TIDMCZA
RNS Number : 9317W
Coal of Africa Limited
29 November 2010
ANNOUNCEMENT 29 NOVEMBER 2010
ACQUISITION OF RIO TINTO'S SOUTH AFRICAN COAL ASSETS
Highlights
-- CoAL, via one of its black empowered subsidiaries, has
entered into an agreement to pay a total consideration of US$75
million for the Chapudi Coal Project and several other coal
exploration properties ("Related Exploration Properties")
-- The Chapudi Coal Project has an estimated 1,040Mt JORC
resource and is contiguous with CoAL's Makhado Coking Coal
Project
-- The Soutpansberg Basin is the only coal basin in South Africa
that hosts significant premium hard coking coal and this
acquisition establishes CoAL as the dominant landholder in the
Soutpansberg Basin
The Acquisition
Coal of Africa Limited ("CoAL" or "the Company") is pleased to
announce that it has entered into a Sale and Purchase Agreement
("SPA") for the acquisition of the Chapudi Coal Project and Related
Exploration Properties (collectively, the "Coal Assets") in the
Limpopo Province of South Africa, from joint venture companies held
by Rio Tinto Minerals Development Limited and Kwezi Mining
(Proprietary) Limited (collectively the "Vendors"). The Coal Assets
comprise both thermal and coking coal development projects.
The acquisition of the Chapudi Coal Project provides CoAL with
an additional estimated 1,040Mt JORC resource (of which 90Mt is
Measured, 220Mt Indicated and 730Mt Inferred, as defined in the
2004 Edition of the 'Australasian Code for Reporting of Exploration
Results, Minerals Resources and Ore Reserves' ("JORC Code") ),
which is contiguous with its Makhado Coking Coal Project ("Makhado
Project"). In addition, CoAL will retain properties that were to be
exchanged with the Vendors in accordance with the Rio Farm Swap
Agreement, the section 102 approval for which was announced on 13
September 2010.
The properties being acquired significantly extend the scale and
scope of CoAL's existing Voorburg and Jutland coal projects,
together with adding new project areas including the Generaal,
Wilderbeesthoek, Chapudi and Chapudi West coal projects. CoAL's
working knowledge of this acreage, which has been established
during its period of ownership, exploration and resource
delineation of Makhado, will aid in further exploring the
contiguous acreage which it has now acquired.
John Wallington, CoAL's Chief Executive Officer, today
commented: "The acquisition of the Chapudi Coal Project and the
Related Exploration Properties bolsters our existing coking coal
projects with the Chapudi Coal Project alone doubling our Makhado
Project's 947Mt resource, thereby cementing CoAL's position as the
dominant landholder in one of South Africa's most prospective coal
basins. The acquisition also comes at a critical time with the
results from the Makhado Project definitive feasibility study
("DFS") due in early 2011 and we believe that the acquisition will
strengthen our application for New Order Mining Rights for the
Makhado Project."
Related Exploration Properties
Separately from the 1,040Mt Chapudi Coal Project, all of the
farms comprising the Related Exploration Properties are contiguous
to one or more of CoAL's existing Voorburg, Jutland, Mt Stuart and
Makhado Coal Projects, significantly expanding both the scale and
scope of each of these project areas (see map on CoAL's website at
www.coalofafrica.com ).
Coal Assets Highlights and Acquisition Rationale
Scale Resource Base and Significant Exploration Potential
The Chapudi Coal Project's estimated 1,040Mt resource more than
doubles the Makhado Project's current 947Mt resource (of which 387
Mt is Measured and 542 Mt is Indicated). Further potential is
available from the Related Exploration Properties for which there
is no current resource, notwithstanding that the Voorburg and
Jutland blocks have been the subject of extensive historical
exploration. These properties comprise approximately two thirds of
the Coal Assets acquired by area.
Establishment of a dominant rights holder in the Soutpansberg
Basin
The Soutpansberg Basin is one of South Africa's most prospective
coal basins, particularly for coking coal, with significant
undeveloped resources. CoAL's early presence through the Makhado
Project and subsequent expansion through both the Rio Tinto Farm
Swap and acquisition of the Coal Assets has cemented its position
as the dominant rights holder in the region.
Dual thermal and coking coal development potential
The Coal Asset's resources are suitable for development of
thermal and coking coal operations. The Chapudi Coal Project's
estimated 1,040Mt resource is more suitable as a thermal coal
project, whilst the Related Exploration Properties which are
contiguous with CoAL's Makhado, Mt Stuart, Voorburg and Jutland
Projects exhibit coking coal properties and are more likely to be
developed as such. CoAL intends to develop the coking coal
properties and will seek either a domestic or export market for the
thermal coal. Strong potential exists for development of an
Independent Power Producer ("IPP") project in the region,
bolstering the domestic market together with international markets
being developed given the ready access to the export market through
the Maputo logistics corridor.
Ability to leverage logistics capacity and expertise
Grindrod, as port sub-concession holder, is currently expanding
the export capacity at the Matola Terminal in Maputo, Mozambique,
to 6Mtpa by Q1 2011, of which CoAL's allocation will increase from
1Mpta to 3Mpta upon completion. Further, CoAL also has the option
to participate in further expansion at the Matola Terminal, which
is expected to increase the capacity at the terminal by an
additional 10-17Mtpa. CoAL's Matola Terminal capacity and scale
presence in the Soutpansberg Basin will allow it to develop the
Maputo logistics corridor and leverage its future production into
the export market.
