Wescoal lifts black ownership to 59% in ‘transformational milestone’

JOHANNESBURG (miningweekly.com) – JSE-listed Wescoal has entered into a subscription agreement that will raise its black ownership to about 59%.

The company’s long-term coal supply agreement with State-owned Eskom requires it to increase its black economic empowerment (BEE) ownership to more than 51% by end December 2016.

A BEE special purpose vehicle (SPV), whose shareholders comprise a consortium of existing Wescoal shareholders – Muthanyi Robinson Ramaite, Simeka Capital and Eric Nthuthuko Mzimela – will subscribe for nearly 125-million Wescoal shares for R211.41-million.

The new shares will be issued to the SPV at about 169c each, representing a 10% discount to the 30-day volume-weighted average price.

The SPV consortium has signed a five-year agreement which restricts its ability to dispose of the shares.

“This transaction is a transformational milestone for Wescoal. It immediately injects R18-million worth of equity into the company, and we now we have a ‘war chest’ for potential acquisitions. It also de-risks the five-year Eskom coal supply contract, allowing us to lend money from banks against that contract,” CEO Waheed Sulaiman told Mining Weekly Online on Thursday.

The Industrial Development Corporation will provide R178.1-million of the financing for the transaction and Wescoal will provide R35.5-million, representing 16.79% of the full cost.

The consortium members will consolidate their existing shareholding in Wescoal under the BEE SPV and raise their aggregate shareholding.

Sulaiman pointed out that the fact that Wescoal’s black ownership exceeded the 51% threshold quite considerably gave it flexibility.

“If we want to top up funding, we can do it with Wescoal shares without going below the 51% threshold. It’s highly unlikely that we will ask existing shareholders for money,” he said.

He added that all of Wecoal’s timelines were designed so that the agreement would be concluded by the end of December.

“We will be holding a shareholder vote in mid-November and implementation of the transaction will be soon after that,” he said.

He mentioned that Wescoal was actively looking at acquiring resources and that the funding gave the company comfort to proceed with those investigations rapidly.

PROJECT EXPANSION
Sulaiman noted that there were plans to look at expanding production at its Elandspruit mine, located 8 km west of Middelburg, Mpumalanga, through areas underground.

“When we start developments at our Khanyisa Complex, which comprises the previous Khanyisa mining area, the Catwalk- and the Tri-Angle area in Mpumulanga, we might need additional funding to do so.

“There are a few uses for the money and we will run whatever creates the best return for shareholders,” he said.