CoAL management disappoints
WHO would have thought five years ago that Coal of Africa Ltd (CoAL), a pioneering coal junior led by a nononsense Aussie MD named Simon Farrell, would end up one of the biggest dogs seen on the JSE? Because that’s what it is. Final nail in the coffin is the failure of the Vele coal processing plant, on which another R220m must now be spent to fix it.
New CEO David Brown confirms it’s a dud, although he’s in a safe position, since the plant was designed, built and commissioned before his time. Coal of Africa has had more than its fair share of problems, and not all were within management’s control.
Record flooding by the Limpopo River and two months’ suspension of exports because of a major derailment in Mozambique; those are acts of God. But failure of the processing plant to meet technical specifications; failure of the Mooiplaats mine to meet production targets leading to its closure; temporary closure of the Vele mine because of noncompliance with environmental regulations — the blame for all those can be laid squarely at management’s feet.
This kind of miserable track record will not help Coal of Africa in its continuing fight over responsible economic development with the environmental lobby which so bitterly opposed the Vele mine and feels the same about the upcoming Makhado project.
YESTERDAY’s Distell AGM was a polite enough affair. All resolutions were passed by the requisite majority, despite resistance by some shareholders (seemingly including SABMiller) to placing the unissued shares under the control of directors. These days certain institutions oppose this resolution as a matter of policy, although such resistance would, one hopes, dissi- pate if the globally ambitious Distell ever proposed issuing new paper to fund acquisitions.
There could be a more vigorous debate today in PSG’s Ou Kollege headquarters, where the CapeVin AGM will be held. CapeVin has a significant minority stake in Distell, its sole investment. Dividends are received from Distell and paid straight to CapeVin shareholders. A more classic holding company you will not find, although CapeVin really should not exist, even if punters do love to take advantage of discounted entry into classy Distell.
It would make sense to unbundle CapeVin’s holding to shareholders, which include a few large institutions, Remgro and PSG (with a leftover stake “for sale”). Aside from removing structural inefficiencies, it would enormously increase the liquidity of Distell, which is tightly held by Remgro-CapeVin Investments (57.7%) and SABMiller (28.9%).
But today the Bottom Line expects to be reminded again of the legacies that preclude the dismantling of the CapeVin structure. Some investors are starting to believe this cumbersome shareholding arrangement has some permanence.