Bisichi LON:BISI, proves (that at the very least in Mpumalanga) coal remains king, as the AIM-listed, London-based miner, with operations in South Africa, has had a very good first half of the year. The company really turned around performance after a disappointing 2023, on the back of: “a significant improvement in mining production and lower mining costs its principal mine in Mpumalanga,” said Andrew Heller, executive chairman and managing director.
The company has some heritage, having been founded in 1910. It was initially known as the Bisichi Tin Company before diversifying into coal.
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Bisichi also has a UK retail property investment portfolio managed by London & Associated Properties LON:LAS. LAP is a London-based property investment firm, which additionally holds 42% of Bisichi’s shares. The two firms coinvest through the vehicle Dragon Retail Properties Limited, and like many of Bisichi’s shareholders LAP has been quite pleased with the year’s progress. Bisichi also owns UK property directly.
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Bisichi’s focus on South Africa
The main focus of the mining company’s operations is the Black Wattle colliery in South Africa’s Mpumalanga Province. This is a 1.04 million tonne per annum bituminous coal mine. Bituminous coal, or ‘thermal’ coal, has a high carbon content and a relatively high heat value. It is used primarily in industrial processes such as steel and cement making. Some Black Wattle coal is used locally, but most is exported through the Richards Bay Coal Terminal, 500km south.
For the year ending-December 2023, Bisichi made a profit before interest, tax, depreciation and amortisation of GBP3.4m, well down from the GBP40m profit the company made in 2022 with an operating profit of GBP2.6m compared to an operating profit of GBP39.4m the year before.
However, fast-forward to the end of August this year, the miner reported earnings of GBP7.35m up 417% year-on-year to end-June 2024. Profit before tax of GBP5m compared to PBT of GBP300,000 for the same period in 2023. This turnaround saw basic earnings per share shoot up from a 3.18p loss in the first six months of 2022 to 18.33p.
Improved production and lower costs
Management attributed the turnaround in fortunes to a significant improvement in mining production and lower mining costs at Black Wattle Colliery. The firm’s employees at the literal coal face have done the company proud in the first part of the year. Total production from Black Wattle of 708,000 tonnes for the first six months, compares to 354,000 tonnes in the first half of 2023, and 453,000 tonnes in the second half of that year.
This spike in production was a strategic and operational decision of the management which in 2023 grappled with geological issues, and inflation leading to an increase in mining and blasting costs. In order to mitigate these issues, in 3Q23 the mine opened a lower-cost second mining area. Since Bisichi started mining the new area it saw a significant improvement in mining production.
However, the company still has room for improvement. It also runs a coal processing operation in South Africa, the Sisonke Coal Processing company and the improved coal production from Black Wattle had a knock-on effect on overall levels of coal processed at Sisonke throughout the period. The price that the company could get for its coal remained depressed in 2024. In the six months Bisichi sold 618,000 tonnes of processed coal compared to 473,000 tonnes in the first half of 2023 and 1.03 million metric tonnes overall in 2023. The company will be hoping for better coal prices in the next half-year.
Performance would have been even better, had it not been for ongoing industrial action on South Africa’s railway network. This significantly impacted the miner’s export sales last year. However, the strikes concluded in 2022 and South Africa’s state rail operator, Transnet, spent most of last year fixing the problems from the industrial action. That process is moreorless concluded, and Transnet is implementing further reforms in conjunction with South Africa’s coal industry to increase rail capacity.
Bisichi’s shares opened the week (2nd September) at 115p. This was 4% behind where they were trading this time last year and down nearly 10% year-to-date. The company’s shares have ranged between 75p and 149p over a 52-week period.
Bisichi share price turnaround post-results
The miner’s shares fell to their lowest point in the last year in April, but since the end of August, on publication of the surprisingly strong results, shares jumped over 30%. The company declared an interim dividend of 3p/share.
Bridgewise the AI-powered stock analyst has Bisichi as a ‘Buy’. The analyst said: “Bisichi’s recent financial results position the company within the top 10% of energy firms. Specifically, Return on Equity Ratio (ROE) and EBITDA, Lease Adjusted overperformed relative to its peers. Analyzing past performance, stronger relative performance in these metrics has often been associated with a higher likelihood of a company’s stock outperforming industry competitors. Considering Bisichi’s latest financial performance, the firm’s shares seem to be a compelling option for investment in the Oil, Gas & Consumable Fuels industry.”
Bisichi’s strong performance in the first half of 2024 demonstrates the continued value of coal mining in South Africa. Despite challenges such as railway strikes and geological issues, the company’s strategic decisions and operational improvements have led to a significant increase in production and profitability. As the South African coal industry continues to evolve, Bisichi’s ability to adapt and capitalise on opportunities will be crucial to its long-term success.
