[miningmx.com] – WESCOAL Holdings, the R375m thermal coal producer, said it would spend R42.5m buying plant that would enable it to begin production from its Elandspruit coal mine in the fourth quarter of this year.
Announcing a 28.7% increase in full-year headline share earnings to 15.7 cents, the company said it was necessary to buy the nearby Muhanga plant because it would take Elandspruit up to 36 months to win regulatory approvals to wash coal on its premises.
Elandspruit, which is is situated about 10km west of Middelburg in South Africa’s Mpumulanga province, is slated to help double Wescoal’s annual run-of-mine production to about 4 millon tonnes a year (mtpa) by its 2016 financial year. The mine was formerly owned by Glencore and was acquired in a mineral rights swap in 2013.
“The acquisition of Muhanga Plant gives Wescoal immediate access to a fully-fledged
beneficiation asset that is currently operational, has all the necessary regulatory approvals an extensive infrastructure to allow for a multi-product operation whilst regulatory approvals are awaited for the Elandspruit site,” Wescoal said today.
Andre Boje, CEO of Wescoal Holdings, said it would cost about R300m to build a new plant and take two years to complete. To date, some R170m has been spent on the development and commissioning of Elandspruit.
The company, which produced 600,000 tons more coal in the financial year ended March to 1.92 million tons (mt) owing to the commissioning of its Intibane colliery, said it had prioritised the upgrade of Elandspruit to a fully-fledged operating mine.
The company announced an increase in the full dividend to 3.8 cents/share compared to 3 cents/share in the previous financial year. Cash in the business more than doubled to R52m, Wescoal said.
The financial results were also assisted by growth in its trading company following the takeover of MacPhail, a coal merchant. The business would have turnover approaching R1bn, said Boje. “That’s a good standalone business just on its own,” he said.
“Once Elandspruit is commissioned, our sustainability is embedded,” said Boje. A water use licence should be approved by end-August, although Boje added that licence approvals were never certain. “Danger lurks around every corner,” he said.
“Elandspruit is a proper mine and will keep us happy for 10 to 15 years,” he later said on the sidelines of the company results presentation.
“We will keep an eye out for other assets, but there is no particular pressure to do anything,” he added.
Shares in Wescoal increased nearly 5% by mid-morning on the Johannesburg Stock Exchange making for a 30% return on a 12-month basis. Set against other coal junior companies such as Continental Coal and Coal of Africa, this is a strong performance.
Wescoal supplies thermal coal to Eskom as well as to the domestic market such as cement manufacturers. It has some export entitlement through Richards Bay Coal Terminal but doesn’t believe the export markets are attractive at current prices.
