South African-based Wescoal has finalised long-delayed negotiations regarding a long-term coal supply agreement (CSA) with Eskom.

Under the agreement, Wescoal will supply coal to Eskom from its Elandspruit colliery, which first produced coal in July last year.

The mine has been supplying coal to Eskom through various contracts since September last year, and under the deal, supply is expected to start from November this year after Wescoal concludes its existing short-term coal supply contract with Eskom.

The five-year agreement will allow Wescoal to enter into other specific long-term projects.

"This long-term position significantly de-risks future cash flows and in the short-to-medium term enables us to repeat the results achieved during the second half of FY16."

During the agreement terms, Wescoal will transfer about 7.8 million tonnes of coal beneficiated at its processing plant to Eskom.

Wescoal said that the company will have to transform its BEE ownership to more than 50% by the end of this year.

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By GlobalData

The agreement requires Wescoal to comply with all regulatory and licensing requirements during the life of the contract.

The existing water use license at the company’s processing plant is set to expire in March next year.

Wescoal CEO Waheed Sulaiman said: “This brings to fruition a major project for the Wescoal team.

“This long-term position significantly de-risks future cash flows and in the short-to-medium term enables us to repeat the results achieved during the second half of FY16.”