[miningmx.com] – WESCOAL Holdings plans to raise up to R81m through the issue of 59 million shares with the proceeds earmarked for the further development of its Elandsrpuit Colliery, the company said today in an announcement.
Elandspruit is the 170,000 tonne/year run of mine operation in South Africa’s Mpumalanga province that predominantly supplies Eskom. Supply is currently through a short-term contract which Wescoal is hoping to convert to a long-term arrangement.
It acknowledged today that in the absence of a long-term Eskom supply contract, it was difficult to raise debt, and that its cash flows were under strain, especially as projects had been financed internally to date.
The cash raised from the shares – which will be issued with Wescoal able to claw back the shares at a later date – would also be used to “… take advantage of inorganic and organic growth options,” the company said.
Said Wescoal: “To date, the company has funded growth projects for the group from operating cash flows, and as a consequence has recently experienced some strain on its free cash flow position which inhibits further growth potential.
“The decision to pursue a combined claw-back and rights offer has further been brought about by delays in the release of long-term bank funding which depends on long-term contracts with Eskom being concluded,” it said.
Speaking to Miningmx in September, acting CEO Waheed Sulaiman said that although he was not worried, the company was not “cash flush”. He also expressed his interest in being nominated CEO of the company on a permanent basis.
“I wouldn’t have accepted the current acting role if I was not interested in leading the company,” said Sulaiman who was previously director of commercial and strategy affairs at Wescoal.
In March, Wescoal’s founding CEO, Andre Boje, resigned from the company following a row with chairman, Robinson Ramaite, related to a takeover offer from an international company. It is thought Ramaite was a against a takeover because he preferred to build his own stake in Wescoal.
This was in terms of a plan sanctioned by the company before December in which Wescoal would lift its black economic empowerment (BEE) status to 50% plus one share in order to have its Elandspruit become an accredited supplier to Eskom.
Waheed said the appointment of a new CEO would be handled at the company’s annual general meeting in November and could include the appointment of at least one independent non-executive director – a move requested by minority shareholders in Wescoal in the wake of the spat between Ramaite and Boje.
“This will be resolved and discussed at the AGM. There’s obviously been a lot of noise about this, but I can’t say much more as I don’t want to overstep the boundaries of the acting CEO role,” he said.
Wescoal said today that it would not pay a final dividend as its board had opted to preserve the cash for Elandspruit.
