Transnet progress a boon to Wescoal

[miningmx.com] — AN IMPROVED delivery performance by Transnet Freight Rail offered respite to Wescoal’s troubled trading operations, the junior coal miner said on Thursday.

Releasing interim results to end-September, Wescoal said the division boasted a 17% comparative increase in volumes for the period under review – an increase Wescoal said was directly related to record delivery rates to the Richards Bay Coal Terminal (RBCT) by Transnet Freight Rail.

The improved performance from Wescoal’s trading division contributed to an overall 53% interim revenue increase. Headline earnings were up 131% from R4.9m to R11.4m.

“These developments have contributed to the first local price increase (of export coal) since mid-2008 of 10% on July 1 2010, and management expects a further 10% to 15% during 2011,’ the group said.

South Africa is a major exporter of coal to power stations in Europe and Asia, but state-owned logistics group Transnet has been struggling to transport all the material destined for export by rail due to bottlenecks on its line.

The state utility has been investing heavily in new and improved infrastructure and has transported a record 6.2 million tonnes to RBCT by rail in September – the last month of Wescoal’s reporting period – but the figure is still far from meeting an expanded annual capacity at the export terminal of 91 million tonnes.

The country exported 61 million tonnes of coal last year, and Transnet said it could ship up to 65 million tonnes this year.

“The trading division experienced a poor second half of the prior financial year; however, the encouraging developments in the trading division (during the period under review) will ensure this is not repeated.’

Wescoal appeared to have made a successful transformation from coal merchant to fully-fledged coal miner as its Khanyisa Colliery, which only started to contribute revenue in February, added 887,000 tonnes to Wescoal’s output for the period under review – well on track to reach its 1.2 million tonnes target for the financial year.

CEO Andre Boje said the group would seek to sustain its strong growth trajectory through further acquisitions and exploration activities.

“We’ve indicated before we want to be a 4 million tonne per year producer,’ Boje said. “Acquisitions remain an integral part of that strategy.’

Wescoal’s recently acquired Elandspruit reserve, near Middelburg in Mpumalanga, forms another key component of its near-term growth strategy. The project, with an indicated resource level of 11.6 million tonnes, is undergoing a feasibility study, while Wescoal expects to be granted mining rights within three months.

“With the incorporation of Khanyisa into the mining division, the trading division will no longer generate the bulk of the group’s profit. The Elandspruit feasibility is at an advanced state and should be completed with the transaction becoming unconditional early in 2011,’ said the group.