CZA Coal of Africa

 

TIDMCZA 
 
RNS Number : 5653Z 
Coal of Africa Limited 
24 September 2009 
 

 
 
 
 
 
 
ANNOUNCEMENT24 SEPTEMBER 2009 
COAL CONFIRMS PPP DISCUSSIONS WITH TRANSNET FREIGHT RAIL 
Coal of Africa Limited ("CoAL" or "the Company"), the AIM/ASX/JSE listed coal 
mining and development company operating in South Africa (ticker: CZA), confirms 
that it is progressing discussions with Transnet Freight Rail ("TFR"), a 
division of Transnet, the South African Government owned rail and freight 
organisation, whereby it continues to explore the possibilities of a public 
private partnership ("PPP") on the Maputo rail corridor. Discussions with TFR 
are designed to ensure the availability of rail capacity to match the port 
capacity CoAL has secured through agreements with Grindrod Limited, as 
previously advised on 25 August 2008. 
 
As per its announcement on 28 January 
2009, CoAL's export capacity via the Matola terminal in Maputo is currently 
1 million tonnes per annum ("mtpa"). This is expected to rise to 3 mtpa by late 
2010 with further potential to reach 13 mtpa following an additional 10 mtpa 
expansion via the creation of a new dedicated coal export terminal. 
 
 
Although terms and conditions have yet to be finalised, TFR and CoAL are 
committed to the process, and are exploring all options to ensure a solution is 
found that will meet the overall objective of facilitating the use of the Maputo 
corridor as a viable export route for coal producers, and an alternative to the 
Richards Bay Coal Terminal. 
 
 
Comment on the status of discussions was made by TFR General Manager, Mr Fuzile 
Magwa, at the recent Coal Trans conference held in Johannesburg in September 
2009. This was reported on by McCloskey's in a recent publication, extracts of 
which are set out below: 
 
 
".... Transnet Freight Rail seems close to signing a public private partnership 
agreement with CoAL as part of its plans to ship coal through Maputo and which 
could also be the first of a string of similar TFR PPP deals. That emerged from 
the Coaltrans SA conference held last week in Johannesburg where TFR General 
Manager Fuzile Magwa said increasing coal exports through the Matola terminal in 
Maputo was a 'critical growth area.' 
 
 
"Mr Magwa said TFR wanted to increase coal export volumes through Matola from 
2mt/yr in 2009/10 to 10mt/yr in its 2013/14 financial year. The key to achieving 
this is finalising the PPP agreement with CoAL which is prepared to pay for the 
wagons required to move the coal to be 'ringfenced' for use on the Maputo 
corridor line to the terminal. 
 
 
"CoAL Finance Director Blair Sergeant said CoAL has already invested $35m in the 
Matola terminal. 'These are not pie in the sky plans. They have been well 
thought out,' he commented. He said CoAL's strategy is to take the risk of this 
investment in infrastructure on its balance sheet rather than be exposed to it 
on the income statement through a 'take-or-pay' agreement with TFR. He said: 
'TFR needs a 'take-or-pay' contract to justify the investment in building the 
wagons. The problem with 'take-or-pay' is that inevitably there will be 
mismatches between production levels and railage capacity which will hit the 
income statement.' Sergeant stressed the PPP had not been signed yet but said he 
was highly encouraged by the comments that Magwa had made in his presentation to 
the conference. Magwa said TFR will be looking at PPPs 'of all kinds' in its 
plans to grow railage volumes of both export coal and domestic coal, in 
particular to supply Eskom power stations. He added that TFR's separate export 
coal and domestic coal (general freight business) divisions would be combined 
into a single business unit to improve operating efficiencies. 
 
 
"Sergeant said a 'unique set of circumstances' make the Maputo/Matola line ideal 
for a PPP with TFR. These included the markedly lower number of companies using 
Matola compared with the Richards Bay Coal Terminal (RBCT) and the fact that 
CoAL's production plans by themselves will underpin the economic viability of 
the scheme. 'TFR will not have 20 to 30 different users banging on their door to 
get wagons,' he commented. Magwa added: 'We believe it is appropriate to share 
the risk on the Maputo Corridor development with someone who is a major player 
in it. Further, the Maputo Corridor is small and relatively low risk. As we go 
into PPPs, we are trying things out as we go along. If we make mistakes on the 
Maputo corridor they will not have company busting implications.' Magwa's 
comments are the most comprehensive made so far by a TFR executive on its 
approach to structuring PPPs..." 
 
 
AUTHORISED BY: 
Simon Farrell 
Managing Director 
 
 
For more information contact 
Simon Farrell, Managing Director CZA 
                       +61 417 985 383                         or 
+61(8) 9322 6776 
Peter Bacchus/ Alastair Cochran 
Morgan Stanley+44(0) 20 7425 8000 
Simon Edwards/ Chris Sim 
Evolution Securities +44(0) 20 7071 4300 
Jos Simson/  Leesa PetersConduit PR       +44(0) 20 7429 6603 
Melanie de Nysschen 
    Macquarie First South Advisers+27(11) 583 2000 
 
 
About CoAL: 
Coal of Africa Limited ("CoAL") is an AIM/ASX/JSE listed coal mining and 
development company operating in South Africa.  CoAL has three key projects 
including the 113 million tonne ('mt') Mooiplaats thermal coal mine, the 656Mt 
Vele coking coal project and the 1bn tonne Makhado coking coal project. 
 
 
The Mooiplaats coal mine commenced production in 2008 and is currently ramping 
up to produce 2 mtpa. CoAL's Vele and Makhado coking coal projects are expected 
to start production in H1 2010 and Q4 2011 respectively producing an initial 2 
mtpa rising to a combined annual output of 10 mtpa of coking coal. 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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