JOHANNESBURG (miningweekly.com) – A consistently strong operational performance from JSE-listed Wescoal’s projects has resulted in the miner posting a gross profit of R267-million for the six months ended September 30, a 42% increase from the prior year’s R188-million.

It also maintained its gross profit margin at 17%.

Mining production was up 100% to 3.13-billion tonnes, with total coal sales from the mining division having reached 2.4-million tonnes during the interim period.

However, as the takeover deal with counterpart coal miner Keaton Energy was finalised, the company reported a drop in earnings a share, which declined by 18% to 22.5c apiece from the prior year’s 27.6c apiece, mainly owing to the 5.8c a share impact of nonrecurring costs and the additional shares issued since September 2016 in terms of a black-economic empowerment capital raise, and the Keaton Energy transaction.

Meanwhile, total comprehensive income for the period increased by 42% to R88-million, with the additional capital enabling significant progress on Wescoal’s growth strategy in the acquisition of Keaton Energy, which boosted production capacity by 74% and added more than 250-million tonnes to Wescoal’s resource base.

The acquisition strategy is set to continue in the year ahead, Wescoal CEO Waheed Sulaiman told Mining Weekly Online, noting that it would entail diversifying Wescoal’s income stream in the coalfields of Mpumalanga, particularly through the acquisition of thermal coal assets.

“We are also looking to secure coal resources with a higher energy content, just to have a different [portfolio] of coal products,” he added.

This puts assets such as Universal Coal’s Kangala, Brakfontein and New Clydesdale Colliery projects in its sights, while Anglo American’s thermal coal operations in the Witbank coal basin could also come into its crosshairs.

Sulaiman, however, could not comment on any acquisitions at this stage, but noted that the company was evaluating a number of options.

“We will look at areas where we are comfortable operating and where we have expertise . . . we are open to opencast and underground mining. The preference would be for operations that have existing cash flows,” he highlighted.

Study work associated with the Moabsvelden resource, which it acquired through the Keaton transaction, was expected to be completed in January 2018 following which Wescoal would make an investment decision.

Sulaiman added that, pending board approval, the project could be up and running in about 18 months.

“If we acquire another resource or another company that has a better return . . . then we would look to exploit that first,” he said.

Two dividend tranches were declared during the period, with a final dividend of R12-million paid for the year ended March 31 and the board resolving to declare an interim dividend of R14-million for the period ended September 30.

ESKOM TROUBLES
Although State-owned Eskom was facing its own turmoils, Sulaiman remained confident about Wescoal’s relationship with the utility.

“They’ve always paid us on time, they are up to date with their invoices.

“There will be a sufficient need for coal to ensure that Wescoal’s business will continue to be successful. From an energy perspective, coal seems to be very important for South Africa. We want to continue working with Eskom; [it is] an important customer,” Sulaiman said.

Pointing out that while the risk profile was perhaps a little higher, and the company would look to further its international market share, Sulaiman pointed out that it was not because the company was “anti-Eskom”.

Sales to Eskom for the six months to September 30 totalled 1.3-million tonnes, compared with 700 000 t during the six months to September 30, 2016.