INTERIM RESULTS For the six months ended 30 September 2014 4 - - PowerPoint PPT Presentation

INTERIM RESULTS

For the six months ended 30 September 2014 4 November 2014

Agenda

Welcome Group overview and growth path Financial performance Industry and prospects Risks Q&A Elandspruit project

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1 2 3 4 5 6 7

Financial performance

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Salient financial features for the period

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92,8% to R897,8m 73,2% to R84,3m 33,3% to 15,23cps 1,8% (up 15,5%)

Revenue

Operational EBITDA

HEPS Margin improvement of

Salient operational features for the period

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Muhanga coal processing plant acquisition unconditional Acquired mining right for Intibane Phase 2 Successful integration of MacPhail and resultant contribution

Initiatives to underpin sustainability and shareholder returns

R’000 Unaudited Sep 2014 Unaudited Sep 2013 Change Reviewed Mar 2014 Revenue 897 791 465 679 92.8% 1 147 444 Gross profit 120 356 53 867 123.4% 125 529 Gross profit margin 13.4% 11.6% 10,9% Operational EBITDA 84,292 48,659 73.3% 89 308 Finance costs (9 927) (3 175) 212,7% (9 615) Profit before taxation 39 957 95 009 (57.9%) 109 519 Taxation (11 892) (18 301) (35.0%) (22 839) Profit for the period 28 065 76 708 86 680 Net profit on the sale of assets (64) (58 651) (60 030) Headline earnings for the year 28 001 18 057 55.1% 26 650

Statement of comprehensive income

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Statement of comprehensive income (cont)

337 067 351 361 465 679 897 791 293 684 325 566 681 765

200 000 400 000 600 000 800 000 1 000 000 1 200 000 2012 2013 2014 2015

Revenue (R’000)

First half Second half

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16 092 10 688 16 678 28 065 4 510 9 019 9 972

• 5 000

10 000 15 000 20 000 25 000 30 000 2012 2013 2014 2015

Profit for the period (R’000)

First half Second half

Earnings

Cents per share Unaudited Sep 2014 Unaudited Sep 2013 Change Reviewed Mar 2014 Basic earnings per ordinary share 15.2 37,2 (59.1%) 41,0 Fully diluted basic earnings per ordinary share 15.1 36,6 (58.9%) 40,2 Headline earnings per ordinary share 15.2 11,4 33.3 15,7 Fully diluted headline earnings per ordinary share 15.0 11,2 33.9 15,4

• September 2013 and March 2014 HEPS excludes an after tax profit on sale of

Vlaklaagte prospecting right

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Headline earnings per share

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7.3 6.9 11.4 15.2 2 4 6 8 10 12 14 16 18 2011 2012 2013 2014

HEPS for the interim period

Segmental contribution - Revenue

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33% 67%

Revenue

Mining Trading

2014 2013

44% 56%

Revenue

Mining Trading

Segmental contribution – operational EBITDA

77% 23%

Operational EBITDA

Mining Trading

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93% 7%

Operational EBITDA

Mining Trading

2014 2013

Mining division

261 693 296 787

240 000 250 000 260 000 270 000 280 000 290 000 300 000 2013 2014

Revenue (R'000)

48 874 67 828

• 20 000

40 000 60 000 80 000 2013 2014

Operational EBITDA (R'000)

10.6 12.8

2 4 6 8 10 12 14 2013 2014

Operating margin (%)

Performance:

• Excellent result
• Produced 942,291 (2013: 895,185) tons of coal
• Intibane incorporated for full period

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Trading division

Performance:

• MacPhail acquisition proved strategic
• Sold 625,949 tons of coal (2013: 217,831)
• Division rebranded as Wescoal Trading
• Synergy savings flowing through

3 649 20 141

• 5 000

10 000 15 000 20 000 25 000 2013 2014

Operational EBITDA (R'000)

13 2 894 14 168

• 5 000

10 000 15 000 2013 2014

Profit from operations (R'000)

203 986 601 004

• 100 000

200 000 300 000 400 000 500 000 600 000 700 000 2013 2014

Revenue (R'000)

Issues impacting earnings

• Trading division
• Volumes increased
• Increased operating costs
• Amortisation of intangibles
• Mining division
• Volumes increased
• Intibane operational for full period
• Reduced production at Khanyisa
• Accelerated rehabilitation and amortisation

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Issues impacting earnings

• Group
• Increased finance costs
• Higher operational costs
• Power and Fuel
• Labour costs
• Costs of early vesting of share options

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Statement of financial position - assets

R’000

Unaudited Sep 2014 Unaudited Sep 2013

Reviewed Mar 2014 Non-current assets 386 204 239 341 335 752 Property, plant and equipment 135 314 69 246 116 004 Investment property 709 709 709 Investments 9 714 3 199 6 664 Goodwill and intangible assets 107 882 51 209 111 722 Mineral assets 118 644 113 744 101 118 Other receivables 13 772

