JSE-listed coal miner Wescoal says it expects to report a headline loss a share of between 2.5c and 3.2c for the financial year ended March 31.

This compares with a headline loss a share of 32.67c reported for the prior financial year.

Further, it expects to post a basic loss a share of between 8.1c and 8.9c, compared with a basic loss a share of 32.57c in the 2020 financial year.

The miner attributes the improvement in the 2021 financial performance to an improved performance from the mining operations and, as such, the company was able to maintain positive cash generation from operations, with earnings before interest, taxes, depreciation and amortisation expected to be between R550-million and R590-million.

Meanwhile, production ended the year under review 1% higher than in the prior financial year, with the Vanggatfontein operation having been a solid performer for the group throughout the 2021 financial year.

Although run-of-mine (RoM) production was down 17% year-on-year for this mine, overall production was up 68%.

As for Elandspruit production, the mine ended the fourth quarter with RoM production up 32% from the third quarter, and only slightly down from the comparable period of the 2020 financial year.

At this mine, the restart of the underground mining section will commence during the first quarter of the 2022 financial year.

Wescoal’s Khanyisa mine ended the quarter under review with a solid performance, with its production up 24% from the previous quarter, and 4% higher than the fourth quarter of the 2020 financial year.

However, despite the good performance in the 2021 financial year, overall production for Khanyisa was 9% lower than what was achieved in the 2020 financial year.

Meanwhile, the miner reports that its development of the Moabsvelden project is currently well under way, contributing just over 10% of the group’s 2021 financial year RoM production.

In this regard, ongoing developmental workstreams are in progress and will support the ramp-up to 160 000 t a month of saleable product by July.

SALES & GUIDANCE

Wescoal reports that its overall mining sales volumes for the fourth quarter were 2% lower year-on-year, mainly owing to a decrease in sales from the Neosho Trading 86 company in terms of the Eskom rectification plan for Moabsvelden, which was 20% lower year-on-year.

Besides the buy-ins for the Moabsvelden contract, Wescoal reports that no coal had to be bought from third parties to supplement its 2021 financial year production.

As such, the miner was able to sell more than 1.5-million tonnes of its own production in the fourth quarter of the 2021 financial year.

Nonetheless, Wescoal notes that trading sales volumes remain under pressure, but in line with expectations, considering the tough trading environment and the impact of Covid-19 during the initial lockdown in the 2020 calendar year.

The business saw its total trading sales volumes decrease by 12% from 759 000 t in the 2020 financial year, to 668 000 t in the 2021 financial year.

As such, trading sales for the year under review were 25% higher than the financial year prior, signalling an improvement in coal offtake from Eskom.

However, Wescoal highlights that the coal offtake by Eskom remains lower than pre-Covid-19 lockdown levels.

In terms of guidance, Wescoal points out that, while the South African economy is starting to show signs of recovery, concerns remain as the country navigates through the third wave of the Covid-19 pandemic.

This – coupled with the operational problems being faced by Wescoal’s major customer Eskom, as it continues to implement rolling blackouts to manage grid pressure – will continue to impact on domestic coal demand, the miner notes.

Alternatively, Wescoal notes that the seaborne market presents a “great opportunity” for miners with export capability, as prices have surpassed the highs last seen in 2018.

As such, the miner states that the current environment remains challenging, but can present opportunities for companies like itself, as export demand starts to drive up local prices.