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Wescoal Holdings Limited - Wescoals Voluntary Strategic And Operational Update

Release Date: 12/01/2017 13:05:00      Code(s): WSL     
Incorporated in the Republic of South Africa
(Registration number 2005/006913/06)
Share code: WSL
ISIN: ZAE000069639
(?Wescoal? or ?the Company? or "the Group")

Wescoal?s voluntary strategic and operational update


Strategic update
Wescoal has leapt into 2017 on the back of FY17 half year profits (unaudited) reported in November
2016, up more than 500 percent having delivered across the board on its commitments. Heading up
the Group?s bouquet of successful milestones: a long term contract that calls for some 7.8 million
tons of coal to be delivered to Eskom over the next 5 years; HDSA ownership increasing to more
than 51 percent and the injection of R178 million equity; export contracts of more than 1 million
tons per annum; and strengthening of the management team

Wescoal?s coal supply agreement (?CSA?) with Eskom which commenced on 1 November 2016 will
ensure uninterrupted coal supply for the next 5 years. Some 7.8 million tons of coal beneficiated at
Wescoal?s Processing Plant will be delivered to Eskom during the life of the CSA. This equates to
approximately 165 000 tons of run of mine (?ROM?) coal per month from Elandspruit Colliery.

Wescoal?s stated intent was to conclude a BEE transaction by end December 2016 (?the BEE
Transaction?). On 20 December 2016 shareholders were advised that the Company had successfully
concluded and implemented its BEE Transaction. The Company has now secured at least 51% direct
black ownership for the next five years. Additionally, the BEE Transaction injected R178 million
capital into the business which has been earmarked for use in acquisitions.

Export contracts for more than 1 million tons per annum over the next three years have also been
concluded. These contracts have significantly de-risked and diversified future revenue streams.
A number of management appointments in key functions were made during calendar year 2016.
These high calibre professionals have not only helped revitalise the organisation, but they have also
contributed toward a transformed business leadership team.

Management?s priorities remain to strive for safe and reliable operations, solid and predictable
financial performances, re-alignment of the trading business to Wescoal?s needs and to maximise
value from the existing asset base. Planning and executing projects in a conservative, risk-based
manner will continue to form the basis on which Wescoal will manage and realise value from its
growth plans.

Growth plans
Wescoal remains an active participant in the consolidation of the domestic junior coal mining sector
with respect to reviewing value enhancing opportunities.

Recently concluded Eskom and export coal sale contracts, coupled with an equity injection from the
BEE Transaction, have positioned Wescoal very well to further its inorganic growth ambitions of
acquiring additional coal resources and interests in key logistic infrastructure. Organic growth
options revolve around expanding Elandspruit and operationalising the Khanyisa Colliery.

These growth initiatives support Wescoal?s 8 million ton per annum of ROM aspirations and revenue
diversification strategy.

Operational update
Operationally, Wescoal continues to perform in line with expectations, consistent with the
achievements during the first half of FY17.

Mining division
No reportable accidents were recorded during the period 1 April 2016 to 31 December 2016.
The Elandspruit complex continues to deliver on its promise and will continue to be a core value
enhancing contributor to the Group. A number of projects were successfully completed resulting in
steady state ROM production increasing from 165 000 tons per month to more than
200 000 tons per month and beneficiation capacity increasing to 190 000 tons per month.

Work on the small underground mining initiative has progressed well and first coal was extracted
during November 2016. It is expected that the underground activities will reach its targeted steady
state production of 25 000 tons per month during February 2017.

The Intibane Colliery was effectively operationalised in October 2016 and now meets the production
requirements of secured off-take agreements.

Mining activities at the Khanyisa Colliery are only subject to consent from the Department of Mineral
Resources. The integrated Khanyisa Colliery has a targeted production rate of approximately
100 000 tons per month.

The financial year to date ROM production is approximately 2.4 million tons.

Trading division
The trading division continues to operate resiliently under difficult business conditions. Business re-
alignment initiatives have to date resulted in the closure of the Port Elizabeth depot and realignment
of the Western Cape operations. This work is expected to be complete by mid-2018 and will result in
a more robust and simplified trading division.

Total sales are in line with that of prior years and the business continues to carefully manage credit

Financial update
The Company continues to focus on strong cash flow and working capital management. The balance
sheet has strengthened significantly over the past 18 months, with the Group now in a net cash
position following the BEE Transaction. The capital structure is being optimised with a view to taking
advantage of growth opportunities and rewarding shareholders.

The Company declared two dividend tranches in 2016 namely: final dividend of R10 million for FY16
and a special dividend of R10 million declared during September 2016.

12 January 2017
Nedbank Corporate and Investment Banking

Investor Relations & Communications
Singular IR

Date: 12/01/2017 01:05:00 Supplied by www.sharenet.co.za                     
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