TIDMCZA
RNS Number : 8925W
Coal of Africa Limited
01 February 2013
ANNOUNCEMENT 31 JANUARY 2013
REPORT FOR THE QUARTER ENDED 31 DECEMBER 2012
On-going execution of strategy and balance sheet strengthened
following the US$100 million equity investment by Beijing Haohua
Energy Resource Co. Limited
Coal of Africa Limited ("CoAL" or "the Company") the coal
exploration, development and mining company operating in South
Africa, together with its subsidiaries, is pleased to provide its
operational report for the quarter ended 31 December 2012. A copy
of this report is available on the Company's website,
www.coalofafrica.com.
Commenting today, Mr John Wallington, Chief Executive Officer of
CoAL said: "Haohua Energy International's US$100 million investment
is a significant milestone for the Company and provides us with the
capital base to continue developing our coking coal projects. It is
anticipated that a portion of the funds will be used to complete
the modifications to the Vele Colliery processing plant to enable
the simultaneous production of semi-soft coking and thermal
middlings coal products. We expect the co-operation agreement with
Haohua Energy International to be finalised during the current
quarter. This will enable us to start collaborating with them to
benefit from their extensive technical expertise and financial
resources as we develop the Greater Soutpansberg Projects,
including the Makhado Project.
The South African mining sector continues to be affected by
labour relations unrest and production at the Mooiplaats Colliery
was affected by strike action during the quarter. As previously
communicated, the coal deposit at the Vuna Colliery will be
depleted by March 2013 and coupled with the restructuring process
at the Mooiplaats Colliery, our management is engaging closely with
the key stakeholders to mitigate the related impacts."
Key Highlights
-- Improved safety statistics with three lost time injuries
("LTIs") recorded during the quarter (FY2013 Q1: six).
-- Run of mine ("ROM") coal production decreased from 1,523,335
tonnes in the previous quarter to 1,153,486 tonnes as a result of
scheduled shutdown over the festive season and wage related strike
action at Mooiplaats.
-- Export coal sales from the Matola Terminal ("Matola")
increased by 83% to 411,292 tonnes (FY2013 Q1: 224,972 tonnes) due
to improved demand, availability of rail capacity and the reduction
of inventory build-up in the previous quarter.
Financial Highlights
-- Approval by the Australian Foreign Investment Review Board
("FIRB"), regulatory authorities in the People's Republic of China
("PRC") and CoAL shareholders for the US$100.0 million direct
investment in the Company by Beijing Haohua Energy Resource Co.
Limited's ("BHE") wholly-owned subsidiary Haohua Energy
International (Hong Kong) Company Limited ("HEI").
-- Payments totalling US$9.6 million for the acquisition of the
Chapudi Project shareholder claims from Rio Tinto Minerals
Development Limited ("RTMD") with the balance of US$4.0 million
(plus $0.2 million in interest) due on 28 February 2013.
-- Disposal of the Company's US$11.2 million loan to Grindrod
Trading & Shipping Limited ("Grindrod") raising US$8.5 million,
being the discounted present value over the remaining six year
term.
-- Available cash at period end of US$18.7 million and at the
date of this report, US$100.8 million including the proceeds from
the US$80.0 million placement.
Corporate Highlights
-- Appointment of Mr Tony Bevan as Company Secretary and closure
of the Company's Australian and London offices.
Post Period Highlights
-- Signing of Memorandum of Understanding ("MOU") with Vitol as
the Company's exclusive marketing agent for all export thermal and
coking coal for eight years, except for the Makhado product for
which the marketing period is five years from the start of
production. The MOU excludes all current agreements and potential
coal off-take arrangements with the Company's strategic equity
partners.
-- Agreement with Grindrod to eliminate CoAL's funding
obligation for the Phase 4 expansion of the Matola Terminal.
Additional throughput volumes will be contracted for on a
take-or-pay basis.
-- PRC regulatory approval for HEI's US$100.0 million investment
in the Company on 9 January 2013 and CoAL shareholder approval of
the transaction at the Extraordinary General Meeting ("EGM") held
on 25 January 2013.
-- US$80.0 million received from HEI on 31 January 2013 as part
of the total transaction of $100.0 million, in respect of which
197,934,063 CoAL shares at 25 pence (40.4175 United States cents
per share) will be issued, with admission to trading on the AIM
market of the London Stock Exchange ("AIM") on or around 7 February
2013.
-- Total of 1,048,368,613 shares in issue following admission to
trading on or around 7 February 2013.
