Bisichi Plc - Final Results

For further information, please call:

Andrew Heller or Garrett Casey, Bisichi PLC 020 7415 5030

Bisichi PLC (Company Registration No. 00112155)
 

Annual Report 2023

A TRIBUTE TO

CHRISTOPHER JOLL

Director 2001-2024

It was with great sadness that the Board of Bisichi announced the death of our senior non-executive Director, Christopher Joll, on 18th April 2024, at the age of 75 years old.

Christopher was a director of Bisichi for 23 years. As well as maintaining a keen eye on the running of the company, Christopher was a very active participant in Board meetings, always requesting forecasts and projections from the Executive Directors. He was the most articulate member of the Board, rewriting and improving anything that had been drafted. His extremely wise counsel, integrity, communication skills and enthusiasm for the company will be sorely missed.

Christopher attended Oxford University and spent seven years in The Life Guards, including completing four tours of duty in Northern Ireland. Christopher built his career in financial PR which is where Bisichi first came across him. He was also a British military historian, author of an incredible fifteen books and manager of the British Military Tournament. Christopher was the essence of an English gentleman and board meetings will not be the same without him.

Strategic report

The Directors present the Strategic Report of the company for the year ending 31 December 2023. The aim of the Strategic Report is to provide shareholders with the ability to assess how the Directors have performed their duty to promote the success of the company for the collective benefit of shareholders.

Strategic report

Chairman’s Statement

For the year ended 31 December 2023, your company made a profit before interest, tax, depreciation and amortisation (EBITDA) of £3.4million (2022: £40.0million) and an operating profit before depreciation, fair value adjustments and exchange movements (Adjusted EBITDA) of £2.6million (2022: £39.4million).

2023 was a challenging year for your company and its South African operations. The lower earnings for the Group, compared to 2022, are mainly attributable to lower export sales, due to the performance of Transnet, the South African state rail provider, and lower prices for our coal sold by Sisonke Coal Processing, the Group’s South African coal processing operation. In addition, earnings were further impacted by difficult mining conditions and low mining production at our coal mining asset, Black Wattle Colliery.

During 2022, the Group benefited from significantly higher prices of Free on Board (FOB) coal from Richards Bay Coal Terminal (API4 price). However, during 2023, the weekly API4 price averaged US$120 compared to US$273 in 2022. In addition to the weaker international coal price, constraints in transporting coal for export on the South African rail network, which were beyond our control, significantly impacted the Group’s export sales during the period. Due to the lack of available rail capacity, the Group exported 134,000 metric tonnes in 2023, compared to 262,000 metric tonnes in 2022 and 320,000 in 2021. This, in turn, had a further impact on earnings during the period, as coal allocated for export was eventually sold into the domestic market at prices that were significantly lower than the export price achievable by rail through Richards Bay. Transnet, the South African state rail operator, and the wider South African coal industry, are working hard to collectively implement measures to increase rail capacity. We are pleased to report that, in 2024 to date, we have seen an improved performance in our railed coal export volumes compared to 2023. We remain optimistic that the measures, once fully implemented, will have a significant positive impact on both the export and domestic prices achievable for our coal.

At Black Wattle, difficult mining conditions impacted profitability during the period. For the majority of 2023, geological issues reduced the production from our opencast mining area as well as increasing related mining and blasting costs. In order to mitigate these issues, the mine opened a lower cost second mining area in the third quarter of 2023. Since the commencement of this new mining area, we have seen a significant improvement in mining production and lower operating costs and we expect the improved performance at Black Wattle to continue throughout 2024.

The low coal production levels at Black Wattle in 2023 had a knock-on effect on overall levels of coal processed at Sisonke Coal Processing. The Group sold 1.031million metric tonnes during the year compared to 1.287million metric tonnes in 2022. The decrease in the Group’s mining revenue during the period to £49.3million (2022: £95.1million) can mainly be attributable to the lower prices achievable for our coal and the lower overall quantity of coal sold, particularly into the export market.

Looking forward into 2024, we will continue to see the benefits, both in terms of mining cost and production, from the new mining area at Black Wattle. In addition, we have seen a stabilisation in coal prices in both the export and domestic market and an improved performance by Transnet. We remain confident in the Group’s ability to achieve significant value from our South African operations.

