Wescoal signs 10-year coal sales agreement with Eskom, disappoints on June Q output

Reg Demana, Wescoal CEO

ESKOM’S search for new coal was eased, at least to a small degree, by a coal sales agreement (CSA) with Wescoal Holdings.

The Johannesburg-listed coal producer on July 31 announced it would supply the power utility with coal from its recently approved three million tons a year Moabsvelden project, situated in Mpumalanga province.

Wescoal said in an announcement – in which it also provided disappointing production numbers for the June quarter – that the 10-year CSA was the fruit of 16 months of negotiations. No details were given on price as Eskom CSAs are kept confidential.

Pravin Gordhan, minister of public enterprises, the department to which Eskom reports, said on July 30 that he would embark on talks with South Africa’s coal sector regarding the price at which it was selling the fuel to Eskom. This was after Eskom reported a 17% hike in coal costs which Gordhan labelled “extraordinary” and not in the public interest.

Commenting on Moabsvelden, Wescoal said project development would begin in the third quarter with first coal expected to be delivered to Eskom in January. “The signature of the Moabsvelden CSA falls squarely into the scalability pillar wherein Wescoal announced its intention to fast-track the development of internal growth opportunities,” it said.