• Deferred taxation

169 1 234 170 Current assets 397 450 300 114 368 391 Inventories and work in progress 65 662 47 175 60 839 Trade and other receivables 237 088 158 932 255 389 Cash and cash equivalents 94 700 94 007 52 163 Total assets 783 654 539 455 724 143

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R’000

Unaudited Sep 2014 Unaudited Sep 2013

Reviewed Mar 2014 Total shareholder’s funds 288 823 239 196 273 225 Non-current liabilities 97 337 33 552 96 471 Interest bearing loans 44 923 3 311 57 113 Rehabilitation provision 24 599 22 382 24 282 Deferred tax 27 815 7 859 15 076 Current liabilities 397 494 266 707 354 447 Trade and other payables 209 458 196 536 220 211 Bank overdraft 14 779 4 942 176 Taxation payable 13 232

• 10 268

Interest bearing loans 160 025 65 229 123 792 Total equities and liabilities 783 654 539 455 724 143

Statement of financial position - Equity & Liabilities

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Cash generated from operating activities

2 960 25 948 63 086 74 588 10 000 20 000 30 000 40 000 50 000 60 000 70 000 80 000 2011 2012 2013 2014

R’000

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Cash and cash equivalents

36 163 36 163 89 065 79 921 10 000 20 000 30 000 40 000 50 000 60 000 70 000 80 000 90 000 100 000 2011 2012 2013 2014

R’000

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Group Overview and Growth Path

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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

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Structure and background

Wescoal Holdings

Functioning operations Khanyisa Intibane Future operations Elandspruit Production (six months) 942,291 tons of coal (2013: 895,185 tons of coal) Future production target 4m tons of coal by 2016

Strategic intent – Division will produce the bulk of the Group’s profit

> 80 Years of operational experience in SA Trading operations Benoni, Isando, Pretoria, Port Elizabeth, Worcester, Atlantis, Paarl and Cape Town Sales (six months) 652,949 tons of coal (2013: 21,831 tons of coal)

Strategic intent – Leverage critical mass to enhance group earnings

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Executive and operational management

Wiseman Khumalo

Executive Director

André Boje

Chief Executive Officer

Bonani Siko

General Manager Operations – Wescoal Mining

Ettienne Strydom

Projects Manager Wescoal Mining

Dutch Botes

CEO – Wescoal Mining

Morné du Plessis

Chief Financial Officer

Mike Berry

Operations Director Wescoal Trading

Executive Operational

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Curtis Mnisi

Group Financial Manager Wescoal Holdings

Our growth path

• Wescoal Mining
• Additional assets acquired in order

to supply local contracts as well as access export opportunities

• Wescoal Trading
• MacPhail acquisition added

critical mass to segment

 

2009 2010 2011 2012 2013 2014 2015 2020 onwards

Khanyisa

GTIS 1,15 million tons Strip ratio: 3.5-4:1

Pillar and other extensions Intibane

GTIS 0.82 million tons Strip ratio: 1.5:1

Phase 2

Elandspruit

GTIS 40,16 million tons Strip ratio: 2.35:1 Silverbank & Verblyden

Potential of 4 million tons

• f coal mined

per year

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Our growth path - Khanyisa

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• Additional 1,3

million tons

Our growth path - Intibane

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• Additional 2,2 to 2,9

million tons

Coal Distribution Centre

• Situated in Belville, Western Cape
• Logistics partner, Logistics Intelligence (LQ)
• One of a kind carbon capture site
• substantially reduces the carbon footprint
• switch from road to rail
• product does not go to ground during transportation, transhipment or

bulk storage

• Very well received by customers

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10 000 tons of coal pm taken off road and transported by rail (equal to 350 road vehicles)

Coal Distribution Centre

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Elandspruit project

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Surface rights

Complete Complete WIP Complete Complete 30

Background information

• 10km’s west of Middelburg Mpumalanga
• Needs infrastructure and services
• Rail sidings 1km south and 2km east
• Adjacent to Glencore/Shanduka and Steelcoal collieries
• Surface rights mainly agricultural
• Total measured resource 40.17 MTIS

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Funding structure

• Total funding for Elandspruit

R170m

• Investec facility

R110m

• Funding from internal cash flows

R60m

• Project to-date spend

R65m

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Investec funding structure

R200m facility

• R180m - 5 year term loan
• R20m - 5 year working capital facility

Application of funds

• R70 million to retire current Investec term facility
• R110 million for commissioning of Elandspruit Colliery, including

Muhanga coal processing plant acquisition, mine operational infrastructure, surface rights and production start-up costs

• R20 million working capital facility available for general purposes

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Where are we with the project?

