Junior coal miner Wescoal declared a dividend of 3.1c per share for the six months to September as its recent acquisition of rival Keaton Energy helped to boost interim profit.

Wescoal, whose biggest customer is Eskom, also raised its black ownership to 59% at the end of 2016, above the power utility’s requirement of 51% for its suppliers.

Wescoal shares slipped 0.5% to 207c after the results were released. They are down about 10% over the past year. CEO Waheed Sulaiman said this could reflect the issue of more shares and the exit of some former Keaton shareholders who did not wish to retain shares in the merged entity.

He said problems reported at Eskom were not affecting Wescoal operations and relations with Eskom were on a sound footing, but they could be having a reputational effect.

Wescoal is completing studies on a coal project at Moabsvelden, formerly part of Keaton, which would be presented to the board for an investment decision in January. Discussions on an Eskom supply contract have not yet begun.

Wescoal grew interim revenue 55% to R1.6bn but gross margins narrowed.

Chief financial officer Izak van der Walt said efforts were being made to improve margins through operational efficiencies and procurement.

Headline earnings fell 27% to 20.2c per share on the increase in issued shares. Cash generated from operations more than doubled to R206m.

Keith McLachlan, fund manager at AlphaWealth, said the dividend was fully justified by Wescoal’s free cash flow and the quality of its underlying earnings. Although his first choice would have been a share buyback, he said a dividend was a close second.


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