-- Following heavy rainfall which resulted in flooding in the
Limpopo Province, the Company announced on 21 January 2013 that
operations at the Vele Colliery had been forced to stop. Rainfall
has subsequently ceased enabling mine management to return to site
and establish access to the pit and other mine facilities. Limited
operations have re-commenced at the colliery and production is
targeted for the first week of February 2013.
QUARTERLY COMMENTARY
Operational Summary
Increased demand coupled with higher than normal levels of
export quality coal inventory at the Matola Terminal at the
September 2012 quarter end, led to increased sales of 411,292
tonnes compared to the previous quarter's 224,972 tonnes. Coal
sales to the domestic market declined by 17.8% to 154,186 tonnes
(FY2013 Q1:187,499 tonnes) as a result of lower production owing to
strike action at the Mooiplaats thermal coal colliery ("Mooiplaats
Colliery"). Sales of middlings coal to Eskom increased by 26.0% to
264,169 tonnes (FY2013 Q1: 208,985 tonnes) as deliveries of coal in
the previous quarter were held in abeyance pending conclusion of
the new off-take agreement post quarter end.
December 2012 quarter (tonnes) Woestalleen Mooiplaats Vele Total
ROM production 845,834 113,157 194,495 1,153,486
------------ ----------- -------- ----------
Total coal processed 586,871 101,628 186,478 874,977
------------ ----------- -------- ----------
Overall yield* 73.1% 69.5% ** -
------------ ----------- -------- ----------
Total coal produced 593,799 70,656 53,993 718,448
------------ ----------- -------- ----------
Export coal 316,102 58,827 53,993 428,922
Middlings coal*** 277,697 11,829 - 289,526
------------ ----------- -------- ----------
Total coal sales 393,288 25,067 - 829,647
------------ ----------- -------- ----------
Export**** - - - 411,292
Inland 141,204 12,982 - 154,186
Eskom*** 252,084 12,085 - 264,169
-------------------------------- ------------ ----------- -------- ----------
September 2012 quarter (tonnes) Woestalleen Mooiplaats Vele Total
ROM production 993,632 274,943 254,760 1,523,335
------------ ----------- -------- ----------
Total coal processed 719,138 286,139 252,023 1,257,300
------------ ----------- -------- ----------
Overall yield* 70.4% 69.7% ** -
------------ ----------- -------- ----------
Total coal produced 682,973 199,578 72,325 954,876
------------ ----------- -------- ----------
Export coal 380,906 167,892 72,325 621,123
Middlings coal*** 302,067 31,686 - 333,753
------------ ----------- -------- ----------
Total coal sales 320,766 75,718 - 621,456
------------ ----------- -------- ----------
Export**** - - - 224,972
Inland 144,311 43,188 - 187,499
Eskom*** 176,455 32,530 - 208,985
--------------------------------- ------------ ----------- -------- ----------
* Overall yield is calculated using ROM feed
** Vele Colliery yields will be included when production reaches
steady state
*** Woestalleen's total includes ROM coal sold to Eskom
**** Export sales include thermal coal sales from Woestalleen,
Mooiplaats Colliery and the Vele Colliery
Woestalleen Complex - Witbank Coalfield (100%)
The Woestalleen processing facility and Vuna Colliery recorded
no LTIs during the quarter as compared to (FY2013 Q1: nil LTIs) and
(FY2013 Q1: one LTI) respectively.
As a result of the scheduled shutdowns during the holiday
season, ROM coal produced by the Vuna Colliery decreased by 14.9%
from 993,632 tonnes in the September 2012 quarter to 845,834 tonnes
in the current period. A portion of the ROM coal mined at the
colliery was delivered to Eskom and the balance was processed to
both an export grade product and a middlings product for Eskom.
December scheduled shutdowns also affected the Woestalleen
complex resulting in 586,871 tonnes (FY2013 Q1: 719,138 tonnes) of
ROM coal being processed during the quarter. The 593,799 tonnes
(FY2013 Q1: 682,973) of saleable coal produced by the Vuna colliery
and Woestalleen complex during the quarter comprised:
-- 316,102 tonnes (FY2013 Q1: 380,906 tonnes) of export quality coal; and
-- 277,697 tonnes (FY2013 Q1: 302,067 tonnes) of middlings
product and raw coal supplied to Eskom.
The Vuna colliery's coal reserve will be depleted by March 2013
from which time the supply of ROM coal to the Woestalleen complex
will cease. The Company is assessing various options for the
Woestalleen processing complex to either continue operating the
processing facility, possible disposal or closure thereof, with a
further update to be issued in due course. In the interim, the
Company has engaged all stakeholders in a section 189(A) process
notifying the 274 affected employees of the pending closure of the
Vuna colliery and its impact on the Woestalleen complex.
