TIDMCZA
RNS Number : 3307A
Coal of Africa Limited
31 January 2011
ANNOUNCEMENT 31 JANUARY 2011
REPORT FOR THE QUARTER ENDED 31 DECEMBER 2010
Coal of Africa Limited ("CoAL" or "the Company") provides its
operational report for the quarter ended 31 December 2010. A copy
of this report is available on the Company's website,
www.coalofafrica.com
Highlights
-- The Company entered into an agreement with Rio Tinto to
acquire the Chapudi Coal Project and several other coal exploration
properties ("Related Exploration Properties") for US$75
million.
-- The Chapudi Coal Project has an estimated 1.040 million tonne
("Mt") 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")) and is contiguous with CoAL's Makhado
coking coal Project ("Makhado Project").
-- Substantial progress made on the Definitive Feasibility Study
("DFS") for the Makhado Project.
-- Extraction of over 269,300 bank cubic metres ("bcm") of
material for the Makhado Project bulk sample during the
quarter.
-- 954,915 tonnes of run of mine ("ROM") and 686,403 tonnes of
export quality coal produced at the Woestalleen and Mooiplaats
thermal collieries.
-- Cash balance at the end of the quarter of A$23 million.
Commenting on the results today, John Wallington, Chief
Executive Officer of CoAL said: "The Company continues to work
closely with various government departments to resolve the
challenges at the Vele Colliery. Interactions to date included a
constructive site visit by the United Nations Educational
Scientific and Cultural Organization ("UNESCO") and senior
government officials from the Departments of Mineral Resources
("DMR") and Environmental Affairs ("DEA"), to assess the
co-existence of the Vele Colliery with the Mapungupwe World
Heritage Site. Whilst the Company awaits UNESCO's feedback,
management remains confident that any issues identified can be
satisfactorily resolved allowing for the commencement of operations
at the colliery in early 2011."
"CoAL has committed itself to complying with enacted as well as
any future legislative requirements. While seasonal rainfall
reduced production at our Woestalleen mines, production at the
Mooiplaats thermal coal project ("Mooiplaats Colliery") increased
slightly and further development work and the commissioning of an
additional section is expected to result in a steady rise in
production. The acquisition of Rio Tinto's tenements in the
vicinity of CoAL's Makhado Project will position the Company as the
majority resource owner in South Africa's only known coking coal
area, in an environment of rising global coal prices."
QUARTERLY COMMENTARY
Woestalleen Mines and Processing Plant - Witbank Coalfield
(100%)
The Zonnebloem operation continued its impeccable safety record,
with the site not recording a single lost time injury since
start-up in 2008.
Production at Woestalleen's open cast mines was adversely
affected by seasonal rainfall, resulting in the production of
761,393 tonnes (Q1: 930,840 tonnes) of ROM coal during the quarter.
The Zonnebloem mine produced 639,087 tonnes (Q1: 750,130 tonnes), a
further 12,516 tonnes were produced at Klipbank (Q1: 25,968 tonnes)
and 109,790 tonnes at Hartogshoop (Q1: 154,742 tonnes). The ROM
coal was processed at the Woestalleen processing facility,
producing 500,940 tonnes (Q1: 447,117 tonnes) of export quality
coal and 97,368 tonnes (Q1: 104,082 tonnes) for sale to the
domestic market.
During the quarter, 78,886 tonnes of lower grade middlings were
sold to Eskom, the South African electricity generator, (Q1:
115,141 tonnes) and 504,731 tonnes (Q1: 560,036 tonnes) of export
quality coal was sold.
Mooiplaats Colliery - Ermelo Coalfield (100%)
Safety programmes continued at the Mooiplaats Colliery during
the quarter and no lost time incidents were recorded.
Production increased to 193,522 tonnes of ROM coal compared to
182,230 tonnes during the previous quarter. The increase is
attributable to the addition of a fourth underground section during
October 2010.
The 355,698 tonnes of ROM coal processed during the three months
included 162,146 tonnes (Q1: 154,957 tonnes) of purchased coal and
yielded 185,463 tonnes (Q1: 197,690 tonnes) of export quality coal
and 67,758 tonnes (Q1: 55,870 tonnes) of middlings product for
Eskom. Extensive development was conducted during the period to
create the necessary pit room facilitating increased production and
a rise in output per section is currently being achieved.
Port expansion and upgrade related delays and a derailment
affected the railing of coal to the Matola Terminal in Maputo,
Mozambique ("Matola Terminal") and during the three months, 192,945
tonnes of export quality coal was railed to the port (Q1: 172,022
tonnes).
