Wescoal six-month profit to rocket, thanks to Moabsvelden
Production from the mine in Mpumalanga has helped offset pressure on other operations in the miner’s half-year to end-September
Junior coal miner Wescoal says half-year of profits will rise almost sixfold, boosted by the contribution of its flagship Moabsvelden project in Mpumalanga.
The R827m company, which counts power utility Eskom as its main customer, forecast headline earnings per share for the six months to end-September to rise by at least 485% from the previous period’s 3c, when Covid-19 sapped demand from many of its clients, which includes manufacturers as well as the power utility.
Headline earnings, the main profit measure in which excludes one-off items, was also hit by a build up in stockpiles that cut into its cash flows in the same period a year earlier. That is now forecast at R10.7m
Wescoal said in a trading update that demand from Eskom still hasn’t recovered to pre-pandemic levels, but this was offset by its improved overall operational performance.
The company is also looking at export opportunities to take advantage of higher global energy prices.
Coal prices have surged in 2021, with demand from China soaring after heavy in October disrupted production in one of the country’s top producing regions.
Prices have since cooled, from a high of $205 a ton in October to about $121 now, which is still almost double 2020’s low. China’s coal output recently soared to record daily levels after Beijing ordered miners to boost production to cool prices and plug a power shortage.
Wescoal said coal production in the first half was 7% higher at 4.7-million tonnes, with output from Moabsvelden offsetting the lower production from the other operations.
Production has been steadily increasing at Moabsvelden since first coal was blasted at the greenfield project in January 2021, and it contributed almost 24% of the group’s total run of mine production for the first half.
Wescoal has invested R228m in Moabsvelden, which helped the group record its highest annual production of 7.7-million tonnes in its year to end-March.
Wescoal’s shares jumped 11.67% to R2.01 in afternoon trade on Wednesday, putting it on track for its best day in just more than two months, and bringing its year-to-date gain to 115%.
Update: December 8 2021
This article has been updated with additional information.
With Reuters