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Elandspruit production set to ramp up as project nears completion

FLAGSHIP QUALITY Elandspruit, located outside Middelburg, has reserves of more than 34-million tons and a life-of-mine of 12 to 15 years

FINAL STAGE Elandspruit’s remaining project scope includes construction of permanent on-site building infrastructure and various projects at the coal-processing facility

11th December 2015

By: Mia Breytenbach

Creamer Media Deputy Editor: Features

  

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The Mpumalanga-based Elandspruit colliery will ramp up to produce 335 000 t of run-of-mine (RoM) a month before the end of this financial year, representing at least half of South African coal mining and -trading company Wescoal’s 2016 financial year coal target of about four- million tons of RoM a year.

By the end of this financial year, annualised monthly production at Elandspruit will be at least two-million tons of RoM a year.

“The significance of the Elandspruit project is highlighted by Wescoal’s bucking the local industry trend, where there have been few, if any, new developments of this nature,” says Wescoal acting CEO Waheed Sulaiman.

The company claims that Elandspruit, which is in its final stage of completion, is the only large new coal mine to open in South Africa this year.

Wescoal tells Mining Weekly that the final stage entails the construction and improvement of various access roads, the enhancement of water management systems, the construction of permanent on-site building infrastructure and various projects at the company’s coal-processing facility to improve efficiencies and stockpile management.

During 2015, as coal mining in South Africa retreated amid difficulties in the commodities sector, Wescoal remained steadfast in its strategic development plan, with Elandspruit at the forefront, Sulaiman emphasises.

He believes that the colliery has proven its flagship qualities for the Wescoal group this year, enabling it to perform above the 2015 mining industry average in a challenging business climate “fraught with eroding value, pricing pressures and labour disruptions”.

Elandspruit, located outside Middelburg, has reserves of more than 34-million tons and a life-of-mine of 12 to 15 years. The mine provides feed for the Wescoal processing plant 20 km away.

Creamer Media’s Research Channel Africa reported in September that the Elandspruit mining right contains five potentially mineable coal seams, which occur from suboutcrop to a maxi- mum depth of about 70 m below surface. These seams are near horizontal in formation and appear to be devoid of geological complexities such as faulting or dolerite intrusions.

“Elandspruit will continue to be a mine focused on supplying [State-owned power utility] Eskom,” Sulaiman notes.

While the strategy he and his team have adopted – to focus on the domestic coal mining market and transform Wescoal Holdings into a majority-black-owned business – has not been easy. Sulaiman says, it is the correct one, taking into consideration prevailing economic conditions and the company’s resource base.

“We are highly dependent on Eskom, which, as our major client, has stipulated the need for a supplier with 50%-plus-one empowerment shareholding credentials to secure long-term contracts.”

He adds that the company’s raising long-term debt funding hinges on securing long-term coal supply contracts.

“To date, we have funded our growth initiatives from internally generated cash flows and cost-saving initiatives. This philosophy is, however, not sustain- able and we have approached our shareholders for capital as a last resort,” Sulaiman acknowledges.

Mining Weekly reported last month that the company, which, in October, announced its intention to raise R81-million in equity capital to further develop the Elandspruit colliery and fund other growth options, had settled on a maximum of R65-million through a renounceable combined clawback and rights offer.

“The proceeds of Wescoal’s rights issue will be directed mainly towards the Elandspruit mine and the processing plant to ensure efficient medium- to long-term mine development, as well as the mitigation of operational risks through the construction of additional infrastructure and access roads.

“The capital will also help to fund optimisation projects at the processing plant, which will increase efficiencies and sale-able product volumes,” Sulaiman explains.

Other advances in the Elandspruit timeline have been important in developing Wescoal’s business and will remain so into the medium-term future, he emphasises.

One such development was the water-use licence, awarded in January. In June, contractor Diesel Power Open Cast Mining was appointed the mining contractor, with first coal mined in July.

Wescoal is at an advanced stage regarding the conclusion of a long-term supply contract for Elandspruit coal with Eskom. The company has been supplying coal to Eskom on a short-term basis since September.

Sulaiman says the conclusion of a long-term coal supply contract will, ultimately, be a major milestone as it will be the catalyst to unlocking long-term debt funding facilities.

He underscores the hard work and perseverance of the company’s negotiation team, as contracts have taken longer than expected to conclude. This has resulted in Wescoal entering into suboptimal coal-sale arrangements with other customers while also selling coal to Eskom.

“Signing a long-term contract for our Elandspruit operations is now at the top of our priority list, after which we will focus on our Intibane and Khanyisa collieries, in Mpumalanga,” Sulaiman states.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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