Mooiplaats Colliery - Ermelo Coalfield (100%)
Two LTIs were recorded at the Mooiplaats Colliery during the
quarter (FY2013 Q1: six LTIs) and management continues the focus on
safety management at the mine.
Operations at the Mooiplaats Colliery were temporarily suspended
at the end of September 2012 when the 176 NUM members, of the 368
people employed at the colliery, embarked on a protected wage
related strike. A wage agreement was reached with the National
Union of Mineworkers ("NUM") on 31 October 2012 resulting in
employees returning to work on 1 November 2012. Access to the
colliery was limited during the strike period resulting in the
flooding of two of the underground sections delaying production
from these areas for more than a week after employees returned to
work. The Company commenced a section 189(A) process in relation to
the restructuring of the Mooiplaats Colliery on 6 November 2012,
and further updates will be issued in due course.
On 3 December 2012, NUM-affiliated Mooiplaats Colliery employees
embarked on an unprotected strike protesting against the suspension
of four of their colleagues who had breached picketing rules and
the terms of a court interdict during the September/October 2012
strike, demanding that the suspensions be lifted. All striking
employees were dismissed on 6 December 2012 following a
disciplinary process and were given one week to appeal against
their dismissal. The colliery's remaining 190 employees returned to
work on 7 December 2012 and operations resumed in two of the five
underground sections, as well as coal processing and administrative
functions. On 11 December 2012, the Company and the NUM signed a
MOU re-instating 178 dismissed employees pending further
disciplinary procedures.
The strike action at Mooiplaats during the quarter resulted in
ROM production decreasing quarter on quarter by 58.8% to 113,384
tonnes (FY2013 Q1: 274,943 tonnes) and coal processed declined from
286,139 tonnes to 101,628 tonnes. The colliery produced a total of
70,656 saleable tonnes (FY2013 Q1: 199,578 tonnes) during the
quarter, comprising:
-- 58,827 tonnes (FY2013 Q1: 167,892 tonnes) of export quality coal; and
-- 11,829 tonnes (FY2013 Q1: 31,686 tonnes) of middlings product for Eskom.
The Company continued its discussions with Vunene Proprietary
Limited to resolve the double granting over approximately 128
hectares of the mining area which is included in the Mooiplaats
Colliery and Vunene New Order Mining Right ("NOMR"). As part of the
initiative to address the long term viability of the operation,
various strategic restructuring alternatives including, but not
limited to partnerships or disposal, are being assessed.
Vele Colliery - Limpopo (Tuli) Coalfield (100%)
Vele coking and thermal coal colliery ("Vele") recorded one LTI
during the quarter (FY2013 Q1: nil LTIs) and management has
intensified its emphasis on health and safety. The mine reached an
important milestone, achieving 1,000 fatality-free production
shifts at the beginning of December 2012.
The anticipated closure of Vele over the festive season resulted
in ROM production during the quarter decreasing by 23.7% to 194,495
tonnes (FY2013 Q1: 254,760 tonnes). A total of 186,478 tonnes
(FY2013 Q1: 252,023 tonnes) of coal was processed during the
quarter, producing 53,993 tonnes (FY2013 Q1: 72,325 tonnes) of
saleable export quality thermal coal. During the period, Vele
continued to produce an export grade thermal coal product to offset
costs while the test trials on potential metallurgical coal are
being completed.
During the December 2012 quarter the Save Mapungubwe Coalition
joined the Vele Colliery Environmental Management Committee ("EMC")
as full members and formally withdrew from the MOU previously
signed with CoAL. The EMC includes representatives from relevant
government departments, non-governmental organisations,
municipalities, farming communities and other stakeholders. The EMC
continues to operate effectively with the objective of sharing
environmental monitoring information and strengthening cooperation
in the interest of sustainable development and the preservation and
protection of the Mapungubwe Cultural Landscape.
Capital expenditure
A plant expansion at Vele is planned to process the discard from
the semi-soft coking coal product through a second stage wash
process to produce either an export grade thermal coal or an Eskom
middlings. This expansion will enable the simultaneous production
of both products, increased qualities and yields through the
improvement of recoveries.
The expansion project has been divided into two phases. Phase 1
is scheduled for completion in the first quarter of CY2013 while
Phase 2 is expected to commence in CY2013 for completion in the
second half of CY2013. Phase 1 will allow for the de-watering of
the ultra-fines product by installing filter presses eliminating
the need for the temporary slurry pond and phase 2 incudes the
installation of a permanent front end crushing facility and
dual-product thermal and coking coal plant module.
