Johannesburg - Wescoal [JSE:WSL]
, which has transformed from a coal merchant to a fully fledged coal miner, reckoned its stated production annual target of 1.2 million tonnes "will in all probability be exceeded".
Speaking at the release of year to end-March 2010 results on Wednesday, Wescoal CEO André Boje
said the mining division - built around the Khanyisa mine - enjoyed a promising start and had already secured new contracts. This would boost the production of saleable washed product from 220 000 tonnes to 558 000 tonnes for the year ahead.
He added that the company was currently investigating the feasibility of commissioning an additional washing plant.
"In February this year, the first revenue flowed from Khanyisa and accounted for the bulk of the operating profit achieved by the mining division during the second half."
Not too much mind will be paid to Wescoal's results for the year to end-March 2010 as the performance still mainly reflects the company's coal merchant activities.
Revenue for the year dropped by almost a third to R386m due to significantly reduced pricing structures and smaller volumes. Gross profit reduced by roughly the same margin R37m (before impairments).
Boje disclosed that the mining division contributed only 29% to overall revenue, bringing in R113m thanks mainly to initial contributions from Khanyisa.
More encouraging was that the mining segment generated operating profits of R8.8m and headline earnings of R5.5m.
It's not all bad news for the Wescoal's coal merchant activities. Boje reckoned the coal merchant division would ultimately return to the levels achieved in the past.
But the focus is clearly on mining, and Wescoal seems encouraged by the mining segment's performance in the last two months of the financial year.
Boje said the advantages of the Khanyisa acquisition were already prevalent with Wescoal - in conjunction with a black economic empowerment partner - winning a three-year supply contract to provide Eskom. "Delivery of the initial order of 100 000 tonnes on this contract has already successfully taken place".
Asked whether Wescoal was actively looking for new mining opportunities, Boje said the company was investigating all possibilities.
"These range from potential greenfields opportunities in our existing mining operations, investigating mining rights not currently being used and looking independent coal mining operations."
Wescoal - as previously reported on Fin24.com - made an unsuccessful tilt at SA Coal Mining Holdings earlier this year. Fin24.com has also speculated that Wescoal could seek a tie-up with empowerment giant HCI's struggling coal mining interests.
Boje stressed Wescoal needed to ensure the sustainability of its mining operations. "We don't want to have a gap between Khanyisa's production coming to an end and starting up production at another mine."