05/06/2019 | Press release | Distributed by Public on 05/06/2019 16:47
|WESCOAL HOLDINGS LIMITED - Management appointments and voluntary strategic & operational update|
|06 May 2019 17:40|
WSL 201905060058A Management appointments and voluntary strategic & operational update WESCOAL HOLDINGS LIMITED Incorporated in the Republic of South Africa (Registration number 2005/006913/06) Share code: WSL ISIN: ZAE000069639 ('Wescoal' or the 'Company' or the 'Group') Management Appointments and Voluntary Strategic & Operational Update Wescoal wishes to update shareholders on senior management appointments and various strategic and operational (performance) matters since the last voluntary operational and funding update was published on SENS on 31 January 2019. 1. MANAGEMENT APPOINTMENTS Following changes at board, executive and senior management levels announced in February 2019, the Company is further pleased to announce the appointment of Mr Enos Lentsoane as the Executive Head of Commercial and Investments effective 1 May 2019. Enos has over 12 years' investment banking experience, with the latter six (6) years focusing on mining advisory at Nedbank Limited's Corporate and Investment Banking division ('Nedbank') and Cinga Capital Proprietary Limited. During his time at Nedbank, Mr Lentsoane advised Wescoal on a number of transactions including among others, the black economic empowerment ('BEE') transaction that saw the Company becoming majority black-owned, the acquisition of Keaton Energy Holdings Limited ('Keaton') and various capital raising transactions. Mr Lentsoane will be responsible for identifying potential acquisitions, partnerships and investments that align with strategic growth initiatives of the Company. The appointment of a mining executive, Ms Zanele Sibisi as the Chief Operations Officer (COO) of Mining effective 1 May 2019. Ms Sibisi will be responsible for the management and leadership of Wescoal Mining's three operating mines, Elandspruit, Vanggatfontein and Khanyisa to drive operational stability and efficiency. It is envisaged that she will also be responsible for more mining operations in the future, as projects such as Arnot Mine and Moabsvelden are transitioned from project development to operations. Ms Sibisi comes with over 18 years of coal mining experience in both underground and opencast operations, with the last 10 years of her career at South32 Limited (Coal division in South Africa) where she occupied various key managerial and operational roles. Prior to that she also held leadership roles at Anglo American Coal South Africa where she moved through the ranks and left as a mine manager in 2008 in one of the underground operations. 2. OPERATIONAL UPDATE a) Overall Economic and Environmental Update The overall economic climate remains challenging from a cost containment and business partner risk perspective, with several external factors affecting the Company's operations negatively. Eskom Holdings SOC Limited ('Eskom') remains a consistent and reliable customer and the Company remains committed to maintaining strong relations with Eskom. Above average rainfall in the Mpumalanga Province has been measured since the rainy season started in October 2018. December 2018 measured 295 millimetres ('mm') over 24 days with January 2019 slightly lower at 272mm over 22 days. While the heavy rain subsided in late March 2019, it has been the wettest and warmest rainfall season in over a decade. Compared to a year ago, the Mpumalanga Province received almost three times more rainfall. Although the pumping preparations and water management systems at Wescoal's operations have worked according to plan, the sheer volume of water to be processed has been excessive, impacting negatively the opencast mining operations1. b) Asset Portfolio Update The Group's asset portfolio overall is now better positioned to supply Eskom with more flexibility, including during Vanggatfontein's production downtime reported on 24th April 2019 ('VGF Production Downtime'). There is more optionality from respective operations, including Khanyisa Triangle, which is benefitting from being fully owned, and the imminent addition of Moabsvelden project and Arnot Mine which will strengthen the Group's position further. c) Production and Sales Update Production in general will be lower as a result of operations impacted by above average seasonal rainfall, the Vanggatfontein mining contractor change over and the VGF Production Downtime. At Elandspruit, the impact related to the suspension of the underground mining section during the second half of FY19. Production from Khanyisa was impacted by the dispute outlined in the Aztolinx buy-out announcement on SENS 15 February 2019, which was resolved but affected production by over six (6) months during the period under review. The mining division was however supported by extensive increases in both production and sales from Khanyisa in the last quarter. i) Vanggatfontein: The VGF Production Downtime is being addressed as an urgent priority. Overall, the situation is calm and the restoration plan with the mining contractor remains on track. Training of replacement contract employees is well underway with at least 25% of required workforce already recruited and attending training. These employees are expected to commence production activities by 14 May 2019. Simultaneously, equipment at the mine is being replaced and upgraded, and the mining contractor has initiated negotiations to progress re-hiring of some of the ex-employees eligible to return to work. The remaining VGF Production Downtime is anticipated to be for a minimum four (4) and maximum six (6) week period, which is line with timelines previously communicated, and ramp up to full production will begin in early June 2019. The expansion plan at the asset is to bring on an additional mining phase Vanggatfontein five ('VG5'), adding capacity and optionality in the second half of the current financial year. It is anticipated that expected normalised