Wescoal launches rights issue to raise R81m

(Photo: Supplied)
(Photo: Supplied)

Johannesburg - Coal mining and trading company Wescoal Holdings [JSE:WSL] has launched a rights issue to raise R81m following delays in securing long-term bank funding.

The company, which owns three collieries - Khanyisa, Intibane and Elandspruit and a processing plant - is offering a subscription price of 138c a share on 58 890 389 new ordinary shares.

The money will be used to develop the company’s flagship Elandspruit colliery in Mpumalanga.

The JSE-listed company has so far funded growth projects through operating cash flows, chairperson Robinson Ramaite said on Monday afternoon.

The company said the strategy to self-fund capital expenditure had been successful and delivered value. But it said there was a need for alternative sources of capital “to allow for continued development while improving balance sheet gearing.”

The company has opted for a rights issue because of delays in securing bank funding, which is subject to the conclusion of contracts with Eskom.

The rights issue is aimed at securing funding for Wescoal’s mining division while it awaits bank funding.

The company’s Khanyisa and Intibane collieries are close to Eskom’s Kendal and Kusile power stations “and are well suited to generating Eskom grade coal,” the company said. 80% of Wescoal’s coal meets the requirements of Eskom, the company said.

Ramaite, however, said the company had no intention of supplying the export market. “It will be foolhardy at the moment,” he said.

Oversupply and weak coal prices are weighing heavily on coal producers at the moment. Ramaite, however, said the domestic coal market was looking attractive. Eskom is the main consumer of domestic coal.

Wescoal has not declared a final dividend or paid bonuses in the 2015 financial year. Instead, the company said it would use the money to develop mining assets Elandspruit and the Wescoal Processing Unit.

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