Acceleration of Makhado New Order Mining Right
The Directors believe that the increase in scale of CoAL's
presence in the Soutpansberg Basin following the acquisition of the
Coal Assets will likely enhance the prospects of its Makhado New
Order Mining Right application with the Department of Mineral
Resources. It is anticipated that the New Order Mining Right
application will be lodged before the end of the calendar year,
followed closely by an application for an Integrated Water Use
Licence and further relevant approvals, as required.
Significant Development Optionality
CoAL's dominant presence in the region, together with its
leading logistics capability coupled with the dual thermal and
coking application of the Coal Assets being acquired are likely to
present significant opportunities in the region as it develops,
allowing CoAL to capitalise on a "first mover advantage" through
consolidating, joint venturing or otherwise restructuring its
presence in the Soutpansberg Basin.
Broad Based Black Economic Empowerment ("BBBEE")
CoAL intends to use the acquisition to continue and further
build upon its extensive BBBEE initiatives. Specifically, CoAL
intends to develop the Chapudi Coal Project and potential IPP in
collaboration with its proposed BBBEE partners, the local
constituents of the Mudimeli, Musekwa Makushu--Musholombi and
Tshivhula communities, together with Terracotta Resources and
Vibrant Veterans Mineral Resources.
Acquisition Consideration
The consideration payable by CoAL comprises:
-- US$45 million upfront consideration in cash, payable on
completion of the sale, which remains subject to a number of
conditions precedent, including approval in accordance with Section
11 of the Mineral and Petroleum Resources Development Act.
Completion of the sale is expected to occur within six months. CoAL
has already provided the Vendors with a US$2 million cash deposit;
and
-- US$30 million deferred cash consideration, payable on the
earlier of (i) the granting of a New Order Mining Right for any
farm or combination of farms that form part of the Coal Assets, or
(ii) 24 months from fulfillment of the conditions precedent to the
sale.
Azure Capital acted as Corporate Adviser to CoAL in relation to
the transaction.
Acquisition Funding
As detailed in the 15 June 2010 Company Update, CoAL continues
to consider a number of funding options which include various forms
of debt (such as additional working capital facilities), equipment
finance leasing, self funding environmental rehabilitation
guarantees, sale of non-core assets (such as Holfontein, NiMag and
Madagascar) and equity. The Company also notes the potential
sources of funding that would arise if either (i) the options
issued to its BBBEE partners were exercised, raising some GBP30m,
or (ii) Exxaro Coal (Proprietary) Limited exercised its option to
acquire a 30% participating right in the Makhado Project. JOHN
WALLINGTON
Chief Executive Officer
For more information contact
Simon Farrell Executive Deputy Chairman Coal of Africa +61 417
985 383
John Wallington Chief Executive Officer Coal of Africa +27 11
575 7423
Blair Sergeant Finance Director Coal of Africa +27 11 575
6797
Ryan Rockwood Associate Director Azure Capital +61 447 760
058
Simon Edwards / Chris Sim Nominated Adviser Evolution Securities
+44 20 7071 4300
Jos Simson/Emily Fenton Financial PR Conduit PR +44 207 429
6603
www.coalofafrica.com
About CoAL:
CoAL is an AIM/ASX/JSE listed coal mining and development
company operating in South Africa. CoAL's key projects include the
Woestalleen Colliery, the Mooiplaats thermal coal mine, the Vele
coking coal project and the Makhado coking coal project.
The Mooiplaats coal mine commenced production in 2008 and is
currently ramping up to produce 2 million tonnes per annum
("Mtpa"). CoAL's Makhado coking coal project is expected to start
production in 2013 and timing for Vele to reach production is still
to be confirmed. These operations are targeted to collectively
produce an initial 2Mtpa ramping up to a combined annual output of
10Mtpa of coking coal.
In 2010, CoAL completed the ZAR467m acquisition of NuCoal Mining
(Pty) Limited ("NuCoal"), a thermal coal producer with assets in
South Africa in close proximity to CoAL's Mooiplaats mine. NuCoal
owns the Woestalleen Colliery, which has a number of off-take
contracts in place and processes approximately 2.5Mtpa of saleable
coal for domestic and export markets. NuCoal also owns two
beneficiation plants, one fully operational mine producing
approximately 300kt per month of ROM coal and has recently
commenced production at a second mine.
Resource Estimation:
The information in this report that relates to the Chapudi Coal
Project's estimated 1,040Mt JORC Resource is based on information
compiled by Steen Kristensen, who is a member of the Australian
Institute of Mining and Metallurgy and who qualifies as a Competent
Person as defined in the 2004 Edition of the 'Australasian Code for
Reporting of Exploration Results, Minerals Resources and Ore
Reserves' ("JORC Code"). Steen is a full-time employee of Rio Tinto
Energy and has experience which is relevant to the style of
mineralisation and type of deposits under consideration. . Steen
Kristensen consents to the inclusion in the report of the matters
based on his information in the form and context in which it
appears.
The information in this report that relates to exploration
results, mineral resources or ore reserves in respect of the
Makhado coking coal project is based on information compiled by
Mark Craig Stewardson, who is registered as a Professional Natural
Scientist (Pr Sci Nat, Reg. No. 400119/93) with the South African
Council for Natural Scientific Professions ("SACNASP"), which is a
Recognised Overseas Professional Organisation ("ROPO") in terms of
the JORC Code. Mark Craig Stewardson is employed by Mineral
Corporation Consultancy and has sufficient experience that is
relevant to the style of mineralisation and type of deposit under
consideration and to the activity which he is undertaking to
qualify as a Competent Person as defined in the JORC Code. Mark
Craig Stewardson consents to the inclusion in this announcement of
the matters based on his information in the form and context in
which it appears.
This information is provided by RNS
The company news service from the London Stock Exchange
END
ACQPGGRCGUPUPPR
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