WESCOAL Holdings spent R18m on new business transactions that did not materialise in the six months ended September.
Commenting in a trading update, in which it reported sharply lower coal production, the Johannesburg-listed firm said it had participated in two separate consortia aimed at merger and acquisition activity: one was a bid for South32’s South African Energy Coal (SAEC), and the other was for a stake in Universal Coal.
Wescoal withdrew from the bidding for Universal Coal after a higher rival bid was tabled by Afrimat, a listed industrial minerals company. The fate of its bid for SAEC is not public, but it’s thought a joint venture with Exxaro Resources was not progressed. The right to buy SAEC went to Seriti Resources which last week confirmed a conditional binding deal with South32 in which it would pay R100m and assume the SAEC’s environmental liabilities.
A third transaction also turned negative for Wescoal when it cancelled the sale of its non-core asset, the Leeuw Braakfontein Colliery. The potential buyer of Leeuw Braakfontein Colliery failed to fulfil certain regulatory approvals. “The asset remains non-core to Wescoal and a new asset disposal process may be considered in the near future,” it said.
“The number of corporate activities, including Universal Coal and South32’s SAEC acquisition transactions which Wescoal pursued and progressed to advanced stages, were closed off during H1 FY20,” the company said in its update. “Residual once-off costs related to advisory, structuring, legal and due diligence amounted to R18m.”
These corporate failures were met with disappointments closer to home. Thermal coal production in the six months fell heavily owing to disruptions at its flagship Vanggatfontein mine in Mpumalanga province. This forced the company to buy in more than 500,000 tons from third party sources in order to deliver into contracts, mostly to Eskom.