The Group recognises the need for, and is committed to, the diversification of its future business activities. The Group is continually looking at alternative mining, commodity and renewable energy related opportunities, as well as new opportunities to add to our existing UK property and listed equity related investment portfolios. In the interim, we continue to work closely with Vunani Mining, our BEE partner in Black Wattle and Sisonke Coal processing, to ensure that we are responsible stewards of our legacy coal operations taking into account the climate-related risks outlined in our climate report on page 11 and the impact these risks may have on all our stakeholders.

During the period the Group’s total non-current and current listed equity related investments held at fair value through profit and loss increased to £15.0million (2022: £13.5million). The Group achieved dividend income from investments during the period of £0.56million (2022: £0.59million) and a gain in value from investments of £0.8million (2022: £1.0million). The Group’s listed equity related investment portfolios comprise primarily of listed equities and listed equity related funds involved or invested in extractive and energy related business activities, including entities involved in the extraction of commodities needed for the clean energy transition.   

In the UK, we have seen rental revenue from our retail property portfolio improve in 2023. The Group billed revenue from our directly owned property portfolio of £1.3million (2022: £1.11million) during the year. The Group continues to hold its joint venture development investment in West Ealing, with London & Associated Properties PLC and Metroprop Real Estate Ltd. As previously reported, we obtained a resolution to grant planning consent for 56 flats and four retail units at the end of 2020. During 2023 the joint venture has been finalising detailed designs for the project and working with contractors and designers to improve building efficiency and maximise potential returns. Currently, the joint venture is working toward developing the project to completion. Detailed negotiations to finance construction are underway with the intention of commencing work in the second half of 2024.  

Finally, in light of the challenging year, your directors propose a final year-end dividend of 4p (2022: 12p) per share. The final dividend proposed will be payable on Friday 26 July 2024 to shareholders registered at the close of business on 5 July 2024. This takes the total dividends per share for the year to 7p (2022: 22p).

On behalf of the Board and shareholders, I would like to thank all of our staff for their hard work and dedication during the course of the year.

Andrew Heller
Executive Chairman & Managing Director

22 April 2024

Strategic Report

Principal activity, strategy & business model

The company carries on business as a mining company and its principal activity is coal mining and coal processing in South Africa. The company’s strategy is to create and deliver long term sustainable value to all our stakeholders through our business model which can be broken down into three key areas:

1 Acquisition & investment

The Group continues to oversee responsibly its existing mining and processing operations in South Africa as well as actively to seek and evaluate new alternative mining, commodity and renewable energy related opportunities. The Group aims to achieve this through new commercial arrangements.

In addition, we seek to balance the high risk of our mining operations with a dependable cash flow from our UK property investment operations and listed equity related investment portfolios. The company primarily invests in retail property across the UK as well as residential property development. The UK Retail property portfolio is managed by London & Associated Properties PLC whose responsibility is to actively manage the portfolio to improve rental income and thus enhance the value of the portfolio over time. The Group’s listed equity related investment portfolios comprise primarily of listed equities and listed equity related funds involved or invested in extractive and energy related business activities, including entities involved in the extraction of commodities needed for the clean energy transition.   

2 Production & sustainability

The Group strives to mine its remaining South African coal reserves in an economical and sustainable manner that delivers value to all our stakeholders.

3 Processing & marketing

The Group seeks to achieve value from its South African coal processing infrastructure through the washing, transportation and marketing of coal into both the domestic and export markets.

Strategic Report

Mining review

2023 was a difficult year in terms of performance for our South African coal mining and processing operations. A lack of rail capacity for export and lower international coal prices significantly impacted the profitability of the Group. With more stability in the coal market going into 2024, management will be focussing on improving production levels and keeping operating costs low.

Production and operations

Geological issues in areas mined at Black Wattle, our South African mining operation, had a significant impact on production, particularly in the first half of 2023. The geological issues related to both the coal seams mined and the overburden removed. This, in turn, impacted the rate of extraction and overall cost per tonne of coal mined. In the third quarter of 2023, management took the decision to transition both our mining contractors to a new mining area. After overcoming temporary water issues in the last quarter of 2023, mining of this new area has steadily progressed going into 2024. Overall, the mine achieved production of 807,000 metric tonnes (2022: 824,000 metric tonnes) during the year. In 2024 to date, we have seen a significant improvement in mining production and lower operating costs compared to the previous mining area. We expect the improved performance at Black Wattle to continue throughout 2024.

