TIDMCZA
RNS Number : 4370W
Coal of Africa Limited
31 January 2012
ANNOUNCEMENT 31 JANUARY 2012
REPORT FOR THE QUARTER ENDED 31 DECEMBER 2011
"Green light for Vele a significant step forward", says CoAL
CEO
Coal of Africa Limited ("CoAL" or "the Company") the coal
exploration, development and mining company operating in South
Africa, is pleased to provide its operational report, together with
its subsidiaries ("the Group"), for the quarter ended 31 December
2011. A copy of this report is available on the Company's website,
www.coalofafrica.com.
Highlights
-- An encouraging safety performance was achieved during the quarter with no lost time injuries recorded in the Group.
-- Lifting of the suspension of the Vele coking coal colliery
("Vele Colliery") Integrated Water Use Licence ("IWUL") expediting
the remaining construction and other activities requiring the use
of water.
-- Extraction at the Vele Colliery commenced on 20 December 2011
with approximately 3,200 tonnes of ROM coal stockpiled to date. Wet
commissioning of the plant and related infrastructure completed in
December and hot commissioning underway.
-- Memorandum of Understanding ("MOU") signed with the Save Mapungubwe Coalition ("the Coalition") committing the parties to work together and strengthen co-operation ensuring the sustainable development of the Mapungubwe cultural landscape.
-- Placement of 130,000,000 shares completed raising
approximately US$106 million; securing a new US$40 million working
capital facility with J.P. Morgan Chase Bank N.A. ("New Bank
Facility").
-- 1,083,396 tonnes (FY2012 Q1: 1,199,902 tonnes) of run of mine
("ROM") and 531,506 tonnes (FY2012 Q1: 652,060 tonnes) of export
quality coal produced at the Woestalleen thermal coal complex
("Woestalleen") and the Mooiplaats thermal coal colliery
("Mooiplaats").
-- Resumption of normal sales of export coal during the period,
increasing by 87.7% from 277,499 tonnes in the September quarter to
520,812 tonnes in the December quarter.
-- Further progress on disposal of the non-core assets including
the Group companies of NiMag (Pty) Ltd and Metalloy Resources
Investments (Pty) Ltd (together "the NiMag Group") and the
Holfontein thermal coal project ("Holfontein Project").
-- Total cash balance, available and undrawn facilities
(excluding the New Bank Facility of US$40 million) as at 31
December 2011 of US$101.2 million.
Commenting today, Mr John Wallington, Chief Executive Officer of
CoAL said: "The December 2011 quarter yielded positive outcomes for
various initiatives undertaken during the year, highlights of which
included signing a MOU with the Coalition ensuring that the Company
is working with a broad spectrum of stakeholders to preserve the
Mapungubwe cultural landscape during the lifetime of the Vele
Colliery; the raising of capital and additional debt facilities
which provides CoAL with sufficient financial resources to complete
construction of the Vele Colliery, general working capital
requirements and the funding for phase one of the acquisition and
exploration of the Chapudi and Soutpansberg projects; the disposal
of the NiMag Group by way of a MBO and advancement on the disposal
of the Holfontein Project.
With the IWUL suspension lifted at Vele Colliery, the remaining
construction of the mine and plant, and establishment of
infrastructure was completed by the end of the quarter,
facilitating the commencement of mining activities with
approximately 3,200 tonnes of ROM coal extracted from the open cast
pit and stockpiled at the plant. These critical operational and
corporate developments, as well as the raising of significant
additional capital and the reaching of a landmark agreement with
the Coalition previously opposed to the Vele Colliery, were all
significant milestones for the Group reached during the
quarter."
QUARTERLY COMMENTARY
Woestalleen Complex - Witbank Coalfield (100%)
The outstanding safety record at the Woestalleen Complex
continued without any lost time injuries recorded during the
quarter (FY2012 Q1: nil lost time injuries).
In the December quarter, the Vuna Colliery produced 821,392
tonnes of ROM coal compared to 898,114 tonnes in the previous three
months. Coal processed during the three months decreased to 860,974
ROM tonnes from 913,896 ROM tonnes during the previous quarter. The
Woestalleen wash plant facility produced 353,395 tonnes (FY2012 Q1:
470,482 tonnes) of export quality coal and further 225,475 tonnes
(FY2012 Q1: 108,648 tonnes) of middlings product supplied to Eskom
Limited ("Eskom"), the South African electricity utility.
A drive in selective mining has led to improved plant yields
towards the end of the quarter, with the overall yield increasing
to 67.2% (FY2012 Q1: 63.4%) quarter on quarter.
