Operating profit from South African sourced coal was 9% higher at $414 million, mainly because of a 10% rise in export prices and despite a decrease of nearly 1% in export sales volumes.
Production was maintained at around 59 million tonnes (Mt), with a reduction of 0.6 Mt for the trade mines being offset by a modest increase from Eskom and domestic production. Total sales, however, declined by just over 1% to 58.7 Mt, mainly because export sales volumes were below 2006 due to poor rail performance, adverse weather conditions at the Richards Bay Coal Terminal, together with some production issues.
Capital expenditure was $150 million higher than in 2006, the Mafube Macro and New Vaal MacWest projects being the primary contributors of the significant increase in expansionary capital expenditure of $121 million.
Operating profit from the Australian operations fell to $9 million. This was primarily due to lower realised prices, an unfavourable exchange rate and higher port demurrage charges. Port and rail infrastructure constraints limited the ability to then offset through volume increases.
Delays in the port and rail infrastructure programme have affected the operations. Significantly, high value metallurgical coal capacity allocation was reduced by 2.7 Mt, on a 100% basis, and material additional costs were suffered owing to lengthening port queues. Mitigating actions have included building stockpiles, adjusting production profiles, securing coal sales via alternative routes, rescheduling high rate vessels and renegotiating demurrage rates. Thermal coal prices strengthened by 7% over 2006. However, the 2007 coking coal settlement was below the high levels of 2006.
Operational performance improvements were limited by infrastructure constraints for all export mines except Dawson. The Dawson expansion project will ramp up production to achieve design rates by the end of 2008. It incurred an operating loss during 2007 following transitional issues and a change in the mine plan.
The Grasstree project at Capcoal became operational in 2007 and delivered an increase in volumes over 2006. The full benefits of this could not be realised owing to the port constraints and operating shifts were reduced here and at existing operations. The Lake Lindsay project to expand operations at Capcoal will be completed in late 2008.
Operating profit from South America was in line with 2006 at $227 million. Coal sales at Cerrejón increased by 4% to 29.8 Mt as the expansion project to 32 Mtpa progressed, however operating costs also rose as a result of the appreciation of the Colombian peso and high fuel prices. In Venezuela, sales volumes at Carbones del Guasare were marginally ahead of 2006.
The 66% held Peace River Coal operation in Canada began producing high quality coking coal from the Trend Mine at the end of 2007.