by Sunday, December 12, there had been 92mm of rain compared with 99mm of rain for the whole of December last year.
“The other external suppliers have been able to supply us with 15 000 tons a day,” he said.
Sasol said the full calendar operations shift system (Fulco) ramp-up continued to be slower than expected resulting in production run-rates falling to below 1 000 t/cm/s.
In October, the group had revised forecast production volumes for financial year 2022 7.4 to 7.5 million tons to 7.3 to 7.4 million tons largely due to unforeseen delays during the September shutdown, interruption of power supply from Eskom, poor coal quality.
The group said while it had largely resolved instability issues since October, safety incidents and adverse weather had added to its production woes.
The group said it lost 1 million tons of coal production since October at the Shondoni, Syferfontein and the Bosjesspruit mine where three employees died following an underground water compartment incident.
“Collectively, these incidents contributed to just over 50 percent of the coal production shortfall,” said the group.
Sasol said the lower coal availability also hampered the ability to effectively blend coal, which resulted in lower yield rates in the gasification process at Sasol operations. Sasol said based on actual performance and its coal purchase strategy, it expected mining operations to achieve an average productivity rate of between 950 and 1 040 t/cm/s for financial year 2022.
Sasol said its first objective was to ensure that it restored the integrity of the stockpile to a level of above 1.2 million tons by the end of Q1 of calendar year 2022.
It also plans to gradually increase the pure gas loads through increased coal supply to Secunda Operations in an effort to improve the run-rate.
“We are targeting a stockpile level of 1.5 million tons and will further improve the gas loads for Secunda Operations by quarter 2 of calendar year 2022. Improving the coal quality will take some time and we will update the market of our progress during the following months,” said the group.
Group chief financial officer Paul Victor said the cutting of production would have an impact on revenue although the group would provide an indication of the impact at a later stage.
“When you cut volume it will have an impact on your revenue and ultimately it will have an impact on earnings,” Victor said.
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