Mooiplaats Colliery - Ermelo Coalfield (100%)
The safety performance at Mooiplaats reflected an improvement on
the previous quarter as no lost time injuries were reported during
the period (FY2012 Q1: three lost time injuries).
Despite a decline in ROM production to 262,004 tonnes compared
to 301,788 tonnes in the previous quarter, the overall yield
increased to 70.8% (FY2012 Q1: 67.4%). Coal processed during the
three months decreased to 304,107 ROM tonnes from 317,709 ROM
tonnes during the previous quarter. A total of 178,111 tonnes
(FY2012 Q1: 181,578 tonnes) of export quality coal was produced and
37,234 tonnes (FY2012 Q1: 32,420 tonnes) of the lower grade product
supplied to Eskom.
The reduction in ROM coal production was primarily a function of
the short December month coupled with challenging mining conditions
and infrastructure availability issues. Conveyor downtime is being
addressed through an operational and engineering action plan with
major work completed on the system during the year-end holiday
break, resulting in improved availability from the start of the
March 2012 quarter.
A twelve month operational initiative scheduled to commence
during the March 2012 quarter, is expected to identify potential
improvements in the mining process that should lead to sustainable
levels of higher production. The process results in a change in the
maintenance function for underground machinery by introducing a
support contract with equipment supplier JOY Mining, designed to
ensure a more effective approach in this critical area of the
operation.
Marketing and Logistics
International demand for South African coal, specifically from
Asia and Europe, remained subdued during the quarter. The reduced
demand is attributed to continued concerns regarding the European
economy, larger than normal stockpiles in India and increased
availability of lower grade Indonesian coal. The demand for South
African coal increased towards the end of the December quarter and
this trend has continued in the March quarter.
Index-linked international coal prices were under pressure
during the December quarter with sales recorded at discount to
these indices. South African export coal spot prices declined from
just over $110 per ton at the beginning of the quarter to
approximately $100 at the end of November/early December but were
offset during the period in South African rand terms by the decline
in the value of the currency against the US dollar.
The increased sales from the Matola Terminal in Maputo,
Mozambique, with 520,812 tonnes of coal sold to the export market
in the quarter under review (FY2012 Q1: 277,499 tonnes) and 212,803
(FY2012 Q1: 317,425) tonnes of coal were sold into the inland
market. A total of 254,046 tonnes (FY2011 Q1: 90,344) of lower
quality coal from Woestalleen and 37,421 tonnes (FY2012 Q1: 30,838
tonnes) from Mooiplaats, were delivered to Eskom.
Summary tables (tonnes)
Woestalleen Mooiplaats Total
December 2011 quarter
------------ ----------- ----------
ROM production 821,392 262,004 1,083,396
------------ ----------- ----------
ROM coal purchased - 44,862 44,862
------------ ----------- ----------
Total coal processed 860,974 304,107 1,165,081
------------ ----------- ----------
Overall Yield 67.2% 70.8% 68.2%
------------ ----------- ----------
Total coal produced 578,870 215,345 794,215
------------ ----------- ----------
Export coal 353,395 178,111 531,506
Middlings coal 225,475 37,234 262,709
------------ ----------- ----------
Total coal sales 427,112 77,158 1,025,082
------------ ----------- ----------
Export * * *520,812
Inland 173,066 39,737 212,803
Eskom 254,046 37,421 291,467
----------------------- ------------ ----------- ----------
*export sales include both Woestalleen and Mooiplaats coal
Woestalleen Mooiplaats Total
6 months year to date
to December 2011 quarter
------------ ----------- ----------
ROM production 1,719,506 563,792 2,283,298
------------ ----------- ----------
ROM coal purchased - 44,862 44,862
------------ ----------- ----------
Total coal processed 1,774,870 621,816 2,396,686
------------ ----------- ----------
Overall Yield 64.8% 69.0% 66.2%
------------ ----------- ----------
Total coal produced** 1,158,000 429,343 1,587,343
------------ ----------- ----------
Export coal 823,877 359,689 1,183,566
Middlings coal 334,123 69,654 403,777
------------ ----------- ----------
Total coal sales 793,627 149,250 1,741,188
------------ ----------- ----------
Export * * *798,311
Inland 449,237 80,991 530,228
Eskom 344,390 68,259 412,649
--------------------------- ------------ ----------- ----------
*export sales include both Woestalleen and Mooiplaats coal
Vele Colliery
During the quarter, the suspension of the IWUL was lifted by the
Minister of Water and Environmental Affairs, thereby enabling the
use of water and re-commencement of construction activities
required to complete the remaining infrastructure and plant
development at the mine. Based on the authorisation received, the
IWUL remains in full force and effect pending an appeal to be heard
by the Water Tribunal. As noted below, that appeal is expected to
be withdrawn following the signing of a Memorandum of Agreement
("MOA") with the Coalition.