• Duiker Mining surface right being transferred
• NOMR
• Section 11 granted and executed
• Valid to October 2026
• WUL – submitted and expected end 2014
• Rezoning - applications submitted, in progress

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Once WUL granted, mine establishment commences

Geology and resources

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Marketing channels

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Marketing channels

Eskom Domestic market Export

Muhanga Coal Processing Plant

• Production begins 6 November 2014
• Excess run of mine acquired
• All legislative requirements in place
• Infrastucture in place
• Offices
• Pollution control dams
• Roads
• Rebranding

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Industry Overview

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Industry

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21st Century Coal: An Essential Role in the Future of Energy GREGORY H. BOYCE - PEABODY ENERGY

Industry - International

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• Twin energy challenges: creating electricity

access and eradicating energy poverty

• 21st century coal essential solution for both issues
• Sound policy should advance technology – not caps and taxes

“Delivering universal access to electricity and safe household fuels is a fundamental condition to end poverty.” – World Bank President Jim Yong Kim

Industry - International

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3 Billion People Forage for Biomass for Cooking and Heating

• Primitive biomass burned in households in India,

South Asia, Africa and other developing nations

• Exposure from indoor fires akin to exposure to 400

cigarettes per hour

• 4+ million people die each year from indoor air pollution
• Household air pollution results in 100 million years of life

prematurely lost (Disability Adjusted Life Y ears)

Industry – International

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• 75+ million expected to be

added to cities each year through 2020

• China alone moving

100 million from rural areas to cities by 2020

• Urban migration underpins

need for massive infrastructure development

• Coal is world’s fastest-

growing major fuel to serve these needs

India New PM pledges to make electricity available to every household by 2022 Africa World Bank says coal essential in helping Africa meet power demand

Industry – International

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2013 2014 2015 2020 2025 2030 2035 China 237 249 262 375 560 705 822 India 131 135 138 183 209 279 429 Japan 127 125 121 119 118 118 120 Malaysia 23 25 28 42 51 61 70 South Korea 102 102 103 111 113 122 122 Taiwan 56 57 58 66 72 73 67 Vietnam 3 2 2 17 40 76 120 Other Asia 52 54 56 79 100 140 154 EMEA 189 191 186 137 131 127 127 Americas 32 35 33 34 41 43 45 Production 951 976 987 1,164 1,436 1,745 2,076

Short T erm Weakness Will Continue, But Demand Growth Remains GLOBAL SEABORNE COAL DEMAND 2013 ‐ 2035

(in million tons)

*source: Wood MacKenzie Coal Market Service, Nov 2013

Industry - International

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So why are international prices so depressed?

OVERSUPPLY

All major producers were committed to projects from the boom times but are now not adding capacity for many years to come, greenfields development is almost zero for international market supply

Common consensus is a recovery in 18 to 20 months

Group Prospects

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Successful take over and commissioning will boost revenue, profitabilty Intibane phase 2, Khanyisa extensions and commission Elandspruit Progress made but increased focus on costs required

Prospects – Mining division

Commissioned June 2013 and provided bulk of mining profits

• 1. Intibane – increased

contribution



• 2. Cost control –

margin improvement



• 3. Sustainability



• 4. Muhanga Plant

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

Prospects – Mining division

Being utilised but export price too low to pursue additional allocation

• 5. Export allocation



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Prospects – Mining division

• Intibane commissioned June 2013
• Khanyisa underground
• Khanyisa opencast
• Profitability of Intibane Phase 2
• Khanyisa Triangle Extension
• Establish Elandspruit start 2015
• Muhanga coal processing plant will

contribute to full year results

1.18 1.31 1.6 0.32

0.5 1 1.5 2 2.5 2012 2013 2014

Production (million tons of coal)

1.92 2.0 2.0 2.0 2.0

0.0 1.0 2.0 3.0 4.0 5.0 2015 2016 2017

Production (million tons of coal)

Estimate Actual

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Static whilst export pricing remains at current levels Expecting further synergy savings

Prospects – Trading division

Focus on margin increase

• 1. Division



• 2. Domestic pricing

 Contract suppliers for reduced pricing structures

• 3. Restructure costs

savings

• 4. Leverage critical

mass



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

Risks

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Risks – Mining division

• Eskom
• Reliance on as a customer
• BEE requirement
• Escalating cost of production at Khanyisa
• Life of Mine at Khanyisa
• Depletion before extensions acquired
• Skills shortage

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Risks – Mining division (cont)

• Amendments to the MRPDA - Pending
• Strategic mineral
• Price determination
• Ministerial powers and deadlines
• Legislative issues
• Water use license
• Rezoning requirements

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Risks – Mining division (cont)

• Elandspruit
• Water use licence
• Eskom

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Risks – Trading division

• Eskom/IPP’s (volumes)
• Customer and margin erosion to primary producers
• Export price volatility
• Domestic price reduction
• Increased competitor activity
• Debtors management

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Key objectives – 2014/2015

Establish Elandspruit Commission Muhanga plant Cost control Khanyisa extensions Diversify Mining division’s customer base

1 2 3 4 5

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Summary

Wescoal is in a stage of a rapid growth encompassing all aspects of the group that will lead to enhanced value for all stakeholders

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Thank you

www.wescoal.com For any further Investor Relations questions please contact: Andre Bojé (CEO): 011 954 2721 or Vanessa Rech (Keyter Rech Investor Solutions): 011-447-8656

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