We continue to work closely with Vunani Mining, our BEE partner in Black Wattle and Sisonke Coal processing, to ensure that we are responsible stewards of our legacy coal operations, which have a life of mine of six years, taking into account the climate related risks outlined in our climate report on page 11 and the impact these risks may have on all our stakeholders.

Main trends/markets

The stabilisation of global energy markets in 2023, compared to 2022, had a significant impact on prices achievable for our coal over the year. In the international market the average weekly price of Free On Board (FOB) Coal from Richard Bay Coal Terminal (API4 price) averaged $120 in 2023 compared to $273 in 2022.

The lower prices, offsetting a stronger US Dollar compared to the South African Rand, resulted in the Group achieving an average Rand price of R1,357 per tonne of export coal sold from the mine in 2023, compared to R3,770 in 2022. The Group’s export sales are via Richards Bay Coal Terminal, primarily under the Quattro programme which allows junior black-economic empowerment coal producers direct access to the coal export market via the terminal. During the second half of the year exports continued to be limited by constraints in transporting coal for export on the South African rail network, leading to a decrease in exports volumes from our South African operations during the year to 134,000 metric tonnes compared to 262,000 metric tonnes in 2022. Transnet, the South African state rail operator, and the wider South African coal industry, are working hard to collectively implement measures to increase rail capacity. Feedback to date on the application of these measures has been promising and we are pleased to report that, in 2024 to date, we have seen an improved performance in our railed coal export volumes compared to 2023.

In light of the export constraints, the Group supplied a higher proportion of coal into the South African domestic market in 2023, compared to 2022, at prices that were significantly lower than the export price achievable by rail through Richards Bay. For the year, the Group achieved an average domestic price of R938 per tonne coal sold compared to R774 in 2022. The average price increase in the domestic market in 2023, compared to 2022, was attributable to an increase in higher quality coal, destined for the export market, being sold domestically due to the lack of export rail capacity available. Domestic sales volumes from our South African operations decreased during the year to 0.90million metric tonnes (2022: 1.03million metric tonnes).

In 2023, the Group achieved an average overall Rand price per tonne of coal sold of R992 compared to R1,384 in 2022. The decrease in Group revenue in 2023 can mainly be attributed to the lower export coal prices achieved and lower volumes of coal sold, particularly into the export market. Further details on the financial performance of the Group’s mining segment can be found in the Financial & performance review on page 24 of this report.

Looking forward to 2024, we have seen coal prices remain stable in both our markets and we remain optimistic about a continued improvement in the provision of coal export rail capacity by Transnet.

Sustainable development

The Group’s South African operations continue to strive to conduct business in a safe, environmentally and socially responsible manner. Some highlights of our Health, Safety and Environment performance in 2023:

• The Group’s South African operations recorded 2 Lost time Injuries during 2023 (2022: Two).
• One case of Occupational Diseases was recorded.
• One claim for the Compensation for Occupational Diseases was submitted.

In South Africa, the new government regulated Broad-Based Socio-Economic Empowerment Charter for the Mining and Minerals Industry, 2020 (New Mining Charter) came into force from March 2020. The New Mining Charter is a regulatory instrument that facilitates sustainable transformation, growth and development of the mining industry. The Group is committed to fully complying with the New Mining Charter and providing adequate resources to this area in order to ensure opportunities are expanded for historically disadvantaged South Africans (HDSAs) to enter the mining and minerals industry. In addition, we are pleased to report that Black Wattle has achieved a level 3 Broad Based Black Economic Empowerment (BBBEE) verification certificate for 2024 and we continue to adhere and make progress in terms of our Social and Labour Plan and our various Black Economic Empowerment (“BEE”) initiatives. A fuller explanation of these can be found in our Sustainable Development Report on page 7.

Prospects

Management would like to thank all our South African employees and stakeholders for their significant contribution to the Group’s performance in 2023. Going forward, your management are optimistic that 2024 will be a successful year for our South African operations.

Strategic Report

Sustainable development

The Group is fully committed to ensuring the sustainability of both our UK and South African operations and delivering long term value to all our stakeholders.

Social, community and human rights issues

The Group believes that it is in the shareholders’ interests to consider social and human rights issues when conducting business activities both in the UK and South Africa. Various policies and initiatives implemented by the Group that fall within these areas are discussed within this report.

