Chairman's statement
2010 has been a very challenging year for
your Company and particularly for its direct
coal mining subsidiary in South Africa, Black
Wattle, which operated at a loss during 2010.
The reasons for the loss are as follows:
- the strengthening of the SA Rand against the US
Dollar;
- a shortage of railway trucks at our coal loading
siding; and
- lower prices for our coal.
To overcome the effect of the strong SA Rand, we
increased production by expanding our washing
plant and buying in high quality coal. Our railway
siding was also expanded and markets were
found for this increased production. However, the
shortage of railway trucks to deliver this coal to our
customers meant that during the second half of the
year we built up unacceptable levels of stock. In
order to reduce these stock levels we had to stop
buying in coal, which in turn had a material effect
on our earnings. Despite this, the investments that
we have made in 2010 in terms of mine expansion
and new reserve acquisitions will reap substantial
benefits in years to come.
At the 31 December 2010, Bisichi had very little
net debt and cash balances of £5.4 million which
can be used to expand Group activities.
By the second half of 2011 I believe that we will
return to an acceptable level of profitability. The
reasons for this are:
- the reserves that we are mining in 2011 have a
lower average stripping ratio than the reserves we
mined in 2010;
- the washing plant yield is higher than the yield on
the reserves that we mined throughout 2010;
- coal prices have gone up significantly in all
our markets - so far we have seen an average
increase in the export price in 2011 of 28% and
an average increase in the domestic price of 12%
free on mine;
- the markets that we are now selling into are less
reliant on rail performance, although the supply
of trains to our coal loading siding has recently
improved; and
- we are in the process of building up production
and we have undertaken a substantial and
successful cost cutting programme.
As previously announced, Vunani Limited has
concluded the purchase of a 37.5% shareholding in
Black Wattle. Vunani Limited is a leading, publicly
listed, black-owned and managed company and
we are very pleased that they have joined us as a
partner in Black Wattle.
On the subject of health and safety, I am very
pleased to report that Black Wattle had another
very good year having made significant investment
in this area over a number of years. A more detailed
report on health and safety is included in the
Mining Review.
Bisichi’s UK property portfolio, managed by London
and Associated Properties PLC, continues to
perform well. It showed a small increase in external
valuation at year end and – as in previous years
when the mine has under-performed - the income
from the property portfolio has underwritten many
of our costs and so provided the company with a
stable financial cushion. Voids in the portfolio have
continued to remain low, even during the difficult
retailing conditions that have been experienced
over the last 18 months.
As recently announced, Michael Stevens, who
held the position of Group Company Secretary for
twenty five years, has retired. I would like to thank
Michael on behalf of the Board, for his extremely
valuable contribution during the years of substantial
growth for the company and to wish Michael a very
enjoyable retirement.
The Board paid an interim cash dividend of 1p
during the year. The Directors recommend the
payment of a final dividend of 3p (2009: 3p). The
final dividend will be payable on 8 August 2011 to
shareholders registered at the close of business on
1 July 2011. It will be proposed that shareholders
are given the opportunity of electing to receive all
or part of the final dividend in the form of fully paid
ordinary shares rather than cash.
Although the company made a loss in 2010,
the Board felt it was appropriate to maintain
the dividend but to pay it in a form that will give
shareholders the opportunity to either take cash
or to take new shares and receive the benefit
of the investment we have made in the mine
during the year, which will be realised in years to
come. Your directors, and London & Associated
Properties PLC have agreed to elect to take
their full entitlement in new shares in lieu of cash,
representing over 51% of the ordinary share capital
of the company.
On behalf of the Board I would like to thank all of our
staff for their hard work during the course of the year.