Charlotte Mathews
20 November 2008
Johannesburg — COAL and mining services company Sentula Mining is discussing with the JSE whether the posting of its revised annual report has given shareholders enough certainty to enable Sentula's shares to resume trading on the JSE, CEO Robin Berry said yesterday.
Sentula's shares were suspended at the request of its directors at 860c in mid-September, before the global credit crisis hit equity markets, when irregular transactions were discovered in the accounts and a forensic investigation was launched. Last month the company said it had made a R242m provision, which could be recoverable, against money siphoned out of the company by management.
Berry said on a conference call a number of executives were involved and actions had been taken to recover the money, including giving information to the police for a criminal investigation. He declined to name the executives implicated.
The transactions meant Sentula had to restate its 2008 and 2007 year-end financial results, but management said there was no effect on cash flow or the fundamentals of the business.
In the six months to September Sentula's turnover grew 60% to R1,7bn from the same period last year -- which has not been restated -- and operating profit rose 19% to R296m. Headline earnings were marginally higher at 69,6c a share from 67,5c.
No dividend was declared because of market volatility and credit conditions, but the directors said the position would be reviewed at year-end.
Sentula's debt to equity ratio fell slightly to 83% from 85%, although financial director Deon Louw said he would be more comfortable with gearing of about 70%. The group still had R200m to spend of its total capital budget of R700m for the financial year but the facilities were already available and he did not expect Sentula would have to raise debt or equity this year.
The development of the number four seam at the Koornfontein colliery, held in a joint venture between Sentula and Siyanda Resources, would require about R820m in capital expenditure over several years. Louw said the mine was profitable and the partners expected they would need to raise only about R150m-R250m of that sum, which would be through project finance.
Louw said there had already been approaches from banks wanting to lend money because it was a financially sound project.
Berry said the group's mining services, drilling and blasting, exploration drilling and coal mining operations were well positioned to weather conditions in the industry.
Although there had been some softening in export coal prices, the weakening of the rand-dollar exchange rate had benefited local producers, especially Koornfontein which still had fixed-price contracts, Berry said. Freight rates were also falling significantly, making South African coal more attractive to the European market.
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