WESCOAL

Financial Mail - Investors Monthly - - Opening Bell - Shaun Har­ris

Share price: R1,18 JSE code: WSL

SELL WESCOAL’S ES­TEEMED DIREC­TORS should be kick­ing them­selves for be­ing deemed a sell when this ju­nior miner has so much po­ten­tial. But if you don’t get into the pit and start dig­ging, this is what hap­pens.

Wescoal has been head­ing south. An un­easy board re­la­tion­ship seems part of the prob­lem, though the BEE share­holder is prob­a­bly as much to blame. The re­sult is that, be­cause of Wescoal’s BEE sta­tus, it is not get­ting long-term con­tracts from Eskom. It plans to rec­tify this, partly through a re­cent claw-back and rights of­fer for R65m, part of which will be for­warded to the BEE part­ner to get its house in or­der (or make it shut up).

What is work­ing, at last, is the Eland­spruit mine. Act­ing CE Wa­heed Su­laiman says the rights is­sue will al­low Wescoal to be bet­ter po­si­tioned to con­clude the Eland­spruit project. There­after, he says, it can take ad­van­tage of other growth op­por­tu­ni­ties and re­bal­ance its in­ter­nal cash flows.

Wescoal seems quite good at do­ing deals. At the end of last year it bought MacPhail, which helped fi­nan­cial re­sults, though they were nonethe­less ter­ri­ble, with Heps down 66,4% to 5,1c. It did not de­clare an in­terim div­i­dend. Su­laiman says con­sol­i­da­tion in the ju­nior coal sec­tor is part of the nat­u­ral evo­lu­tion of the sec­tor and Wescoal sees it­self as a sig­nif­i­cant par­tic­i­pant in this process.

It is. But un­til Wescoal ac­tu­ally does some­thing, it’s a sell.

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