Makhado Coking Coal Project - Soutpansberg Coalfield (100%)
The scope of the Definitive Feasibility Study ("DFS") for the
Makhado coking coal project ("Makhado Project") was expanded and
upgraded in CY2012 to include the thermal coal fraction and the
underground mining portions of the Makhado Project. During the
December 2012 quarter, the DFS on the opencast mining area, which
includes both hard coking coal and a thermal coal fraction, was
upgraded to provide greater certainty on the operational plan and
reducing project risk. The Company expects that the additional work
on the DFS will be completed in the first quarter CY2013 for
release to shareholders in the second quarter CY2013.
The Company has made significant progress on the regulatory
requirements relating to the NOMR Application. During the quarter,
the Company continued to make progress on the acquisition of
various properties required for rail infrastructure and operations
and discussions to acquire the remaining properties for the Makhado
Project are on-going. CoAL is also assessing various Black Economic
Empowerment structures that in conjunction with the regulatory
requirements, will also provide a pro rata share of funding into
the project.
Water Requirements
During the December 2012 quarter, the Company and the Nzhelele
Farmers signed a Memorandum of Agreement ("MOA") in respect of the
more efficient use of water in the Nzhelele River catchment area of
Limpopo Province, South Africa. The key objectives of the MOA are
to:
-- improve the assurance of water supply to the Makhado Project and other water users;
-- prevent the loss of jobs in the agricultural sector in the
vicinity of the Makhado Project as a result of water use at the
mine; and
-- facilitate the Makhado Project obtaining a bulk water
allocation without negatively affecting the availability of water
for agricultural purposes.
Under the terms of the MOA, the Nzhelele Farmers surrendered
portions of their water-use entitlements facilitating a bulk water
supply for the Makhado Project. The parties have undertaken to form
a technical working group with the aim of identifying projects
which would create "new water" to, at a minimum, replenish the
allocation surrendered by the farmers. The MOA also strives to
establish the co-existence of mining, local communities and
agriculture maximising socio-economic development in the
region.
The signing of the MOA enabled the submission in December 2012
of the Makhado Project Integrated Water Use Licence Application.
The application process includes the requirement for the Company to
respond to queries from the Department and Water Affairs and other
Interested and Affected Parties, which is underway.
Greater Soutpansberg Project
During the quarter CoAL continued compiling the exploration and
technical data on the Greater Soutpansberg Project ("GSP")
incorporating the Chapudi, Mopane and Makhado Extension projects
and in March 2013 quarter, will commence preparation of NOMR
Applications for these projects. The analysis of this information
has resulted in the compilation of an exploration programme
comprising 57-hole large and small diameter exploration holes,
commencing in the first quarter of CY2013. The Company is currently
consulting with all stakeholders that will be affected by
prospecting activities.
Strategic Partner - Beijing Haohua Energy Resource Co.
Limited
On 30 September 2012, BHE through its subsidiary HEI submitted a
binding offer to subscribe for US$100.0 million of equity funding
at GBP0.25 per share with the transaction to be executed in two
stages. The initial placement of US$20.0 million was completed
during the December 2012 quarter following receipt of the
Australian FIRB approval for the foreign direct investment into the
Company. During the period, HEI applied for the relevant PRC
approvals to complete the conditional placement of US$80.0 million,
which was received on 9 January 2013. The CoAL shareholder approval
of the placement and to waive the requirement for a mandatory offer
following HEI's interest in the Company exceeding 19.9% was
received on 25 January 2013. The Company has subsequently received
the US$80.0 million for the conditional placement and will proceed
to issue 197,934,063 shares on or around 4 February 2013 resulting
in HEI owning approximately 23.6% of CoAL's issued share
capital.
Market context
Index-linked RB1 export quality thermal coal prices remain under
pressure, and have declined by 16.0% during the 12 month period
from US$106 per tonne on 1 January 2012 to US$89 per tonne on 31
December 2012. During the quarter under review, prices decreased
marginally to US$86 per tonne compared to US$87 per tonne in the
previous quarter.
The South African rand remained volatile during the 12 month
period to 31 December 2012, trading between ZAR7.46 and ZAR8.95
against the US dollar. During the December 2012 quarter the average
exchange rate weakened by 5.3% from ZAR8.25 in the September 2012
quarter to ZAR8.69, alleviating in part the decline in coal
prices.
Deutsche Bank US$50 million pre-export trade finance
facility
In March 2010, the Company entered into a US$50.0 million
pre-export trade finance facility with Deutsche Bank A.G. (the
"Facility") secured over CoAL's thermal coal assets, production and
off-take agreements. The terms of the Facility result in the
balance reducing by one twelfth or US$4.2 million per month,
commencing in October 2012 and continuing until its expiry in
September 2013.
