[miningmx.com] – WESCOAL Holdings, the R252m junior coal miner, signalled its confidence in domestic and Eskom coal supply paying a maiden dividend of 3 cents per share, and said it was seeking new acquisitions.
“We remain on the lookout for acquisitions. We should see some consolidation and strongly believe Wescoal is well positioned to become one of the formidable players,” said Robinson Ramaite, Wescoal Holdings chairman.
In the financial year to March 31, Wescoal posted a solid 7.7% improvement in headline earnings to R19.3m. Cash reserves increased to R21.4m while the balance sheet is almost without debt.
The company was strongly cash generative in the year and with fresh production coming from its new colliery, Intibane, it decided to pay a dividend.
“It is a conservative policy,” said Andre Boje, CEO of Wescoal Holdings of the dividend policy. “But we have decided that long suffering shareholders should get a return from Wescoal.”
“We experienced strong cash flows during the year, and we expect that to continue,” said Boje. Some R25m was invested in Intibane in the year under review with a further R15m due to be invested in the current financial year.
Coal production for the year increased to 1.31 million tonnes (mt) compared to 1.18mt in the previous financial year. Wescoal has set itself a production goal of 4mt by 2015.
Boje forecast production of 1.6mt in the current financial year with some 700,000 tonnes due to be produced from Intibane. The balance of production would be sourced from Wescoal’s Khanyisa colliery of some 900,000 tonnes, less than in the previous financial year as production was recently shifted to underground following exhaustion of the higher yield open cast operation, said Boje.
The lionshare of Wescoal’s profits are derived from its mining division, but it also operates a trading division, described by Boje as “a service to the industry”.
Commenting on the company’s trading operations, Boje said there was a lot of work to do. “Every man and his dog thinks it’s easy to buy and sell coal,” said Boje on increased entrants to the trading market.
Wescoal announced earlier this month that it intended to buy a trading rival for about R79m, a transaction that would boost earnings of its trading activities 54% based on the firm’s performance in the period under review.
On an annualised basis, combined revenues of the new business with Wescoal’s trading activities would total R1bn. “It gives us severe critical mass going forward,” said Boje.
Commenting on the coal market, Boje said: “Coal is not going to disappear. Even if they shut down coal power station in South Africa they will have to build new ones as we cannot afford to double our electricity costs in this economy”.
The purchase of Wescoal’s next asset, Elandspruit, would become unconditional from July 31. Commissioning of the asset was due in the first half of 2014.