58,350 tonnes (Q1: 83,167 tonnes) were sold to Eskom's Camden
Power Station during the three months and 170,776 tonnes (Q1:
181,342 tonnes) of Mooiplaats and Woestalleen coal exported from
the Matola Terminal.
Development of the fourth section at the Mooiplaats Colliery was
completed during the quarter. Management has decided to commence
the deployment of the fifth section after production from the
current four sections has been optimised and sufficient pit room
established. Further investment decisions will be undertaken
following confirmation of increased rail capacity from Transnet
Freight Rail.
At the end of October 2010, a Pre-Compliance Notice pertaining
to the Mooiplaats Project was issued. CoAL representatives met with
the Mpumalanga Department of Economic Development, Environment and
Tourism shortly thereafter and subsequently the Pre-Compliance
Notice was withdrawn. No Compliance Notice was ever issued to the
Company nor was the Company ever required to cease operations at
Mooiplaats. Progress continued to be made in this regard between
the relevant officials at the mine and Provincial Departments.
Vele Coking Coal Project - Tuli Coal Field (100%)
As announced at the end of the September quarter, the
development phase of the Vele coking coal project ("Vele Colliery")
comprising the construction of the open cast mining pit, processing
plant and related mining infrastructure is near completion. No
construction or mining activity was undertaken at the Vele Colliery
during the reporting period as a result of the Compliance Notice
served on the Company by the DEA during the previous quarter.
During the quarter, representatives of UNESCO visited the Vele
Colliery, together with senior members of the DMR, DEA and CoAL
management. The visit was conducted in a positive manner and
discussions are ongoing.
The Company continued to interact with DEA representatives
during the quarter and submitted the first set of rectification
papers in terms of Section 24G of the South African National
Environmental Management Amendment Act, 1998 (Act No. 107 of 1998)
("NEMA"). In early January 2011, the Company submitted the second
set of NEMA rectification papers.
Pending the granting of the Integrated Water Use Licence
("IWUL") and favourable rulings in terms of the 24G submissions,
mobilisation and construction completion is expected to take up to
twelve weeks, followed soon thereafter by production and the first
sales of coking coal.
Makhado Coking Coal Project - Soutpansberg Coal Field (100%)
Significant progress was made during the quarter towards
completing the New Order Mining Right ("NOMR") application for the
Makhado Project, resulting in its lodgement with the DMR during the
March 2011 quarter. This will be followed closely by application
for further regulatory approvals, as required.
Work on the NOMR application included baseline social and
environmental studies conducted by independent experts.
Consultation with interested and affected parties continued during
the quarter and included the establishment of the Makhado Project
Community Engagement Forum to formalise engagement with the
communities and land claimants affected by the Makhado Project.
Once the NOMR application has been accepted by the DMR, extensive
economic, social and environmental impact studies will be prepared
as part of the process in formulating a detailed Environmental
Management Programme.
By the end of the quarter, CoAL had largely completed the DFS
for the Makhado Project and the initial results are currently
undergoing a review process which the Company expects to complete
by the middle of the March quarter. The detailed design phase of
the Makhado Project will commence once the DFS has been finalised
and approved by the CoAL Board. The Company anticipates that this
will occur by the end of the June quarter and will be followed by
the purchase of long-lead time items. These activities are expected
to occur whilst CoAL awaits approval from the DMR for the Company's
Makhado Project NOMR Application.
As announced previously, the Company has received all required
regulatory approvals to extract a bulk sample from the Makhado
Project. Progress on the bulk sample continued during the quarter
and by the end of the period, over 350,000 bcm's of material had
been removed. A 19,000 tonne ROM coal sample will be transported to
Exxaro Resources Limited's Tshikondeni Colliery, where it is
expected to be beneficiated into approximately 4,400 tonnes of
coking coal with an approximate 10% ash content. The Company is
confident that analysis and testing will confirm the expected
coking qualities. It is estimated that by the end of March 2011,
the sample will have been transported to the Tshikondeni Colliery
for processing.
The product will then be tested by ArcelorMittal SA in their
coking ovens at Vanderbijlpark. The results of these tests are
intended to facilitate the finalisation of certain terms and
conditions related to volumes and pricing for the proposed off-take
agreement between CoAL and ArcelorMittal SA.
