Bulked up Wescoal open to more deals. The coal producer says it remains strongly positioned as a consolidator in the

coal sector and will continue to consider value-enhancing opportunities while

disposing of non-core assets.

Wescoal's acquisition of Keaton Energy last year has been a game changer,

strengthening its balance sheet and free cash generation and giving it

economies of scale and synergies as it diversified its asset base. The mid-

tier miner says it now has coal resources of about 300 million tonnes,

together with three operating mines, three processing plants and significant

interests in coal supply-chain infrastructure.

Releasing interim results yesterday, Wescoal said the integration of Keaton

was now complete. As part of a restructuring of its operations over the

period, it sold the non-core Leeuw Braakfontein and Intibane collieries.

Proceeds from the disposals were used to reduce its short-term borrowing and

fund new growth options.

Its Mining division grew revenue by 25% to 1.33 rand billion over the six months

to end-September, buoyed by the inclusion of Keaton's Vanggatfontein

operation. Total coal sales were steady at 2.4 million tonnes, with sales to

Eskom jumping 46% to 1.9 million tonnes.

Wescoal's Trading division lifted revenue by 36% to 808 rand million to

contributed 39% of total revenue.

Group revenue rose 28% to 2.06 rand billion and operating profit increased by 22%

to 197 rand million. Headline earnings jumped 30% to 103 rand million, helped by a 21%

reduction in operating expenses to 104 rand million. Headline earnings per share

came in 16% higher at 23.5c.

Its gearing ratio improved to 18% from 29% in March and 32% a year ago.

We are pleased with the operating performance, production and sales from the

broader asset base in the first half," CEO Waheed Sulaiman said. "The company

is solidly on track to meet its production targets and is well-positioned for

steady sustainable growth."

Wescoal said it remained strongly positioned as a consolidator in the coal

sector and would continue to consider value-enhancing opportunities while

disposing of non-core assets. Last month, it said it had joined a consortium

to buy Australia-listed Universal Coal.

Its shares rose 5.1% yesterday to close at 2.05 rand.

Eskom being short of coal puts Wescoal in a strategically strong position

for pricing its coal. Yes, the coal trading segment has access to coal that it

could technically supply into Eskom. Likewise, there is an export element

(currently via Glencore) that Wescoal could use.

-- Keith McLachlan (@keithmclachlan) November 13, 2018