Eskom’s demand for additional coal to replenish its depleted stockpiles and demand for thermal coal internationally continue to provide growth opportunities for the group.
This unprecedented demand from the opencast coal mining industry has necessitated revision of capital expenditure. Buildmax anticipated capital expenditure of approximately R360 million for the year ending February 2009 at the time of the reverse listing in April 2008, but has subsequently increased this forecast to between R600 million and R650 million. The capital expenditure incurred and to be incurred has been secured at favourable prices and exchange rates, prior to the recent devaluation of the Rand against major world currencies.
As a result of the delay between acquiring equipment and deploying it into use, the full benefit of the additional capital expenditure will only be realised in the years ending February 2010 and beyond. Approximately 95% of the capital expenditure has been or will be applied to expand coal mining operations.
Equipment acquired is in use on existing and new contracts and notwithstanding the increased capital expenditure, the group continues to hire-in additional equipment to meet current demand.
To date Buildmax’s strong growth has resulted in a fleet with an average age of less than two years and formal preventative maintenance programmes ensure that the life of all equipment is extended. This results in longer usability of assets without a concomitant decrease in reliability. The level of replacement capex is therefore expected to be relatively low in the next three years.
