Investor presentations light Wescoal’s fire

[miningmx.com] -Shares in junior coal miner and trader Wescoal jumped 22% to 192c today from closing at 157c on May 12 after management gave investor presentations in Johannesburg and Cape Town where those attending clearly liked what they heard.

Miningmx was not able to attend the Johannesburg conference on May 12 because, according to investor relations consultants Keyter Rech Investor Solutions, the company’s interim CEO Waheed Sulaiman wanted to deal with media in subsequent “one on one’ interviews.

As a result it seems only analysts and fund managers were at the meetings to hear management’s pitch. This reporter was not able to attend despite being a member of the Investment Analysts Society of South Africa (IASSA) under whose auspices the meetings were held.

Miningmx was provided with a copy of the presentation materials and had a telephonic interview with interim CEO Waheed Sulaiman.

The Wescoal share price has been volatile since the beginning of 2014 falling from around 228c to a low of 148c in October before jumping 62% to a high of 237c in late December from where it plunged again to 157c by May 12.

The key attraction of Wescoal for investors – and the bullish driver behind the share price – has been development of the Elandspruit colliery which, when it is up and running, will double Wescoal’s production to around 4mt/year by 2016.

Wescoal was awarded the water usage licence for Elandspruit on April 7 meaning all the necessary regulatory approvals are now in place and construction on the mine can start once the funding is in place.

Elandspruit’s production is earmarked for sale to Eskom and that – ironically – is why the share price slumped from January because issues around Eskom’s requirement that Wescoal restructure itself to become 50% plus 1 share black economic empowered (BEE) owned in terms of the supply contract.

The debate over how this will be achieved led to a bust-up at board level which resulted in the rapid departure of CEO Andre Boje who had been with Wescoal since it was founded 18 years ago.

Boje subsequently told Miningmx that Wescoal was a “fundamentally sound company and I intend to remain invested in the business.’ Boje owns about 5% of the company.

According to Sulaiman, Wescoal has “given a commitment’ to Eskom that it will be 50% plus 1 share empowered by December 2016 and the company has entered into short-term supply contracts while negotiating the long-term supply contract.
“We have made significant progress with Eskom over the last couple of months, ” Sulaiman commented adding that an independent consultant had been brought in to advise on the new structure.’

The other outstanding issue to be settled before Elandspruit can be developed is funding and Sulaiman said management was “working through the requirements to implement long-term funding arrangements.’

Those two issues aside Sulaiman pointed out the mine is ready to be built with the design finalised and optimised; the processing plant operational and optimised and the mining contractor briefed and ready for site establishment.

Sulaiman added management expected Elandspruit ” to produce first coal 16 weeks from flow of funds.’