Wescoal secures long-term coal export business

JOHANNESBURG (miningweekly.com) – Coal mining and marketing company Wescoal has finalised a series of coal contracts in line with its stated intention of supplying a million tonnes of coal a year into the export market.

The coal purchase confirmations, which involve the supply of more than five-million tonnes of coal from November this year to April 2021, underpin the revenue diversification strategy of the JSE-listed company, headed by CEO Waheed Sulaiman.

They also provide cash-flow certainty into the future for Wescoal, which has up to now been 80% reliant on coal sales to State electricity utility Eskom.

In the next five to eight years, Sulaiman – a former BHP Billiton strategy and business development employee – is planning to grow Wescoal’s run-of-mine production to eight-million tonnes of coal a year, from three-million tonnes currently.

On the organic growth front, Wescoal’s Elandspruit flagship mine is on the way to producing at a rate of two-million tonnes of coal a year, with its Intibane and Khanyisa collieries together set to provide another one-million tonnes a year.

In the 12 months to March 31, the company produced 2.8-million tonnes of coal and recorded 78.8%-higher after-tax profit of R51.8-million on a better-quality debtor book, increased productivity and cost cuts.

Wescoal said in a cautionary in August that it had entered negotiations to increase its black economic empowerment (BEE) ownership and drew attention to the long-term coal supply agreement it had entered into with Eskom, which required it to increase its BEE ownership to more than 50% by end December 2016.

The company, which mines, processes, sells and supplies coal to clients in the power generation, manufacturing and petrochemicals sectors, also has acquisition targets in its sights.