Wescoal final results presentation

FINAL RESULTS
For the year ended 31 March 2013
24 June 2013
1
Agenda
• Introduction and background
• Operating environment
• Financial performance
• Prospects
• Q&A
2
Introduction
and
background
3
Strategic intent
“The key strategic thrust of Wescoal
is to be a leading junior miner with
a sustainable resource base and a
coal trading operation”
Robinson Ramaite
Chairman: Wescoal Holdings
4
Organisational structure
Board of Directors
Executive
André Boje
Chief Executive Officer
Wiseman Khumalo
Piet Janse van Rensburg
Operations
Executive Director
Dutch Botes
Chief Operations Officer
Wescoal Group
Martin Bartle
Managing Director
Wescoal Mining
Chief Financial Officer
Ettienne Strydom
Projects Manager
Wescoal Mining
Gerrie Coetzee
Managing Director
Wescoal Trading
Curtis Mnisi
Group Financial
Manager
Wescoal Holdings
5
Background to Wescoal
Wescoal is involved in the mining, processing and
distribution of coal
Wescoal Holdings
Wescoal Mining
Functioning operations
Khanyisa
Intibane
Future operations
Elandspruit
Production
1.31m tons of coal
(2012: 1.18m tons)
Future production target
4m tons of coal by 2016
Wescoal Trading
> 80 Years of operational experience in SA
Functioning operations
Benoni, Port Elizabeth, Cape
Town, Krugersdorp (central sales)
Strategic intent – Remain the mainstay feature of
the Group
Strategic intent – Division will produce the bulk of
the Group’s profit
6
Financial
performance
7
Salient features (continuing operations)
Revenue
7.3% to R676.9m
EBITDA
0.2% to R45.3m
Headline earnings
7.7% to R19.3m
HEPS
7.0% to 12.2 cps
Cash reserves
7.3% to R21.4 m
Maiden dividend of 3 cps declared
8
Dividend Policy
• Experienced strong cash flows and should
continue to do so
• Dividend cover of 4 times
• Conservative policy adopted by board
• Shareholder returns
9
Year under review
• Solid set of results produced
• Production increased to 1.31m tons of coal (2012: 1.18m
tons)
• Underground mining successfully begun at Khanyisa
• Inland coal price increased over the period (going forward
will remain static)
• Export price remains low
• Notwithstanding challenges
– Cost of production
– Strike action (transportation sector)
– Diesel price increase
10
22-May-13
01-May-13
10-Apr-13
20-Mar-13
27-Feb-13
06-Feb-13
16-Jan-13
26-Dec-12
05-Dec-12
14-Nov-12
24-Oct-12
03-Oct-12
12-Sep-12
22-Aug-12
01-Aug-12
11-Jul-12
20-Jun-12
30-May-12
09-May-12
18-Apr-12
28-Mar-12
07-Mar-12
ZAR
Fuel price increases
Diesel price (Reef)
1250
1200
1150
1100
1050
1000
950
900
Source: Automobile Association of South Africa
11
Statement of comprehensive income (cont)
Reviewed
Mar 2013
Audited
Mar 2012
% Change
676 927
630 751
7.3%
72 674
64 138
13.3%
10.7%
10.2%
0.5%
EBITDA
45 306
45 230
0.2%
Profit before taxation
25 045
26 191
(4.4)%
Taxation
(5 338)
(5 589)
(4.4)%
Profit for the period from continuing
operations
19 707
20 602
(4.3)%
Headline earnings for the year
19 327
17 947
7.7%
R’000
Revenue
Gross profit
Gross profit margin
• Profitability increased due largely to Mining division results
• 2012 includes a profit on the sale of fixed assets
12
Statement of comprehensive income
400 000
293 684
500 000
223 311
600 000
10 000
0
8 832
10875
20 000
11 506
700 000
12 380
30 000
325 566
800 000
9 096
Profit from continuing operations (R’m)
Revenue (R’m)
2012
2013
-10 000
-20 000
-30 000
-29 427
351 361
100 000
337 067
200 000
334 303
300 000
-40 000
0
2011
First half
2012
2013
Second half
2011
First half
Second half
• Sustained earnings from operations
13
Earnings
Headline earnings reconciliation (cents per share)
Reviewed
Mar 2013
Audited
Mar 2012
%
Change
19 707
20 602
(4.3)%
(380)
(2 655)
85.7%
19 327
17 947
7.7%
Net profit for the year
Less profit on the sale of assets
Headline earnings for the year
Reviewed
Mar 2013
Audited
Mar 2012
Total at year end
157 931
157 931
Weighted average shares in issue
157 931
157 931
Fully diluted weighted average shares in issue
158 306
158 247
Ordinary shares in issue (‘000)
14
Earnings
Reviewed
Mar 2013
Audited
Mar 2012
%
Change
Basic earnings per ordinary share
12.5
13.1
(4.6)%
Fully diluted basic earnings per ordinary share
12.4
13.0
(4.6)%
Headline earnings per ordinary share
12.2
11.4
7.0%
Fully diluted headline earnings per ordinary share
12.2
11.4
7.0%
Cents per share
15
Headline earnings per share
HEPS for the full year
30
20
11.4
12.2
2012
2013
10
0
2011
-10
-20
-30
-26.2
16
Segmental contribution
Revenue
Profit from operations
11%
53%
47%
89%
Mining
Trading
Mining
Trading
Mining will continue to produce the bulk of the Group’s profits
going forward
17
Mining division
Reviewed
Mar 2013
R’000
External revenue
Profit from operations
Margin
Audited
Mar 2012
% Change
318 347
273 785
16.3%
34 691
29 923
16.0%
10.9%
10.9%
-
Performance:
• Good result considering challenges faced
• Will produce in excess of 1.6 million tons to March 2014
• 700 000 tons from Intibane
• Mining costs will reduce as Intibane comes on line
• Margin improvement should be seen
18
Trading division
Reviewed
Mar 2013
R’000
External revenue
