HomeCoalEskom secures new coal supply contract with Wescoal

Eskom secures new coal supply contract with Wescoal

JSE-listed coal miner Wescoal has entered into a long-term coal supply agreement with Eskom to supply coal for the next 10 years from its Greenfield development project, Moabsvelden.

The contract was secured with Eskom through Wescoal’s wholly-owned subsidiary Neosho Trading 86.

The signature of the CSA marks the conclusion of 16 months of negotiations with Eskom which commenced early in 2018.

Moabsvelden is located approximately 5 km from the current Vanggatfontein mine, in Delmas and formed part of the assets acquired from Keaton Energy during 2017. Development work, that includes box cut mining and associated mining infrastructure, will commence during Q3, 2019 with first coal to Eskom expected in January 2020.

This project is expected to contribute circa. 3 Mtpa of mined coal towards Wescoal’s production capacity and says Wescoal, “presents a new growth opportunity for all our key stakeholders, namely employees, communities and shareholders.”

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The signature of the Moabsvelden CSA falls squarely into the scalability pillar wherein Wescoal announced its intention to fast track the development of internal (organic) growth opportunities.

Conclusion of debt refinance process

In order to achieve the stated strategic objective of sustainability, Wescoal identified the optimisation of Wescoal’s funding and capital structure as being of paramount importance.

As such the company has closed the refinance of its existing credit facilities through a consortium of South African commercial banks consisting of Nedbank Limited (acting through its Corporate and Investment Banking Division) and The Standard Bank of South Africa Limited (acting through its Corporate and Investment Banking Division).

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The new debt facilities are for a combined R1.1 billion, with a provision that also allows Wescoal access to an additional R500 million accordion facility subject to credit approval but within the legal agreements of the refinance facilities, thus reducing significantly the lead time towards accessing this extra liquidity facility.

The improved capital structure will consolidate and optimise various debt instruments thereby enhancing the group’s liquidity and overall balance sheet strength.

This will further enable the group to pursue specific existing organic growth expansion projects e.g. Moabsvelden and, subject to lenders approval, to take advantage of further inorganic acquisition opportunities in the market.

The first draw down to refinance the old debt facilities has already been undertaken.