JOHANNESBURG (miningweekly.com) – Coal mining and trading company Wescoal intends to raise R81-million equity capital to further develop its flagship Elandspruit colliery as well as fund other growth options.

To date, JSE-listed Wescoal has self-funded growth projects from its own operational cash flows and, as a consequence, has recently experienced strain on its free cash flow position, which is inhibiting further growth potential.

On top of that, long-term bank funding, which is dependent on the conclusion of long-term Eskom contracts, has been delayed, which has brought about the decision to pursue a combined claw-back and rights offer to shareholders at a subscription price of 138c a share on 58 890 389 new ordinary shares.

The company stated in this week’s media release on its 2015 integrated annual report that group revenue had increased 0.19% to R557.3-million, with its margin lifting to 17.5% from a previous 13.5%.

Wescoal chairperson Robinson Ramaite commented in the release to Creamer Media’s Mining Weekly Online that the company’s key focuses had been on the strategic transition and delivery in a tough environment.

He explained that the board’s decision not to declare a final dividend was based on opting to use available cash to develop mining assets like Elandspruit, which is feeding the company’s new processing plant that has a throughput target of 170 000 run-of-mine tons a month by December 31.

Revenue from mining topped R557-million compared with last year’s R556-million and operational earnings before interest, taxes, depreciation and amortisation (Ebitda) were R94.7-million, compared with R101.2-million in the 2014 financial year.

Revenue from trading almost doubled to R1.16-billion from R591.2-million previously following the takeover of MacPhail, and operational Ebitda soared to R34.3-million from R1.6-million in the corresponding 2014 period.

Direct comparisons to the previous year’s figures were, however, difficult because only four months of MacPhail’s results were reported and Vlaklaagte was sold for R75-million, a disposal that Elandspruit and the extensions of the lives of existing mines far outweigh.

To face increased competition, load-shedding impacts, a weakened local steel sector and reduced coal orders, Wescoal is taking steps to put a revitalised executive team in place while the company evolves its long-term strategy on the Eskom requirement of 50%-plus black ownership for long-term coal supply contracts.

Eighty per cent of Wescoal’s reserves are of the resource-type that meet the requirements of the State power utility and the business is thus continuing to build itself around Eskom.