The domestic coal price is expected to increase by as much as 16% by March 2012, bolstering JSE-listed Wescoal’s bullish outlook on the inland coal market for the year ahead, CEO André Boje said last week at the miner’s interim results presentation.

He pointed to State-owned transport utility Transnet Freight Rail’s (TFR’s) improvement in the amount of coal moved to the Richards Bay Coal Terminal in recent months and the premium prices paid for export coal as factors that would contribute to an inland shortfall of coal of about 200 000 t next year.

“We expect a volatile coal price during the next six months if TFR maintains moving its improved tonnage. However, if the rail operator fails to maintain this good performance, the price would stay relatively flat,” he said.

The company’s headline earnings for the six months ended September 30 fell to 7.3c a share, from 8.6c a share in the corresponding period last year. Wescoal reported a 1% increase in revenue to R337.07-million; how- ever, profit was down by 10.9% to R11.5-million, compared with R12.9-million in the corresponding period last year.

This was due to increasing operating costs.

Wescoal operates through its mining and trading divisions, with its mining division earning about 85% of the company’s profit and the current weakened rand also significantly boosting profits.

The mining division is mainly focused on supplying State-owned power utility Eskom with lower-grade coal from its Khanyisa mine. The mine is running at full capacity, with the company expecting to sell 1.4-million tons of coal for the year by March 2012.

However, the Khanyisa resource is expected to be depleted within 18 months, placing the company’s focus firmly on developing its new resource of export-quality and Eskom-grade coal at Vlakvarkfontein, in Mpumalanga. It has applied for mining rights for this project, which it expects in the first half of 2012.

The company will continue to focus on supplying the inland market, especially Eskom, which it said had increased its prices to ensure that it received better-quality coal for its coal-fired power stations.

Meanwhile, Wescoal expects to increase its coal resources by 90-million tons, with three additional mining rights being applied for at its Vlaklaagte, Silverbank and Verblyden properties, in Mpumalanga.

Wescoal further pointed out that its share price has declined by about 33% in the last six months, which it blamed on two of its mining contractors endeavouring to cause it harm and raise concern among investors. The litigation dates to July, when one of the contractors applied for the liquidation of the miner.

“These legal matters will continue to be opposed and dealt with by our legal team,” Boje said.

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