Elandspruit colliery
JSE-listed Wescoal managed to buck the downward coal trend and come out on top in 2016 at a time when the global industry took a knock.

It is the company’s can-do attitude and clear strategic objective of establishing a black-controlled sustainable and scalable business since then that has enabled it to transition from a 1 Mtpa coal producer to a +7 Mtpa coal producer in just over two years.

This is an edited version of the original article published in the December 2017 edition of Mining Review Africa which can be read here

AUTHOR: Mining Review Africa’s senior deputy editor, Chantelle Kotze

The recently concluded R526.8 million acquisition of Keaton Energy earlier this year brought Wescoal another step closer in realising its goal of becoming an 8 Mtpa ROM coal producer in the medium term.

With four mining operations performing consistently well, Wescoal is less than 1 Mtpa of production away from its goal of becoming an 8 Mtpa coal producer and achieving ‘mid-tier miner’ status as a diversified, sustainable South African coal producer, says CEO Waheed Sulaiman, who has been at the helm of the company since April 2016.

Since mining began in July 2015 at the flagship Elandspruit colliery near Middleburg in Mpumalanga, the operation has performed consistently well, has slightly ramped up production in recent months and is producing roughly 2 Mtpa of ROM coal from both open cast and underground sections of the mine.

The company’s Khanyisa Complex near Ogies in Mpumalanga is operating as expected. In May, the Khanyisa Complex began producing coal from the Khanyisa “Catwalk” and adjacent Khanyisa “Triangle” areas, which were opened up as part of a resource extension project. “We are now at our expected steady-state production of roughly 100 000 tpm,” says Sulaiman.

Also part of Wescoal’s suite of operating mines is the newly acquired Vanggatfontein mine (formerly Keaton Energy’s flagship mine) which is currently producing 2.5 Mtpa of ROM coal.

The acquisition of Keaton has added impetus to the growth of Wescoal’s revenue, production and sales strategies across domestic and export markets as well as diversification and optionality in contracts and off-take negotiations.

The enlarged business now has coal resources in excess of 300 Mt, four operating mines and three processing plants. Combined annual ROM production from Wescoal is expected to exceed 7 Mtpa and is indicative of Wescoal’s good progress towards its objective of producing 8 Mtpa of ROM coal in the medium term.

Integration focus

“The integration of Keaton Energy into Wescoal is the priority at the moment,” says Sulaiman, noting that the process is progressing well. “We are on track to realise targeted cost savings by exploiting synergies and optimising and integrating management and systems,” he adds.

“We have closed the Keaton head office and relocated the employees and have also started work on systems integration. Our aim is to have common reporting and resource management across the Wescoal group, says Sulaiman, adding that the company aims to implement this during this financial year.

Wescoal has also started implementing cost saving measures across the Keaton operations, specifically at Vanggatfontein mine.

Moreover, in the coming months, Wescoal will also begin looking at ways to optimise Vanggatfontein. One of the main focus areas will be to improve the consistency in performance by improving the predictability and stability of the operation – so that both the Vanggatfontein and Elandspruit operations are operating on the same principles.

As a result of the acquisition, Wescoal now has more diverse and stable revenue streams, a larger asset base and opportunities to leverage of a larger base of service providers with which to work.

Future focused right from the start

“We are not finished growing in our view and we are still keen to expand,” says Sulaiman, adding that Wescoal will continue to look at consolidation within the coal sector in South Africa by considering value enhancing opportunities for its shareholders.

As a result of this long-term acquisitive growth outlook, a very important factor when it was structuring the company was to build scalability into whatever it was doing. Wescoal did this to ensure than no massive disruptions would occur when it acquires a new operation or business.

“We have not grown in an unsustainable way, we have been growing in a very sustainable, considered manner from a very solid base which enables us to easily acquire assets and slot them into our existing business – as we have with Keaton Energy – and as we plan to in future.

“We see a good future in South Africa for coal as a cheap energy source, that if managed responsibly, can be unlocked in a sustainable way that minimizes harm to the environment,” says Sulaiman.

Extra production ton potential through organic growth

The areas for organic growth within the company as it works toward achieving its 8 Mtpa objective lies within expanding the Elandspruit mine –  where Wescoal believes incremental expansion is possible.

Another area for large new organic growth lies within the Moabsvelden asset, which Wescoal acquired as part of the Keaton acquisition. Moabsvelden, which lies adjacent to Vanggatfontein, was developed to study stage by Keaton Energy.

We are currently evaluating project plans at Moabsvelden, by inspecting the study documents prepared by Keaton. “We expect this process to be completed by January 2018 after which we will make an investment decision, Sulaiman notes.

“It is really through Moabsvelden we expect to produce between 1.5 – 2 Mtpa of ROM,” notes Sulaiman. “With Moabsvelden operationalised we will comfortably and easily exceed our 8 Mtpa objective.”

Feature image credit: Wescoal