production will be achieved from July 2019 onwards at Vanggatfontein which has a remaining life of around eight (8) years and a long-term production run rate targeting 340 kilo tonnes per month ('ktpm) run-of-mine ('ROM') from the next financial year. ii) Elandspruit: The underground mining section, representing around 10% of Elandspruit's capacity, remains suspended due to the process underway to secure a new underground mining contractor. Normal production levels will resume by July 2019. The opencast mining contractor has secured extra equipment to increase capacity to at least 230 ktpm ROM, which will guarantee the budgeted production levels without the underground operations. The multiple faces active at the mine enable operational flexibility and the current reserve has a remaining life of around six (6) years. iii) Khanyisa: The Khanyisa agreement announced on SENS on 15 February 2019, secured access to additional coal production and is at present a consistent and strong contributor to production and profitability for the Group. Khanyisa produced 293 kt during the last quarter ending March 2019. The Khanyisa Triangle resource and the Catwalk resource areas are consolidated into one mining complex, 10 kilometres ('km') west of Ogies in Mpumalanga Province. Wescoal effectively gained the full commercial value of the Khanyisa Triangle, whereas previously, in terms of the previous joint venture, it had been entitled to only 35% of the commercial benefit from this coal reserve. At the current mining rate, the production at Khanyisa is approximately 100 ktpm ROM, with a life of mine at slightly more than four (4) years. d) The Trading Business saw seasonal cycle of sales from the Trading division lower than the first half of the year. Overall the division continues to perform in line with expectations in the second half of the year and is managing its counterparty risk well, in a challenging environment. 3. GROWTH STRATEGY AND PROJECTS UPDATE Wescoal's continued strategic drive for growth has seen much activity and management time invested during FY19. The most significant growth project was the offer to acquire Universal Coal Plc which, after an extensive process, was rejected due to another offer being considered by the board of Universal Coal Plc. Projects concluded under corporate activity during the year include the disposal of non-core assets, Intibane Colliery and Leeuwbraakfontein Colliery, and significantly the acquisition of Arnot Mine and the Khanyisa Triangle operation. A number of projects in progress hold potential for significant value enhancement and include development of Moabsvelden project and Vanggatfontein extension. a) Arnot: On 28 February 2019, Wescoal announced the acquisition of a 50% indirect interest in the Arnot Mine subject to certain suspensive conditions. The Arnot Mine is expected to be around a 2 million tonne per annum ('mtpa') asset when mining activity resumes. On Wednesday, 1 May 2019, the Department of Mineral Resources announced the granting of consent (Section 11 approval) to proceed with the Arnot Mine acquisition, subject to remaining approvals by the competition authorities and Eskom. The agreement to partner with surrounding communities and erstwhile employees of Exxaro Coal Mpumalanga Proprietary Limited ('ECM') who were previously retrenched at Arnot Mine in December 2015, is a first of its kind in South Africa as a broad-based BEE transaction which not only secures employment for such previously retrenched employees but also provides employees and affected communities around the Arnot Mine with equity participation, as outlined in the 2018 Mining Charter III. b) Moabsvelden, acquired through the Keaton acquisition, is adjacent to Vanggatfontein Mine, 16 km southeast of Delmas. With a 47.8 million tonne resource, Moabsvelden has the potential to be developed into a 1.5 - 2mtpa ROM operation with coal washing and processing at Vanggatfontein Mine, or to be sold directly as a crush-and-screen ROM product. Wescoal is currently negotiating with potential customers, including Eskom, for coal offtake and/or supply agreements. The asset is fully permitted and the mine development plan is an opencast project with the aim of producing first coal during the second half of this calendar year. 4. STRATEGIC PRIORITIES AND OUTLOOK The Company is managing a challenging environment including labour disruption that resulted in the VGF Production Downtime. The focus is on restoring production and increasing output from existing operations, whilst also focussing on cost containment and operational business partner risks. Wescoal remains focused on its strategy for long term sustainable growth, to be achieved in a measured and responsibly managed way. The Company's immediate priorities are to resume normalised production at Vanggatfontein, to progress the extension project at Vanggatfontein and the development of the Moabsvelden Project, which form part of the plan to optimise the Keaton asset base. Wescoal continues to evaluate various inorganic growth opportunities in the market on a case-by- case basis. However, no imminent announcement should be expected in this regard. 5. TRADING STATEMENT A trading statement will be released in due course once Wescoal has reasonable certainty on the impact on headline earnings per share and earnings per share for the year ended 31 March 2019. The above information has not been reviewed or reported on by the Company's auditors. Wescoal will release its audited financial results for the year ended 31 March 2019 on or about 25 June 2019. The Company is currently in a closed period and shareholders will be engaged directly after the results have been published. 6 May 2019 Sponsor Nedbank Corporate and Investment Banking IR Advisor Singular IR Note 1: Source:https://www.worldweatheronline.com/witbank-weather-averages/mpumalanga/za.aspx Date: 06/05/2019 05:40:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 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