Wescoal expects debt revamp to help its acquisition opportunities
Coal miner and trader Wescoal has consolidated various debt instruments into a single longterm R440m facility, which will allow it to continue paying dividends and take advantage of acquisition opportunities, CEO Waheed Sulaiman says in a market update.
Earlier in 2017, Wescoal took over and delisted junior coal miner Keaton in a R526m cash and shares deal.
The acquisition put it on the path to becoming an 8-million tonnes a year coal producer. It produced 3.4-million tonnes in the previous year.
A year ago, Wescoal raised its black empowerment shareholding to 59% to meet the requirements for Eskom coal suppliers. Eskom is the company’s biggest customer.
Wescoal plans to add to its black empowerment shareholding by putting in place an employee share scheme. Sulaiman said in a strategic update ahead of the release of interim results on November 21 that the integration of Keaton’s operations was progressing well. Key technical and mining skills had been retained.
With a larger resource base and infrastructure, Wescoal was able to produce more and different products to meet market requirements.
Production from the Vanggatfontein mine, formerly part of Keaton, was stable. Project work on Moabsvelden, which was Keaton’s main development project, was due for completion by January. Sulaiman said he would provide an update on the cost savings and efficiencies of the merger when the results were announced.
Elandspruit, which was Wescoal’s flagship colliery, has reached steady-state production and increased its target to 2.5million tonnes of run-of-mine coal a year.
The Khanyisa joint venture had come into production and was producing about 100,000 tonnes of run-of-mine coal a month as planned.
Intibane was also performing in line with expectations.
Despite difficult economic conditions, Wescoal Trading was doing well, Sulaiman said, as a result of an improved debtors’ book, focus on customer maintenance, new procurement activities and reduced fixed costs.
Wescoal’s shares added 3.7% to 225c after the update on Tuesday. They have gained 4.65% over the past year.