At the end of the quarter, the reduced Facility balance was
US$37.5 million and the first instalment of US$4.2 million was paid
during January 2013 in the ordinary course.
Disposal of the Grindrod Loan
In January 2009, the Company granted Grindrod a US$16.0 million
interest free loan to fund the Phase 3 one million tonne per annum
expansion at the Matola Terminal. The loan was interest free,
repayable in 10 equal annual instalments of US$1.6 million
commencing in January 2010. At 31 December 2012, the outstanding
loan balance was US$11.2 million.
During the quarter the Company agreed to an early settlement of
the outstanding loan balance, calculated on a discounted cash flow
basis over the remaining period of 6 years, at US$8.5 million. The
settlement consisted of US$4.75 million in cash and the remaining
US$3.75 million settling outstanding take-or-pay liabilities and
the balance held as a pre-payment against FY2013 Q3's expected
payment obligations for take-or-pay, loading and shipping
charges.
Cash and Available Facilities
During the December 2012 quarter production, logistics and
administration expenditure was funded from operational cash flows
and cash on hand.
The Company had inventory of 152,362 tonnes of export quality
coal at the end of the quarter (FY2013 Q1: 327,156 tonnes),
including 63,706 tonnes at the Matola Terminal (FY2013 Q1: 135,916
tonnes). Projected exploration and development expenditure for the
next quarter is expected to be funded from operating cash flows as
well as funds made available through HEI's equity subscriptions,
including:
-- capital expenditure for the plant upgrade and working capital at Vele;
-- finalisation of the Makhado Project DFS and limited
expenditure for the acquisition of surface rights, water, power and
consulting work;
-- technical and exploration work on various tenements in the
Chapudi, Mopane and Makhado Extension project areas;
-- operational expenditure at the thermal coal assets; and
-- corporate costs including debt repayments, and for general working capital.
Appendix 5B Cash flow Statement
Cash outflow from operations for the quarter of US$17.6 million
was 56% lower than the previous quarter of US$40.0 million due to
higher coal sales. The reduction of saleable coal inventories at
mine and port reduced by 53.1% to 154,835 tonnes (FY2013 Q1:
330,239 tonnes) resulting in the US$20.1 million increase in sales
quarter on quarter.
Net cash outflows from operations for the next quarter is
expected to be in the order of US$15.0 million to US$20.0 million,
including a portion of costs associated with phase 1 of the Vele
plant upgrade, exploration costs for the GSP and the Tshipise gas
project. Funding of repayment obligations under the Deutsche Bank
Facility of US$12.5 million for the following quarter and the last
tranche of the RTMD payment of US$4.2 million will be funded out of
cash realised from the disposal of assets of a similar amount.
Cash outflow from investing activities of US$13.8 million
included payments to Rio Tinto of US$9.8 million as part of the
acquisition of the Chapudi coal assets while cash inflows of
US$19.2 million from financing activities included the net proceeds
from the US$20.0 million equity placement concluded with HEI.
Corporate Activity
As part of the Company's drive to reduce overhead costs and the
closure of its Perth and London offices, Mr Tony Bevan was
appointed Company Secretary of CoAL. Mr Bevan works for Endeavour
Corporate Pty Ltd based in Perth, Australia, which has been engaged
to provide company secretarial services to CoAL. Mr Bevan is a
Chartered Accountant with over 25 years' experience and is an
experienced company secretary.
Authorised by
JOHN WALLINGTON
Chief Executive Officer
31 January 2013
For more information contact:
+27 11 575
David Brown Chairman Coal of Africa 4363
Chief Executive +27 11 575
John Wallington Officer Coal of Africa 4363
+27 11 575
Sakhile Ndlovu Investor Relations Coal of Africa 6858
Endeavour Corporate +61 08 9316
Tony Bevan Company Secretary Services 9100
Company advisors:
Jos Simson/Emily Financial PR (United +44 20 7920
Fenton Kingdom) Tavistock 3150
Investec Bank +44 20 7597
Chris Sim/Neil Elliot Nominated Adviser plc 5970
Charmane Russell/James Financial PR (South Russell & Associates +27 11 880
Duncan Africa) 3924 or
+27 82 372
5816
Investec Bank Limited is the nominated JSE Sponsor
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 Greater
Soutpansberg Project, including CoAL's Makhado Project (coking
coal) and the Mooiplaats and Woestalleen Collieries (both thermal
coal).
This information is provided by RNS
The company news service from the London Stock Exchange
END
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