In line with the authorisations received, the mine commenced
production in December and to date produced 118,000 m(3) of
overburden and 3,200 ROM tonnes of coal. Progress continued with
the plant and related infrastructure, with wet commissioning
completed in December and hot commissioning scheduled for late
January 2012.
Also during the quarter, the Company signed a MOU with the
Coalition comprising the Endangered Wildlife Trust, Birdlife South
Africa, Wilderness Foundation South Africa, World Wide Fund for
Nature South Africa, Mapungubwe Action Group and the Association
for Southern African Professional Archaeologists. The partners to
the MOU share a commitment to work together and strengthen
co-operation in the interest of sustainable development and the
preservation and protection of the Mapungubwe cultural landscape.
These negotiations aim to set a benchmark for best practice in
relation to managing and mitigating the impacts of mining and
related activities at the Vele Colliery on the environment,
specifically the impact on water and heritage resources.
The MOU requires the signing of a MOA by 31 January 2012,
subject to which the Coalition has agreed to withdraw legal
proceedings and administrative appeals against the Vele Colliery's
New Order Mining Right ("NOMR"), Environmental Management Plan
("EMP"), IWUL and Section 24G authorisation. Progress on converting
the MOU into an MOA continues and the Coalition has agreed to
extend the completion date to 29 February 2012.
The additional Heritage Impact Assessment as required by the
United Nations Educational Scientific and Cultural Organization
("UNESCO") and the Department of Water Affairs ("DWA") was
completed during the quarter and was presented to UNESCO in January
2012.
Makhado Coking Coal Project
The review of the Definitive Feasibility Study ("DFS") was
completed during the December quarter and is expected to be
presented to the CoAL Board during Q3 FY2012.
The Makhado Project NOMR consultation process with interested
and affected parties continued during the quarter and included the
involvement of various government departments. Additional comments
from various interested and affected parties on the Environmental
Impact Assessment, EMP and IWUL submissions were received and the
IWUL Technical and Engineering report is expected to be submitted
to the DWA during the March 2012 quarter.
Further product testing at ArcelorMittal South Africa ("AMSA")
is nearing completion at both the Vanderbijlpark and Newcastle
plants. In addition various independent tests have been
commissioned for corroboration of the AMSA results. Test work for
establishing potential secondary products was completed which
conceptually indicates that the production of a secondary thermal
coal product may be feasible.
A product road show to potential international customers for
both Makhado Project and Vele Colliery is planned in the first half
of the 2012 calendar year.
Disposal of the NiMag Group
On 23 December 2011, CoAL entered into a definitive Sale and
Purchase Agreement for the disposal of its 100% interest in the
non-core NiMag Group by way of a MBO. The Company will dispose of
its shares in the NiMag Group companies for a total of ZAR54
million (approximately US$6.6 million) of which 60% is being funded
by a combination of equity contributions and bank debt. The
remaining 40% will be financed by an interest bearing loan provided
by CoAL that is repayable over four years. The closing of the
transaction is subject to certain conditions precedent normal with
a transaction of this nature, including finalization of bank loan
financing agreements and, to the extent necessary, exchange control
approval from the South African Reserve Bank, expected to be
satisfied by 29 February 2012.
Disposal of the Holfontein Project
On 30 January 2012, the Company agreed with HDSA owned Govhani
Consulting (Pty) Ltd ("Govhani" or "the Purchaser"), to acquire
from CoAL an exclusive right to acquire by 30 June 2012, the
Holfontein thermal coal project ("Holfontein Project") for a total
consideration of ZAR100 million (approximately US$12.7 million) and
a continuing payment to CoAL of ZAR2.00 (approximately US$0.25) per
tonne of saleable coal produced by the project.
Govhani paid an initial non-refundable deposit of ZAR4.0 million
(approximately US$0.5 million) to conduct a detailed review of the
project and a further amount upon signature of this agreement of
ZAR5.0 million (approximately US$0.6 million), to finalize the DFS
in order to complete the acquisition of the project. Upon
completion of the transaction, the total purchase consideration
will be reduced by ZAR9.0 million (approximately US$1.1
million).
Conditions precedent to closing the transaction include, Govhani
completing the DFS and obtaining the remaining funding for the
project and approval of the transaction by the Department of
Mineral Resources.
