Eskom reduces coal off-take from Wescoal

Wescoal’s major customer, Eskom reduced coal off-take in response to lower electricity demand during the government-imposed lockdown in South Africa and issued suppliers with force majeure notices in April 2020.

Wescoal continued to operate at full capacity as an essential service provider during the National Lockdown. Although the force majeure notice was subsequently withdrawn in August 2020, sales to Eskom remain lower than pre-National Lockdown normalised levels due to reduced coal offtake.

This has resulted in a build-up of run-of-mine (ROM) and saleable product stockpiles across all three of Wescoal’s operating mines. Total ROM and saleable product stockpiles have increased by more than 60% since the beginning of FY 2021.

While offtake levels are expected to normalise in the late third, to early fourth quarter of FY 2021, there remains significant downside risk to sales volumes.

Wescoal is currently exploring opportunities to supply into the domestic market, as demand for coal returns with the easing of National Lockdown measures, and if successful, this will diversify revenue streams in general, whilst offsetting lower sales volumes to Eskom.

Wescoal, through its two divisions – Mining and Trading – is a coal-focused mining company incorporating mining, processing, selling and distribution of coal and coal-related products.

Post the 2019 financial year-end, Wescoal acquired a 50% interest in the empowering Arnot Mine from Exxaro. The group business now has coal resources in excess of 300 million tonnes, three operating mines, four processing plants and minor interests in coal supply chain infrastructure.

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