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.