Context and dependencies

The effective management of risk remains an area of focus and is central to the continued growth and efficient management of Wescoal. the group implemented Enterprise Risk Management (ERM) according to the framework and policies approved by the Audit and Risk Committee and the Board of Wescoal. the concept of risk appetite guides our risk management activities and the approach focusses on managing uncertainty (or risk) to ensure that controls required manage risks within pre-stated tolerances, remain effective and efficient.

Areas of focus

HDSA status of wescoal
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  • Key for Eskom and other off take agreements
  • Renewed focus area for DMR
  • Wescoal aims to achieve HDSA control by December 2016
  • Initiatives implemented during the year increased HDSA ownership to more than 40%
Funding and capital structure
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  • Key to implementing organic growth projects
  • Key to pursue inorganic growth options
  • Wescoal funding model is an area of focus, to secure long-term funding
  • Stable operations, improved financial performance and balance sheet gearing created opportunities for beneficial funding options being advanced at present.
  • Wescoal aims to secure long term offtake agreements to further de- risk from a funders perspective
Long term off-take agreements
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  • Most of Wescoal’s coal is of good quality and suitable for Eskom
  • Eskom contract brings consistent demand and volumes, beneficial to operations and cost
  • Wescoal continues uninterrupted supply to Eskom in terms of recurring short-term contracts
  • Wescoal’ strategy is for long-term offtake agreements and secured a five year Eskom contract during August 2016

The company is ever mindful of risks to the overall operation affecting the sustainability of the business. These include:

One main
customer

Wescoal Mining’s primary product is Eskom grade coal and there is a natural tendency to have a large part of the business exposed to one client. The Trading Division assists to diversify the client base slightly. The Group is exploring the development of non-Eskom based revenue streams.

Primary producers competing with trading division

Wescoal’s trading and mining divisions work closely together to ensure potential synergies are exploited.

Criminality

Wescoal is exposed to crimes related to theft of assets  and potential acts of fraud. The business implemented  an anti-fraud hotline and improved the security measures, inventory controls and policies to address these exposures.

Life of mine (key risk eliminated)

The previously reported risk the duration of Life of Mine posed to the sustainability of Wescoal was effectively eliminated during the  year. In addition to the start-up of Elandspruit, with an expected fifteen-year life of mine, Wescoal secured additional resources contiguous to each of Intibane and Khanyisa colleries, substantially extending the life of both mines.

One main
customer

Primary producers competing with trading division

Criminality

Life of mine (key risk eliminated)

Wescoal Mining’s primary product is Eskom grade coal and there is a natural tendency to have a large part of the business exposed to one client. The Trading Division assists to diversify the client base slightly. The Group is exploring the development of non-Eskom based revenue streams.

Wescoal’s trading and mining divisions work closely together to ensure potential synergies are exploited.

Wescoal is exposed to crimes related to theft of assets  and potential acts of fraud. The business implemented  an anti-fraud hotline and improved the security measures, inventory controls and policies to address these exposures.

The previously reported risk the duration of Life of Mine posed to the sustainability of Wescoal was effectively eliminated during the  year. In addition to the start-up of Elandspruit, with an expected fifteen-year life of mine, Wescoal secured additional resources contiguous to each of Intibane and Khanyisa colleries, substantially extending the life of both mines.

Structural risks have the potential of significantly affecting business sustainability or derailing business plans. These types of risks include data protection and information security, social license to operate, development and growth of alternative energy sources, climate change concerns, access to water and power. Wescoal will continue to develop its responses and actions to these risk categories.