Salungano Group Limited (formerly Wescoal Holdings Limited)

Salungano Group is a small, black-controlled South African thermal coal producer and trader whose economics are now almost entirely tied to Eskom, the state power utility. Its earnings base rests on two Mpumalanga opencast collieries near Delmas: Moabsvelden (operated by Neosho Trading 86) and Vanggatfontein (operated by Keaton Mining), both selling under long-term coal supply agreements with Eskom, plus an inland coal trading arm and related transport services. Once positioned as a consolidator aiming to become a mid-tier, majority black-owned producer at roughly 8 Mt per year, the group endured a near-collapse between 2022 and 2025: bank default, subsidiary business rescues, two disclaimed audit opinions and a 33-month JSE suspension. FY2026 marked a sharp operational and financial recovery, with record EBITDA of R734m, bank debt fully repaid and the listing restored in May 2026. The equity story is now dominated by a R2.39bn environmental rehabilitation liability, Eskom concentration and contract-renewal risk.

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Company's own description. In its FY2026 annual financial statements, the board describes the company as an investment and management company whose operating subsidiaries mine, process and trade coal, operating principally in South Africa. The corporate information page of its interim results describes the nature of business as the mining, processing, sale and distribution of thermal coal. Source: Salungano FY2026 AFS, Directors' report; HY2026 interim results, corporate information.

What the company does. The group extracts bituminous thermal coal by opencast methods, processes (crushes, screens and, where required, washes) it at the Vanggatfontein plant complex, and delivers it by road to Eskom power stations under long-term coal supply agreements (CSAs). It also buys coal from third parties for "rectification" into its Eskom contracts (blending or substituting bought-in coal to meet contracted volumes and qualities), sells coal to inland industrial customers through Salungano Trading, and earns transport revenue on coal delivery. A small property-holding subsidiary rents property within the group.

Business model and revenue model. The model is product sales plus a large logistics service component; there is no subscription or licensing revenue. In FY2025 (audited), revenue of R4,369.4m split into:

Source: HY2026 interim results, note 9 (FY2025 audited comparative). The H1 FY2026 split was Eskom coal sales R2,237.3m, transport R715.5m and local sales R71.1m out of R3,031.3m.

Value chain position. Salungano is an upstream producer and mid-stream aggregator. It holds mining rights and owns processing infrastructure but outsources mining to contractors; contractor cost, bought-in coal and transport are its three largest cost lines (FY2025: direct purchases R1,263.8m, mining contractor cost R1,007.5m, transport R1,015.8m). It does not own rail or port capacity; its first export contracts via Durban in FY2022 were not sustained, and no export sales were recorded in FY2025 or H1 FY2026.

Customer types and end-markets. Eskom is effectively the single customer. The residual is inland industrial and merchant coal buyers served by Salungano Trading. End-market: South African electricity generation, with minor industrial heat demand.

Independent characterisation. Salungano is best understood today as a two-mine, single-customer Eskom contractor with a holding company that is technically insolvent on a standalone basis but sits atop cash-generative mining subsidiaries. The FY2026 recovery was driven by Moabsvelden's ramp-up, high-volume third-party rectification sales through Neosho in the first three quarters, and Vanggatfontein operating under a creditors' compromise.

Stated strategy themes (FY2025–FY2026 reporting). The current agenda is recovery and stabilisation rather than growth. Themes communicated in the FY2026 integrated report and AFS, paraphrased:

1. Embedding the reporting discipline that restored JSE compliance as a permanent feature of the organisation (chairman).

2. Sustaining operational performance and building long-term resilience now that bank debt is settled and the suspension lifted (CEO).

3. Predictable operational execution, continued cash generation, disciplined capital allocation, management of contractual commitments and robust financial controls as the board's oversight priorities.

4. Holding-company liquidity and intercompany funding management, given the parent's standalone insolvency.

Historical strategic positioning. Under Wescoal (2016–2019) the strategy was consolidation of junior coal miners into a majority black-owned mid-tier producer targeting 8 Mt per year, pillared on scalability and standardisation. At the 2022 rename the group announced a transformation into a diversified investment company with focus on agriculture and renewables, underpinned by ESG; this agenda was suspended by the 2022–2025 crisis.

Initiatives in the last 24 months (Oct 2024 – Oct 2026)

Medium-term financial targets / guidance: Not publicly disclosed. The company provides no production, cost or earnings guidance beyond JSE-mandated trading statements. Dividend policy: none declared; no dividend paid since the Wescoal era.