Health, Safety & Environment (HSE)

The Group is committed to creating a safe and healthy working environment for its employees and the health and safety of our employees is of the utmost importance.

HSE performance in 2023:

• One case of Occupational Diseases was recorded.
• One claim for the Compensation for Occupational Diseases was submitted.
• No machines operating at Black Wattle exceeded the regulatory noise level.
• The Group’s South African operations recorded 2 Lost Time Injuries during 2023.

In addition to the required personnel appointments and assignment of direct health and safety responsibilities on the mine, a system of Hazard Identification and Risk Assessments has been designed, implemented and maintained at Black Wattle and at Sisonke Coal Processing. Health and Safety training is conducted on an ongoing basis. We are pleased to report all relevant employees to date have received training in hazard identification and risk assessment in their work areas.

A medical surveillance system is also in place which provides management with information used in determining measures to eliminate, control and minimise employee health risks and hazards and all occupational health hazards are monitored on an ongoing basis.

Various systems to enhance the current HSE strategy have been introduced as follows:

• In order to improve hazard identification before the commencing of tasks, mini risk assessment booklets have been distributed to all mine employees and long term contractors on the mine.
• Dover testing is conducted for all operators. Dover testing is a risk detection and accident reduction tool which identifies employees’ problematic areas in their fundamental skills in order to receive appropriate training.
• A Job Safety Analysis form is utilised to ensure effective identification of hazards in the workplace.
• In order to capture and record investigation findings from incidents, an incident recording sheet is utilised by line management and contractors.
• Black Wattle Colliery utilises ICAM (Incident Cause Analysis Method).
• On-going training on first aid is being conducted with all employees involved with this discipline.

Looking forward into 2024, Black Wattle intends to enhance the safety of our employees and contractors onsite through the sourcing and procurement of a Proximity Detection System (“PDS”) solution for the mine. The PDS solution comprises a sensing device that detects the presence of another person, vehicle or object and a sophisticated interface that provides an audible and visual alarm. These systems warn both the vehicle operator and the pedestrian of the imminent danger of a potential collision.

The Group continues to monitor and adhere to all of the South African government’s guidelines and regulations including all updates and advice from the National Department of Health and the Department of Minerals Resources and Energy.

Black Wattle Colliery Social and Labour Plan (SLP) and Community Projects

Black Wattle Colliery is committed to true transformation and empowerment as well as poverty eradication within the surrounding and labour providing communities.

Black Wattle is committed to providing opportunities for the sustainable socio-economic development of its stakeholders, such as:

• Employees and their families, through Skills Development, Education Development, Human Resource Development, Empowerment and Progression Programmes.
• Surrounding and labour sending communities, through Local Economic Development, Rural and Community Development, Enterprise Development and Procurement Programmes.
• Empowering partners, through Broad-Based Black Economic Empowerment (BBBEE) and Joint Ventures with Historically Disadvantaged South African (HDSA) new mining entrants and enterprises.
• The company engages in on going consultation with its stakeholders to develop strong company-employee relationships, strong company-community relationships and strong company-HDSA enterprise relationships.

The key focus areas in terms of the detailed SLP programmes were updated as follows:

• Implementation of new action plans, projects, targets and budgets were established through regular workshops with all stakeholders.
• A comprehensive desktop socio-economic assessment was undertaken on baseline data of the Steve Tshwete Local Municipality (STLM) and Nkangala District Municipality (NDM).
• Through engagements with the Department of Education and STLM regarding the Local Economic Development projects for the current SLP year cycle (2022-2026). The department endorsed the Khulunolwazi School Project in late 2023. The project is currently in a planning phase for the implementation of the project in various phases. At present, drawing plans for the school are being finalised, which requires approval from the local municipality.

Black Wattle has implemented various community initiatives including:

• A community training environmental project, where local community members are trained to safely cut and remove non-indigenous vegetation. Thereafter the vegetation is utilised in the making, bagging and sales of charcoal.
• A waste management project at Uitkyk community, nearby to Black Wattle, involving the collection and recycling of waste from their community.
• Certain community members have been identified for training in areas regarding mining and beneficiation. These areas include but are not limited to:
  • conveyor maintenance;
  • operation of mining machinery;
  • training in environmental waste management;
  • drivers licenses; and
  • security officer training
• One HDSA female completed her University studies in the 2023 academic year.
• Various upgrades were initiated at the Evergreen School nearby to Black Wattle.