Acquisition of Rio Tinto's South African Coal Assets
During November 2010, the Company announced that it entered an
agreement to acquire Rio Tinto Minerals Development Limited's
Chapudi Coal Project and Related Exploration Properties
(collectively, "the Coal Assets"). The Coal Assets are situated in
the Soutpansberg Basin and comprise both thermal and coking coal
and establish the Company as the dominant coal prospect holder in
the Soutpansberg Basin.
The acquisition more than doubles the Company's current Makhado
Project resource and provides CoAL with an estimated additional
1.040 million tonne JORC resource. The Chapudi Coal Project is
contiguous with the Company's Makhado Project and CoAL will retain
properties that were to be exchanged in accordance with the
previously announced Rio Farm Swap Agreement.
Separately from the 1.040 million tonne 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. CoAL's working
knowledge of this area, which has been established during its
period of ownership, exploration and resource delineation of the
Makhado Project, will aid in further exploring the contiguous areas
which it has now acquired.
CoAL intends to develop the coking coal properties and expects
to seek either a domestic or export market for the thermal coal.
Grindrod, as port sub-concession holder, is currently expanding the
export capacity at the Matola Terminal to 6 million tonnes per
annum ("Mtpa"), completion of which is expected in the March 2011
quarter and will result in CoAL's allocation increasing from 1Mtpa
to 3Mtpa. The Company also has the option to participate in further
expansion at the Matola Terminal which is expected to significantly
increase the capacity at the terminal. CoAL's Matola Terminal
capacity and scale presence in the Soutpansberg Basin will allow
the Company to develop the Maputo logistics corridor and leverage
its future production into the export market.
CoAL intends to use the acquisition of the Coal Assets to
continue and further build upon its extensive Broad Based Black
Economic Empowerment ("BBBEE") initiatives. Specifically, CoAL
intends to develop the Chapudi Coal Project and a potential
Independent Power Producer project in collaboration with its
proposed BBBEE partners, including the local communities and other
broad based groupings.
The acquisition consideration payable by CoAL comprises:
-- US$45 million up front 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. 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 NOMR for any farm or combination
of farms that form part of the Coal Assets, or (ii) 24 months from
fulfilment of the conditions precedent to the sale.
Polokwane Analytical Laboratory (100%)
During the quarter, the Polokwane laboratory continued with the
analysis of CoAL's Makhado Project exploration samples. The
facility received its South African National Accreditation System
approval for the majority of the procedures undertaken at the
laboratory. The accreditation results in the facility being more
marketable and ensures that laboratory results are reliable and
accurate.
NiMag Group of Companies (100%)
The NiMag Group returned a profit for the quarter as a result of
increased orders during the three months, stable nickel prices and
the consolidation of the Joerg Foundry acquired in the previous
quarter. Profitability was however adversely affected by the
strengthening of the South African Rand against the United States
Dollar.
The investment in the NiMag Group was assessed during the
quarter and as a result of it being considered non-core to the CoAL
Group, it has been classified as available for sale. The Company
has commenced with a formal disposal process.
Holfontein Coal Project (100%)
The Company continues to classify its Holfontein Project as a
non-core asset available for sale. The Company has been tentatively
approached by interested parties and, as previously announced, has
commenced with a formal disposal process.
Madagascar Coal Project (50%)
CoAL holds a 50% interest in the Imoloto Project located in
south west Madagascar which covers approximately 90% of the Imoloto
basin. The project comprises 43 blocks, totalling 270 km2, as well
as a further 90km2 in 14 blocks in adjacent coal basins. It is
intended that the Madagascan asset be listed on the Australian
Securities Exchange in the near term.
Corporate Activity
Funding options
The Company held A$23m of cash at the end of the December 2010
quarter. Operating cash flows were impacted by rail and port
performance. Commissioning of the Matola Terminal upgrade is
scheduled for completion by the middle of the March 2011 quarter
and is expected to result in increased export volumes. Operational
cost and cash flow controls have been substantially reviewed and
are being significantly strengthened as CoAL transitions to a fully
fledged operational and project delivery company. The Company is
well advanced in assessing the various financing alternatives
available.
Appointment of Non-Executive Directors
As announced in November 2010, Messrs Khomotso Mosehla, Mikki
Xayiya and Rudolph Torlage were appointed as Non-Executive
Directors to the Board of CoAL.
Authorised by
JOHN WALLINGTON
Chief Executive Officer
31 January 2011
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
Rob Collins / Romil Patel / Chris Sim Nominated Adviser
Evolution Securities +44 20 7071 4300
Jos Simson/Emily Fenton Financial PR Tavistock +44 207 920
3150
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
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