Soutpansberg Coal Bed Methane Project
During the December quarter, Tshipise Energy (Pty) Ltd
("Tshipise") a joint venture between CoAL and BEE partner Vibrant
Veterans (Pty) Ltd, completed the exercise to collate desktop
studies undertaken by Australian based Geogas (Pty) Ltd ("Geogas")
on the coal bed methane potential of the properties located in the
Soutpansberg coalfields, substantially in the same proximity as the
various coking coal projects the Group is currently involved in.
Geogas compiled desktop studies of the total area granted under
Tshipise's 1,578 km(2) Exploration Right and the Company will move
into the next phase of the exploration based on recommendations
detailed in the Geogas reports. This will include the drilling of
additional holes and completing further technical studies in order
to prove up a potential coal bed methane resource in accordance
with the JORC code.
Cash and Available Facilities
At 31 December 2011, total available cash on hand and call
deposits was US$89.2 million (FY2012 Q1: US$8.8 million), available
loan facilities and standby credit arrangements under existing
facilities of US$12.0 million (FY2012 Q1: US$20.1 million). The
remaining conditions precedent for the New Bank Facility of US$40.0
million, are expected to be completed in Q3 FY2012.
Corporate Activity
The Company issued 130,000,000 shares during the quarter raising
gross proceeds of approximately US$106 million (excluding
expenses). The proceeds of the capital raised will be used to
finance the continuing development of the Group's projects, the
first tranche cash payment for the acquisition of Chapudi Coal
(Pty) Ltd and Kwezi Mining & Exploration (Pty) Ltd (the holders
of the Chapudi Coal Project prospecting rights), bringing the Vele
Colliery into production, general working capital, exploration of
the Chapudi and Soutpansberg coal fields and the establishment of
certain financial guarantees. The raising of US$106 million
satisfied a significant condition precedent to secure the US$40
million New Bank Facility.
Work continues with the group restructuring and preparation for
the migration of the primary listing from the Australian Stock
Exchange to the main market of the London Stock Exchange. In
preparation for this change and achieving further alignment of
corporate advisors, CoAL is pleased to advise the appointment of
J.P. Morgan Equities Limited as JSE sponsor with effect from 30
January 2012.
Authorised by
JOHN WALLINGTON
Chief Executive Officer
31 January 2012
For more information contact
John Wallington Chief Executive Officer Coal of Africa +27 11
575 4363
Wayne Koonin Financial Director Coal of Africa +27 11 575
4363
Shannon Coates Company Secretary Coal of Africa +61 893 226
776
Chris Sim/Jeremy Ellis/Neil Elliott Nominated Adviser
Evolution Securities +44 20 7071 4300
Jos Simson/Emily Fenton Financial PR (United Kingdom) Tavistock
+44 207 920 3150
Reuben Govender JSE Sponsor J.P. Morgan Equities Limited +27 11
507 0430
Charmane Russell/James Duncan Financial PR (South Africa)
Russell &
Associates +27 11 880 3924
+27 82 372 5816
www.coalofafrica.com
About CoAL:
CoAL is an AIM/ASX/JSE listed coal exploration, development and
mining company operating in South Africa. CoAL's key projects
include the Vele Colliery (coking and thermal coal), the Makhado
Project (coking coal) and the Mooiplaats and Woestalleen Collieries
(both thermal coal).
The Mooiplaats Colliery commenced production in 2008 and is
currently ramping up to produce 2 Mtpa. The Woestalleen Colliery,
acquired through the acquisition of NuCoal Mining (Pty) Limited in
January 2010, currently processes approximately 2.5Mtpa of saleable
coal for domestic and export markets. The Woestalleen Complex also
incorporates three beneficiation plants with a total processing
capacity of 350,000 run of mine feed tonnes per month.
CoAL's Vele Colliery started commercial production in Q1 2012.
During the initial phase, the operation is targeting 2.7 Mtpa ROM
production to produce 1.0Mtpa of saleable coking coal. The Makhado
Project, CoAL's flagship project in the Soutpansberg coalfield, is
well into the feasibility stage, with a Definitive Feasibility
Study nearing completion. An application for a New Order Mining
Right for the Makhado Project was submitted in January 2011.
In November 2010, CoAL agreed to acquire the Chapudi coal
project and several other coal exploration properties in the
Soutpansberg coal basin in South Africa from the previous owners,
including Rio Tinto. Upon completion, the acquisition of these
projects will significantly extend the scale and scope of certain
of CoAL's existing projects in the region and will more than double
the resource of the existing Makhado Project.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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