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 interim results for the period ended 30
September 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 will be between 20.9 and 24.9 cents (30 September 2017: 20.2 cents), being an increase of
        between 3.5% and 23.3%.
    -   EPS will be between 23.0 and 26.5 cents per share (30 September 2017: 22.5 cents), being an increase
        of between 2.2% to 17.8%.

The increase in Group profitability was driven by good performance from the trading division and synergies
realised from the acquisition of Keaton Energy Holdings Ltd (“Keaton Energy”). (See operational detail below.)
The financial information on which this trading statement is based has not been reviewed or reported on by
Wescoal’s auditors.

Voluntary Operational and Strategic Update

Wescoal wishes to further update shareholders on various operational and strategic matters.
Production and Operational update: The Group is now better positioned to meet increased demand, both
from Eskom and other customers. The enhanced flexibility of the enlarged resource base and associated mine
infrastructure has facilitated increased run of mine (“ROM”) production and product variations to service the
market as and when required. During the period, the Group produced 3.2 million tonnes of ROM. The Group’s
stronger balance sheet allowed it to trade more coal and increase saleable coal tonnes to 2.4 million tonnes.
Elandspruit: Elandspruit continues to operate at steady-state production levels with multiple faces active
which enables operational flexibility. Overall monthly production is 250 000 tonnes of ROM and the current
reserve has a remaining life of about 7 years.

The Elandspruit Processing Plant: Elandspruit’s production is trucked to the nearby processing plant for
beneficiation. Total feed capacity of the plant is around 200 000 tonnes per month.

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 additional capital expenditure.

Vanggatfontein: Post the acquisition of Keaton, the Company now has a second large operation in the form
of Vanggatfontein, which has a remaining life of 11+ years. The mine has been integrated into the Group and
its mining philosophy has been aligned with that of the rest of the Group’s mines. Productivity and cost saving
opportunities have been identified and implemented over the period. Vanggatfontein contributed 1.6 million
tonnes to Group ROM production during the period, compared to 0.9 million tonnes during the prior period.

The Vanggatfontein mining contractor, Liviero Mining, is currently in business rescue. Wescoal is working with
the business rescue practitioner to minimise disruptions to mining operations. Management are concurrently
putting the finishing touches to a more sustainable model which will include the Group having a minority
interest in the ownership structure of the contract mining entity. This will enable greater oversight of costs
and risks, greater participation in the economic benefits of contract mining and facilitate skills development
and training within the Group.

Moabsvelden: This asset acquired through the Keaton acquisition is adjacent to the Vanggatfontein property
and represents a significant organic growth option. The mine development project plan is being optimised in
conjunction with projected commercial arrangements to sell the coal. With a 47.8 million tonnes resource,
Moabsvelden has the potential to be developed into a 1.5 to 2 million tonne per annum ROM operation. The
asset is fully permitted and conversations with surface right holders are underway. ROM from Moabsvelden
can be washed using existing processing facilities at Vanggatfontein.

Wescoal Trading: The Trading business continues to do well despite challenging economic conditions with
sales volumes of about 600 thousand tonnes, an increase of 15.3% on the prior period.

M&A Update: Wescoal is strongly positioned as a consolidator in the coal sector and will continue to consider
value enhancing opportunities. This strategy is focussed on securing additional resources and strategic
interests in coal and key logistics infrastructure as well as disposing of non-core assets.

Universal Coal: On 26 October 2018, Wescoal announced on SENS that it joined a consortium led by private
equity firm, Ata Resources, to buy Universal Coal listed in Australia. Universal Coal controls two operating
mines in South Africa - the 2.4 million tonne per annum ROM Kangala Colliery and New Clydesdale Colliery
which is forecasted to produce 2.7 million tonne per annum ROM. Wescoal will not be actively involved in the
management of the Universal Coal business in the short term although this potential exists in the medium to
long term.

Leeuw Braakfontein Disposal: On 7 August 2018, Wescoal announced on SENS that it disposed of its non-core
Leeuw Braakfontein Colliery Proprietary Limited (“LBC”) assets located in KwaZulu-Natal to Sitatunga
Resources Proprietary Limited, for a total consideration of R103 million (excluding VAT). The purchase price
will be paid in cash on closing of the transaction from funds within the Sitatunga group. The outstanding
conditions precedent are regulatory in nature and standard for this type of transaction. LBC falls outside
Wescoal’s strategic focus area and disposing of it monetises a dormant asset.

Intibane Disposal: On 7 June 2018, Wescoal announced the disposal of its Intibane 1 and Intibane 2 collieries
located in Mpumalanga, which became effective in July 2018. The purchase consideration of R57 million was
paid in cash. Intibane had an operating lifespan of less than two years and exiting from it freed up
management time to focus on optimising the Group’s other operations.

These acquisitions and disposals are in line with the Company’s strategy of realising value for shareholders
and building a scalable, sustainable business.

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. The Company is pleased to report that the integration
programme as originally contemplated is complete. Additionally, an integrated resource management and
reporting system has been implemented which enhances common reporting across all operations and
facilitates effective management with integrated and data driven decision-making.
Share Buy-Back: In December 2017, Wescoal resolved to repurchase a maximum of R20 million worth of its
own shares in terms of the general approval granted by shareholders of the Company at the annual general
meeting held on 14 November 2017. The Share Repurchase is subject to the Board having applied the solvency
and liquidity test as required in terms of sections 46(1)(b) and 46(1)(c) of the Companies Act, No 71 of 2008.
To date 7.6 million shares have been repurchased.

BEE and Transformation: The BEE transaction completed in 2016 was a significant step in Wescoal’s journey
and its implementation not only facilitated black shareholding of more than 51% over a five-year period but
also resulted in the injection of around R176 million in new equity. The Company continues to invest in and
strengthen its management team, paying special attention to diversity targets. During the period, vacancies
for senior roles in the company secretary and finance functions have been filled by skilled female HDSA
candidates. Wescoal currently meets the DTI Scorecard requirements of 30 percentage HDSA/female
employees in senior roles.

Funding: The Keaton transaction resulted in a step change in the Group’s funding capacity. Total debt facilities
are in the region of R850 million and are sufficient to fund internal and external growth initiatives as well as
operational requirements. Conversations are underway with funders to restructure and consolidate debt
facilities within the Group. This will further reduce finance charges and risks as well as allow the Company to
continue its growth trajectory.

Wescoal’s interim results are expected to be released on SENS on or around the 13 November 2018.

8 November 2018

Sponsor
Nedbank Corporate and Investment Banking

IR Advisor
Singular IR

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