Salungano does not market branded products. Its catalogue is a set of coal supply streams and services, organised below by segment and operating asset.

Mining segment

Moabsvelden Colliery (Neosho Trading 86).

• Description: Opencast thermal coal mine adjacent to and a satellite of Vanggatfontein near Delmas, Mpumalanga. Originally a Keaton Energy project scoped at 1.5–2 Mt ROM per year, later described as a 3 Mt per year project at first coal.

• Processing: Uses Vanggatfontein's washing plants, avoiding separate plant capital.

• Customer and contract: Eskom, under a long-term CSA with first deliveries in March 2021. The FY2026 AFS states the contract is expected to run to early 2028 and is being extended; remaining Eskom contractual tonnes used in the FY2026 impairment model were 6.41 Mt over a four-year horizon.

• Performance: Contributed more than 70% of group production in H1 FY2024, averaging above 240,000 t per month; production rose a further 9.7% in H1 FY2025. It is the group's principal profit generator.

• Pricing model: Contract pricing; impairment models assume index-driven escalation of 3.8% (FY2026). Contract prices and coal qualities are not publicly disclosed.

• Rehabilitation liability: R565.8m (30 Sep 2025).

Vanggatfontein Colliery (Keaton Mining).

• Description: Opencast mine near Delmas, Mpumalanga; Keaton Energy's former flagship, acquired by Wescoal in 2017. Includes the group's washing and processing plants.

• History: Supplied Eskom under a ten-year CSA until its energy allocation was exhausted in early 2022, when it was placed on care and maintenance with reserves then stated at more than 15 Mt. Operated below capacity in FY2024–FY2025, supplying Eskom indirectly through rectification into the Neosho contract.

• Restructuring: Keaton Mining operates under a section 155 creditors' compromise sanctioned 25 September 2024. Its yellow equipment was repossessed by the banks, with proceeds applied to the RCF.

• Customer and contract: New CSA with Eskom signed 20 October 2025 for roughly five years; remaining contractual tonnes in the FY2026 impairment model were 14.66 Mt.

• Rehabilitation liability: R1,661.4m (30 Sep 2025), the single largest liability in the group.

• Status flag: The FY2026 integrated report warns Keaton Mining could enter liquidation if restructuring measures fail.

Elandspruit and Khanyisa Collieries (Wescoal Mining, deconsolidated).

• Elandspruit: Opencast plus small underground section; targeted 2.5 Mt ROM per year in 2017. Opencast operations ceased in H1 FY2024 and the mine has not produced since July 2023.

• Khanyisa: Joint-venture complex brought into the group in 2009; reached end of life of mine by FY2025.

• Status: In business rescue since August 2023; plan approved 12 July 2024; not consolidated since 28 August 2023.

Arnot OpCo (50%, via Wescoal Mining; not consolidated).

• Supplied Eskom's Arnot power station from February 2022; placed in business rescue October 2022; fully impaired.

Trading segment

Salungano Trading (formerly Wescoal Trading).

• Description: Buys coal and resells it, with transport, to inland industrial and merchant customers. Historically the founding business of Wescoal.

• Performance: Revenue R104.7m in FY2025 and R52.6m in H1 FY2026, loss-making in every period reviewed.

• Pricing model: Spot and short-term contract pricing (not disclosed).

Services

Transport services. Coal haulage revenue recognised on delivery, R1,055.0m in FY2025 and R715.5m in H1 FY2026. Transport cost (R1,015.8m in FY2025) closely offsets this revenue, so it adds volume but little margin.

Third-party rectification sales. Bought-in coal sold into Eskom contracts through Neosho. Direct purchases were R1,263.8m in FY2025. The FY2026 directors' report identifies high rectification volumes in the first three quarters as a key profit driver.

Administration and management fees; rental income. R9.3m and R6.7m respectively in FY2025. Blanford 006 holds investment property carried at R0.7m with an assessed fair value of R0.98m.

Diversification vehicles (non-revenue)

Salungano Power, Salungano Resources and Salungano Agriculture were created to pursue the 2022 diversification agenda (renewables, agriculture). Power and Resources are described as dormant in the FY2026 AFS; no revenue from agriculture or renewables has been disclosed.

Resource base

The group publishes SAMREC-compliant resource and reserve statements via Competent Persons Reports (2025 and 2026 versions on the company website). No material changes were reported between 31 March 2025 and 30 September 2025. Detailed tonnages and qualities were not captured in this research. The FY2026 impairment models used four-year horizons for both operating mines, framed on remaining Eskom contractual tonnes rather than full life of mine.