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WESCOAL HOLDINGS LIMITED - Notification of dismissal by the contract mining company of its contract mining employees at Vanggatfontein Mine

Release Date: 24/04/2019 08:00
Code(s): WSL     PDF:  
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Notification of dismissal by the contract mining company of its contract mining employees at Vanggatfontein Mine

Incorporated in the Republic of South Africa
(Registration number 2005/006913/06)
Share code: WSL
ISIN: ZAE000069639
(“Wescoal” or "the Company")

Notification of dismissal by the contract mining company of its contract mining employees at Vanggatfontein Mine
following a disciplinary hearing related to unlawful employee conduct

1. Introduction

Wescoal acquired Keaton Energy Holdings (“Keaton”) with effect from July 2017. The main operating business unit of
Keaton was and remains Vanggatfontein Mine (“VGF”), which is owned by Keaton Mining Proprietary Limited (“Keaton
Mining”), a wholly owned subsidiary of Keaton, which in turn is a wholly owned subsidiary of Wescoal.
At the time of the acquisition, mining operations at VGF were outsourced to a mining contractor. The said mining
contractor was subsequently placed under business rescue during June 2018 and as a result Wescoal began the process
of evaluating options for the continuation of provision of contract mining services at VGF. In this regard, on 30
November 2018, Wescoal appointed a new mining contractor for VGF (“the New Mining Contractor”). Due to the
requirements of section 197 of the Labour Relations Act 66 of 1995 (as amended from time to time) (“LRA”) regarding
a “going concern”, 228 contract mining employees in total were transferred by 1 March 2019 from the previous mining
contractor to the New Mining Contractor (“the Contract Mining Employee Transfer”).

2. Unlawful employee conduct, disciplinary hearing and dismissal

Following the Contract Mining Employee Transfer, numerous unprotected industrial actions in the form of work
stoppages, strike actions and riots have been taking place at VGF on a regular basis (“Unlawful Employee Conduct”),
resulting in considerable lost mine production time and the New Mining Contractor being unable to meet its
contractual obligations to VGF. The Unlawful Employee Conduct turned violent on 16 April 2019, with destruction of
certain equipment on site and blockage of the VGF entrance gate, resulting in the New Mining Contractor applying for
and obtaining a court interdict against its VGF employees on 17 April 2019 from the Labour Court.
A disciplinary enquiry regarding the Unlawful Employee Conduct was held against all contract mining employees of
the New Mining Contractor on 18 April 2019 and the independent chairperson of the disciplinary enquiry delivered a
ruling on 20 April 2019 in which he has concluded that all VGF contract mining employees belonging to the New Mining
Contractor are guilty as charged and that the only recommendation which would be appropriate in the circumstances
would be that of dismissal, subject to the dismissal appeal provisions contained in section 191 of the LRA.
The New Mining Contractor informed Wescoal on 22 April 2019 that it has issued dismissal notices to all 274 contract
mining employees (inclusive of the 228 transferred employees) at VGF and that the New Mining Contractor will
immediately commence with a recruitment process to hire new employees from 23 April 2019.

3. Potential production downtime and impact

As a result of the dismissal of employees and the recruitment process to be undertaken by the New Mining Contractor,
in consultation with Wescoal, production at VGF will be suspended for a period of (minimum) six to (maximum) eight
weeks (“VGF Production Downtime”).

Little to no production is expected during the VGF Production Downtime and Wescoal expects that VGF production
will be reduced by approximately 15 - 20% of budgeted annual production of the mine in FY2020. However, other
activities at VGF are expected to continue on a limited basis, with a particular focus on keeping VGF in a condition to
resume operations in a shorter timeframe if required.
In order to address the impact of coal deliveries to key customers of VGF, in particular, Eskom Holdings SOC Limited
(“Eskom”), Wescoal (through Keaton Mining) has on 23 April 2019 provided notice of force majeure to Eskom of the
inability to continue supplying coal in terms of the contractual obligations under the existing VGF coal supply
agreement with Eskom as a result of the envisaged VGF Production Downtime. Wescoal intends holding further
discussions with Eskom shortly in order to address the impact of the VGF supply shortfall to Eskom. Other Wescoal
businesses are not affected and are expected to continue deliveries of coal to Eskom as scheduled.

4. Conclusion

The Unlawful Employee Conduct has already resulted in significant negative financial impact on Wescoal. Wescoal’s
executive team remains committed to support the New Mining Contractor and VGF mine management with day-to-
day management of the situation including interventions required to minimise the VGF Production Downtime,
accelerate the recruitment and training processes as well as manage community and employee stakeholders in the

The financial impact of the VGF Production Downtime will be communicated and disclosed further in the coming weeks
through the release of the 4Q2019 production update during the week commencing 29 April 2019, the FY2019 financial
results trading statement and the FY2019 financial results on or about 25 June 2019.
The above information has not been reviewed or reported on by Wescoal’s auditors and shareholders of Wescoal are
reminded that the Company is in a closed period until the release of the FY2019 financial results.

24 April 2019

Nedbank Corporate and Investment Banking

Investor Relations Advisor
Singular IR

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