Black Wattle continues to support Care for Wild, a globally recognized local conservation organization dedicated to preserving endangered species and safeguarding the precious biodiversity of our planet. As the largest orphaned rhino sanctuary in the world, Care for Wild specialise in the rescue, rehabilitation, rewilding, and protection of orphaned and injured rhinos. However, their mission extends far beyond rhinos alone, they are deeply committed to the preservation of endangered species that play vital roles in their ecosystems and the conservation of biodiversity.

The Group recognizes the critical importance of this goal in safeguarding biodiversity and aspire to play a significant role in its realization through our sponsorship of three Rhinos as well as various related community gardening initiatives at the sanctuary.

Environment & environment management programme

South Africa

Under the terms of the mine’s Environmental Management Programme approved by the Department of Mineral Resource and Energy (“DMRE”), Black Wattle undertakes a host of environmental protection activities to ensure that the approved Environmental Management Plan is fully implemented. In addition to these routine activities, Black Wattle regularly carries out environmental monitoring activities on and around the mine, including evaluation of ground water quality, air quality, noise and lighting levels, ground vibrations, air blast monitoring, and assessment of visual impacts. In addition to this Black Wattle also performs quarterly monitoring of all boreholes around the mine to ensure that no contaminated water filters through to the surrounding communities.

Black Wattle is fully compliant with the regulatory requirements of the Department of Water Affairs and Forestry and has an approved water use licence.

Black Wattle Colliery has substantially improved its water management by erecting and upgrading all its pollution control dams in consultation with the Department of Water Affairs and Forestry.

A performance assessment audit was conducted to verify compliance to our Environmental Management Programme and no significant deviations were found.

United Kingdom

The Group’s UK activities are principally retail property investment as well as residential property development whereby we provide or develop premises which are rented to retail businesses or sold on to end users. We seek to provide tenants and users in both these areas with good quality premises from which they can operate or reside in an environmentally sound manner.

Procurement

In compliance with the Mining Charter and the Mineral and Petroleum Resource Development Act, the Group’s South African operations has implemented a BBBEE-focussed procurement policy which strongly encourages our suppliers to establish and maintain BBBEE credentials. We are very pleased to report that Black Wattle has a achieved a level 3 BBBEE certificate for 2024. At present, 88 percent of the companies utilised by Black Wattle for equipment and services are BBBEE companies.

Mining Charter

In South Africa, the new government regulated Broad-Based Socio-Economic Empowerment Charter for the Mining and Minerals Industry, 2020 (New Mining Charter) came into force from March 2020. The New Mining Charter is a regulatory instrument that facilitates sustainable transformation, growth and development of the mining industry. The Group’s mining operation is expected to reach various levels of compliance to the New Mining Charter over a period of five years from March 2020. The Group is committed to providing adequate resources to this area in order to ensure full compliance to the New Mining Charter is achieved over the period. As part of Black Wattle’s commitment to the New Mining Charter, the company seeks to:

• Expand opportunities for historically disadvantaged South Africans (HDSAs), including women and youth, to enter the mining and minerals industry and benefit from the extraction and processing of the country’s resources;
• Utilise the existing skills base for the empowerment of HDSAs; and
• Expand the skills base of HDSAs in order to serve the community.

Employment & diversity

In the UK, the Board of Bisichi PLC at 31 December 2023 comprised of:

The above data has been collected through self-reporting by the Board members. Questions asked include gender identity or sex and ethnic background.

The Company notes the diversity targets included in the Listing Rules, being:

• at least 40% of the individuals on the Board are women;
• at least one of the specified senior positions is held by a woman; and
• at least one individual on the Board is from a minority ethnic background.

At 31 December 2023 the Company did not meet the target of at least 40% of the individuals on its board of directors are women and at least one of the senior positions on the Board are held by a women. Should the Board look to appoint further directors in the future, the Company will give due consideration to how it may achieve the diversity targets while ensuring the appropriate structure of the Board and mix of skills and expertise relevant to the Company’s operations. As part of its recruitment processes, the Company gives careful consideration to all potential applicants however has a particular regard to those with knowledge and experience of the mining and extractives sector and in particular the South African market. This necessary focus narrows considerably the pool of potential applicants and poses potential challenges in both recruitment and meeting the diversity targets. The Company will keep this under ongoing review.

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