[miningmx.com] – WESCOAL Holdings has raised a R200m in debt the bulk of which will finance the building of its Elandspruit Colliery, a property in the Mpumalanga province that will double Wescoal’s run-of-mine coal output to four million tonnes a year (mtpa) by its 2016 financial year.
“This structure will provide funding for capex and development of our flagship Elandspruit operation,” said Andre Boje, CEO of Wescoal Holdings which has a value on the Johannesburg Stock Exchange of R371m. Investec is the banker.
In terms of the debt agreement, some R180m will be in the form of a five-year term loan with an additional R20m for working capital. About R70m will be used to retire existing debt with Investec, said Wescoal in a statement.
About R110m will be used to commission Elandspruit including the purchase of the Muhanga coal processing plant which is infrastructure on an adjacent property. Boje said previously it was important to buy the plant because it would take 36 months to win regulatory approval from the Department of Mineral Resources for its own plant.
Elandspruit Colliery increases our life of mine beyond 15 years and coupled with the Muhanga coal processing plant as well as our established Trading business, Wescoal is a well-rounded coal operation,’ said Boje.
The debt facility is somewhat unusual in the South African coal development or junior market where cash flow is non-existant or constrained. As a result, most development companies in coal, such as Universal Coal, Coal of Africa and Continental Coal, to name a few, have opted for equity financing.
Elandspruit, which is situated about 10km west of Middelburg, was described by Boje in June this year as “a proper mine” that would “keep us happy for 10 to 15 years. He added that the company would “… keep an eye out for other assets”.
Wescoal said on October 28 that it expected to report headline interim earnings of between 14.2 and 15.5 cents per share, a decline of between 58% and 62% year-on-year.
The decline in earnings, however, was owing to the exceptional credit in the previous period of some R71m relating to the sale of Wescoal’s Vlaklaagte mineral asset. Excluding this, headline earnings would be up to 36% higher, it said.
Wescoal’s earnings figures will include a full contribution from the trading revenues generated by MacPhail, the coal marketing business it bought during its previous financial year.
