WESCOAL HOLDINGS LIMITED - Trading Statement and Voluntary Strategic and Operational Update

Trading Statement and Voluntary Strategic and 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”)

Trading Statement and Voluntary Strategic and Operational Update

Trading Statement

In terms of paragraph 3.4(b) of the JSE Limited Listings Requirements, companies are required to publish a
trading statement as soon as they become reasonably certain that the financial results for the period to be
reported on will differ by more than 20% from the previous corresponding period.

Shareholders are advised that Wescoal is in the process of finalising its results for the year ended 31 March
2018. The company expects, with reasonable certainty, that Headline Earnings Per Share (“HEPS”) and
Earnings Per Share (“EPS”) are to vary by the amounts set out below:

-   HEPS in excess of 45.5 cents (31 March 2017: 11.3 cents), being an increase of at least 303%.

-   EPS in excess of 46.5 cents (31 March 2017: 11.6 cents), being an increase of at least 301%.

The significant increase in Group profitability was driven by continued strong production from mining
operations as well as from synergies realised from the recent acquisition of Keaton Energy Holdings Ltd
(“Keaton Energy”). (See operational detail below.)

Once the Company has clarity on the actual range of the increase, a further trading statement will be
released on SENS.

The financial information on which this trading statement is based has not been reviewed or reported on by
Wescoal’s auditors.

Voluntary Strategic and Operational Update

Wescoal wishes to further update shareholders on various strategic and operational matters pertaining to the
enlarged organisation.

Share-buy back
During December 2017, Wescoal embarked on a modest share buy-back program in line with the approvals
provided by shareholders. The total to date amounts to two million shares.

Keaton acquisition and integration update
The 2017 acquisition of Keaton Energy strengthened Wescoal’s balance sheet and free cash generation and
further diversified the asset base, realised economies of scale and synergies, as well as enhanced optionality
in contracts and off-take negotiations.
The enlarged business now has coal resources well in excess of 300 million tonnes, four operating mines, three
processing plants and significant interests in coal supply chain infrastructure.
The Company is pleased to report that the integration programme as originally contemplated is complete. Key
technical and mining skills have been retained successfully and personnel redeployments and overhead
reductions are complete. Immediate operational cost-savings and efficiencies identified during the acquisition
have been implemented with the combined savings effect in excess of R40 million per annum. Additional cost
saving opportunities have been identified and are being implemented.
An integrated resource management and reporting system has been rolled out which will enhance common
reporting across all operations and facilitate effective management with integrated and data driven decision-
making.

Production and Operational update
The Group is now better positioned to meet increased demand, both from Eskom as well as other domestic
and export customers. The enhanced flexibility of the enlarged resource base and associated mine
infrastructure has facilitated increased ROM production and product variations to service the market as and
when required. The broader organisation, is producing at an overall annualised rate of over 7 Mt/a ROM.

Elandspruit:
Elandspruit, was developed within a short period as a ‘greenfield’ project, for a capital cost of around R250
million, funded mainly from internal cash flows.
Elandspruit is operating at steady-state production levels with multiple faces active which enables
synchronised mining activities. The open-cast mining contractor, eMalahleni-based IPP Mining & Materials
Handling, is consistently hitting monthly targets. The open-cast production is supplemented by a small
underground section which utilises a single continuous miner. The overall monthly production is running at
about 250 000 tonnes of ROM and the current reserve has a remaining life of about 8 years.

The Elandspruit Processing Plant:
Elandspruit’s production is trucked to the Wescoal Processing Plant for washing. The plant is continually being
upgraded to increase productivity and reduce overall costs. Recently a radial stacker conveyor designed to
stockpile finished product destined for Eskom was installed. The complex consists of a crushing section and
drum/cyclone and fines treatment plants that can produce a range of products to meet the demands of Eskom,
other domestic consumers and the export market. Total feed capacity of the plant is around 200 000 tonnes
per month.
With Elandspruit colliery’s production capacity having been increased, the Company has supplemented
processing capacity by entering into an agreement with one of Elandspruit’s neighbours, which will see some
of Elandspruit’s coal being treated on a ‘toll basis’. This arrangement has boosted Wescoal’s treatment
capacity without the need for any capital expenditure.

Vanggatfontein:
The Company now has a second large operation in the form of Vanggatfontein, which has a remaining life of
around 12+ years. Mining activities at Vanggatfontein, formerly Keaton’s flagship mine, are stable and
operating according to plan. It is producing at an annual rate of around 3 million tonnes and has been
successfully integrated into the Wescoal group with the change of control being effected without any
interruption.
Additionally, Wescoal estimates it will produce between 1.5 million and 2 million tonnes per annum of
additional ROM from the neighbouring Moabsvelden project when it is developed.

Intibane and Khanyisa:
Combined output from Intibane and Wescoal’s share of the Khanyisa complex remains as expected, around
1.5 million tonnes on an annualised basis. These operations have short-lived reserves of 2 and 4 years
respectively.
Overall the Group remains well on track to achieve its short-medium term target of at least 8 million tonnes
ROM production per annum.

Wescoal Trading:
The Trading business continues to do well in challenging economic conditions. Sales volumes are in line with
the prior period at 85 000 ton per month.
These broader combined operations translate into additional revenue certainty and diversification through
production of a range of coal qualities, mining and washing/processing options, customer and sales strategies
across domestic and export markets, as well as optionality in contracts and off-take negotiations.

Management & Resources:
Thivha Tshithavhane head of Mining since 1 April 2017 is ably assisted by a core team of experienced
individuals with well over 100 years of mining experience.
A forward-looking human resourcing and skills model ensures that Wescoal continues to have the internal
expertise and experience required for a profitable, sustainable business.

Board and governance:
Recent board appointments will ensure that the Company continues to be well positioned to take advantage
of value enhancing opportunities in a sustainable manner. Wescoal continues to adopt best-practice
governance principles at all levels of the organisation.

BEE:
The BEE transaction completed in 2016 was a significant step in Wescoal’s journey and its implementation not
only guaranteed a black shareholding of more than 51% over a five year period but also resulted in the
injection of around R176 million in new equity, which continues to position the company well today. Wescoal’s
BEE ownership ranges between 51% - 58% at any one time.

Growth and efficiencies:
Moabsvelden, adjacent to the Vanggatfontein property, represents a significant organic growth option for the
Group. It is being examined whether underground mining or a combination of underground and opencast
might be a better option for development. With a 47,8 million tonnes resource, it has the potential to be
developed into a 1,5 to 2 Mt/a ROM operation. The asset is fully permitted and there is capacity for the coal
it produces to be washed using the processing facilities at Vanggatfontein. It is likely to be a low-capex
development similar to Elandspruit which could be brought into production within a short period of time
representing a significant value enhancing opportunity.
Additionally, various improvement and efficiency projects identified last year are being implemented in a
measured fashion. These projects represent low risk value enhancement opportunities and support the
Group’s philosophy around standardisation and scalability.
Wescoal is strongly positioned and remains intent on playing an active role as a consolidator in the coal sector
and will continue to consider value enhancing opportunities. The acquisition strategy is focussed on securing
additional resources and strategic interests in coal and key logistics infrastructure.
The annual results for Wescoal are expected to be released on SENS on or about the 26 June 2018.

22 May 2018
Sponsor
Nedbank Corporate and Investment Banking
IR Advisor
Singular IR

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