WESCOAL reported a much-reduced annual loss year-on-year, but the miner’s fortunes remain parlous whilst net debt of just over R1bn remains on its books – more than double its market value of R436.7m.
The company is also without a permanent CEO following the departure of Reginald Demana in March after just two years in the role. Robinson Ramaite, a major Wescoal shareholder in Wescoal, is currently interim CEO. In addition to the disruption of Covid-19, Wescoal suffered the effects of employee protests and safety lapses in recent years.
Ramaite said in comments to the firm’s year-end results published today that the outlook for Wescoal was looking up. Record rand-denominated export coal prices and an improvement in business conditions amid the roll-out of Covid-19 vaccines boded well for the company in its 2022 financial year, he said.
A number of key features have to align for Wescoal’s recovery, however, including the successful ramp-up of its newly commissioned Moabsvelden mine, and delivery of its coal into a coal sales agreement with Eskom, the state-owned power utility.
Wescoal is also dependent on a recovery in the domestic thermal coal market and the start-up of Arnot mine, a mine Wescoal sought to resuscitate with its former employees and Exxaro Resources.
The balance sheet is a major concern for the company.
During the period, Wescoal made two repayments into a refinanced R427m term loan, but lenders also waived two other quarterly payments on application by Wescoal after coal sales were curtailed by Covid-19 related disruptions. These repayments were due to be resumed, the company said.
It said that while it “comfortably met all of its financial covenants as of March 31 “… two general and information undertakings in the lending arrangements” were not met. Despite this, lenders had obtained credit approval to extend the loan provisions for this year. “Due to this debt condition breach, the group has reclassified R812.9m of non-current debt to current” in line with international reporting standards, it added.
Wescoal also has a refinanced R500m revolving credit facility.
Wescoal reported an R36m loss for the 12 months ended March compared to an R136m in the previous period. During the year, it cut capital expenditure slightly (to R420m from R433m owing to the ongoing development of Moabsvelden) and retrenched staff. It currently employs 192 permanent people.
Net debt was R1.022bn, down from R1.24bn as of March 31, 2020.