Profit from operations
Margin
Audited
Mar 2012
% Change
358 580
356 691
0.5%
4 166
5 108
(18.4)%
1.2%
1.4%
0.2%
Performance:
• Difficult period with decline in volumes due to increased competition
from new entrants
• Inland pricing to remain static due to weak export pricing
• Focus on margin retention and cost reduction
19
Statement of financial position - assets
Reviewed
Mar 2013
Audited
Mar 2012
% Change
57 704
55 685
3.6%
709
709
-
Goodwill and investments
52 030
50 947
2.1%
Intangible assets
28 014
18 801
49.0%
Deferred taxation
3 719
8 982
(58.6)%
15 986
13 157
21.5%
Trade and other receivables
109 592
113 133
(3.1)%
Cash and cash equivalents
21 370
20 163
6.0%
289 124
281 577
2.6%
R’000
Property, plant and equipment
Investment property & investments
Inventories
Total assets
20
Statement of financial position - equity & liabilities
Reviewed
Mar 2013
Audited
Mar 2012
% Change
177 321
157 062
12.9%
Non-current liabilities
15 368
17 656
(13.0)%
Current liabilities
96 435
106 859
(9.8)%
289 124
281 577
2.6%
R’000
Total shareholder’s funds
Total equities and liabilities
• Debt to equity ratio – 5.6%
• Rehabilitation provision up R5.4 million
• Long term debt down from R8.1 million to R0.8 million
21
Cash generated from operations
40 000
35 654
30 000
20 000
R’000
10 000
5 586
-10 000
2011
2012
2013
-20 000
-30 000
-40 000
-30 493
22
Cash and cash equivalents
35 000
31 323
30 000
25 000
19 913
20 000
21 370
R’000
15 000
10 000
5 000
-
2011
2012
2013
• Invested R25 million in commissioning of Intibane and Khanyisa
underground mining operations
• A further R15 million has been invested since 1 April 2013
• Reduced long term debt by R7.4 million
23
Industry and
Prospects
24
Industry
• Coal will retain second place as source of primary energy – and first for
electricity generation
Source: Coal Roadmap SA
25
Industry (continued)
• Supply “cliff” from 2015 – new supplies of ~60Mtpa (or more)
Source: Coal Roadmap SA
needed in next 5 – 7 years
26
Prospects – Mining division
• Intibane Colliery operational
• Khanyisa underground mining
progressing well
Production
(million tons of coal)
1,60 +
2
1.5
1.18
1.31
1
0.5
0
• Elandspruit project unconditional
2012
2013
2014 E
on 31 July 2013
• Commisioning of Elandspruit
production – first half of 2014
27
Prospects – Mining division (continued)
• Quattro export allocation
• 200 000 tons pa, can be increased
• Higher margin than current supply
• Dry Coal processing
• Upgrade coal quality
• Higher price, higher margin
28
Prospects – Trading division
• “Third Party Coal Business” acquisition
• Announced on SENS 13 June 2013
• Acquisition price – R79 million
• Operates nationally and competes with Wescoal
Trading division
• Financial effects as at 30 September 2012
• HEPS up from 6.9 cents to 10.62 cents, a 54% increase
• Wescoal trading combined would have annualised R1
billion in revenues
29
Thank you
30
Wescoal Mining
Dutch Botes
24 June 2013
31
Agenda
• Business model
• Location
• Strengths
• Risks
• Capital requirement
• Prospects
32
Business Model
Interested & Affected Parties
- DMR
- Union’s
- DWAF
- DEAT
- Local Communities
Growth
Investment
-Sustainable Strategy
-Mining (Owner vs Contract)
-Joint Opportunities
-Consolidation
Operational
-Management & Labour
-Skilled Insourcing
-Quality of production
-Systems
Sales / Customers
-Contract management
-Pricing
-Eskom
-Quattro
33
Locality Map
34
Strengths
•
•
•
•
•
•
Flexible Operating Model
Empowered
Experienced management team
Sound relations with Regulatory departments
Off-take agreements in place
Medium – Long Term Profile
35
Risks
• Sustainability
-
• Labour Unrest
• Environmental
• Regulatory
• Suitable product
-
• Mine planning
• SHEQ
• Working capital
-
Increased number of mines
Khanyisa, Intibane & (Elandspruit)
Most operations contracted
Absolute compliance
All legal requirements in place
Dedicated focus
Mitigated through ensuring life of
mine 3 (15) years
Expertise employed
Monthly monitoring in place
Institutional and Shareholder finance
36
Capital requirements – Current & Ongoing
• Working capital
– Currently self funded
• Capital expenditure
–
–
–
–
Underground mining (self funded to date)
Intibane establishment (self funded to date)
Equipment (long term institutional funding)
Rehabilitation (ongoing and self funded)
• Expansion capital
– Potential
• Intibane
37
Capital requirements - Future
• Elandspruit capital expenditure
–
–
–
–
–
–
Surface Rights
Washing Plant
Surface Infrastructure
Environmental
Box Cut and Development
Current estimate R250 million
• Initial development to steady state mining can be self
funded
• Pre-feasibility study in progress to finalize strategy and
capital requirements
38
Prospects
• Expanded mining operations
– Elandspruit
– Joint ventures
– Contiguous resources
• Technology
– X-RT vs Air dry vs DMS
• Quattro export allocation
• Rail sidings
– Arbor
– Clewer
39
Prospects - Summary
“There is movement towards
consolidation in the junior coal mining
space. Wescoal Mining is well positioned
on most fronts, to take advantage and
benefit from this process.”
