JOHANNESBURG (miningweekly.com) – JSE-listed junior miner Wescoal on Tuesday announced that it had entered into a R79-million agreement with MacPhail Distributors, which would enable it to attain the critical mass required to negotiate and overcome challenges in the coal trading environment.

Through the agreement Wescoal would acquire MacPhail’s coal trading business as a going concern, CEO Andre Boje said.

“The coal trading market has been under pressure since 2008, owing to increased competition from primary coal suppliers, resulting in reduced volumes and pressure on margins,” he said.

MacPhail had extensive operations across South Africa with seven depots across three provinces and Wescoal expected the acquisition to impact positively on its profit margins.

“This transaction will also afford Wescoal significant synergies, such as cost savings and increased visibility and presence in the marketplace,” Boje said.

The coal trading business would fall under Wescoal’s wholly owned subsidiary Chandler Coal.

The company, which first announced the transaction in June, said the purchase price was subject to possible adjustment, depending on the outcome of a stocktake the day before the effective date, and was to be paid out of current cash resources and bank funding.

The acquisition, which included fixed assets, stock, contracts, intellectual property, leases and goodwill, was set to take effect from October 1, or once the last of the suspensive conditions had been fulfilled, on whichever date occurred last.

The suspensive conditions included MacPhail obtaining a special resolution from its shareholders approving the disposal, the lodgement of the application to the Competition authorities and Chandler Coal being able to secure funding for the acquisition, Wescoal said in a statement.

Wescoal shareholders and regulatory authorities also needed to approve the transaction.

Meanwhile, Blanford 006, a wholly owned subsidiary of Chandler Coal, also entered into an agreement with FSW Property Trust to purchase four properties in the Eastern and Western Cape, on August 8.

The total purchase consideration for the properties was R13.5-million, exclusive of value-added tax at a rate of zero per cent. The amount would be paid in cash and funded by bank funding.