40
Resources & Reserves
Life of resource
Commence
ment
Resource
(million
tons)
Khanyisa
12 - 18 months
Current
1.32
Intibane
20-26 months
Current
1.73
Elandspruit
12-15 years
2014
28.50
Vlaklaagte
0
0
0
TBA
TBA
80.48
Reserve
Verblyden & Silverbank
Total
112.03
41
Khanyisa Colliery
•
•
•
•
•
•
•
Currently operational
Produce – 1 million tons per annum
Strip ratio – 3.5 > 5 (Opencast)
Underground Mining (500 000 Tons)
Life of mine – 12-18 months
Export Coal opportunities
Adjacent opportunities > 12 months
42
Khanyisa Colliery - Opencast
43
Khanyisa Colliery - Underground
44
Khanyisa Colliery - Underground
45
Khanyisa Colliery
46
Khanyisa Colliery
Rehabilitation
East Pit
47
Khanyisa Colliery
Rehabilitation
West Pit Ramp
48
Intibane Colliery
•
•
•
•
•
Commencement April 2013
Produce – 1.8 million tons
Strip ratio – 1.5:1
Life of mine – 20 – 24 months
Adjacent Opportunities > 24 Months
49
Intibane Colliery
50
Intibane Colliery
51
Intibane
52
Intibane
53
Intibane
54
Intibane
55
Elandspruit
• Pre Feasibility study – End July 2013
• Various options
– Export vs Domestic vs Eskom
– Underground mining
• Environmental
– Water Use License
– EMP
56
Elandspruit
SHANDUKA COAL
GRASPAN
WESCOAL
XSTRATA
SHANDUKA COAL
TOWNLANDS
57
Silverbank and Verblyden
• Extended Geologic
• Upgraded resource statement
imminent
• Options to be considered
58
Silverbank
59
Verblyden
60
Social and Labour plan
Keeping warm
project
Escorting children
through mine area,
twice a day
Upgrading of
local school
61
Social and Labour plan
Chicken Farm
upliftment project
for local
community
62
Wescoal Trading
André Bojé
23 June 2013
63
Agenda
• Business Model
• Location
• Strengths
• Risks
• Risk mitigation
• Prospects
64
Business
model
65
Business Model
Clients
Specification /product requirement
Timely
delivery
Contract
Wescoal Trading
Source: All primary producers
Transportation arrangement
66
Location
67
Wescoal Trading – areas of activity
68
Location – Benoni Depot
69
Location – Cape Town Depot
70
Strengths
71
Strengths
• Combined 80 years of operational experience
• Trading name, Chandler Coal, is synonymous with high
class service and integrity
• Clients include: beverage, mining, food, yeast, paper and
sugar
• Staff with an extensive knowledge of the inland coal
market
• Established relationships
72
Risks
73
Risks
• Availability of product
– Increased export demand
– Mines closing or insufficient raw product (ROM)
• Competition
– Primary producers supplying the domestic market
– Many new entrants to the market
– Low export prices increase competition
• Logistical infrastructure
• Inconsistent price movement
74
Risk
mitigation
75
Risk mitigation
• Acquisitions
– Well respected companies
– Good track records
– Create critical mass
•
•
•
•
Supply contracts with primary producers
Maintain relationships
Source exclusive product from Wescoal Mining
Investigate alternative product
76
Prospects
77
Prospects
• Acquisition of “Coal Trading Business”
–
–
–
–
–
–
More than doubles Wescoal Trading division
Critical mass
Increased industry leverage
Brings new expertise
Greater domestic footprint
Enhances group HEPS by 54% as at 30 September 2012
• Acquisition risks
– Competition Commission
– Funding
78
Thank you
Questions?
79