TIDMCZA
RNS Number : 5983F
Coal of Africa Limited
29 July 2016
ANNOUNCEMENT 29 July 2016
REPORT FOR THE QUARTERED 30 June 2016
Proposed acquisition and regulatory progress
Coal of Africa Limited ("CoAL" or "the Company") which operates
in South Africa, together with its subsidiaries, hereby provides
its update for the quarter ended 30 June 2016. All figures are
denominated in United States dollars unless otherwise stated. A
copy of this report is available on the Company's website,
www.coalofafrica.com.
Salient operational features
-- No lost-time injuries ("LTIs") recorded during the quarter (FY2016 Q3: nil).
-- The due diligence process regarding the potential equity
investment by Qingdao Hengshun Zhongsheng Group Co Ltd ("Hengshun")
in Baobab Mining and Exploration (Pty) ("Baobab"), continued albeit
at a slower pace due to the main focus of the Company during the
quarter being on the Universal Coal plc ("Universal") offer (as
further detailed below). Baobab is the subsidiary of CoAL that owns
the Mining Right for the Makhado Project.
-- The Integrated Water Use Licence ("IWUL") for the Makhado
Project remains suspended following an appeal to the Department of
Water and Sanitation ("DWS") submitted by the Vhembe Mineral
Resources Forum. Discussions remain ongoing with the DWS.
-- The Optimisation Study and Front End Engineering and Design
("FEED") for the Makhado Project has been completed by the
International engineering and project delivery group DRA Project
South Africa ("DRA") demonstrating a 31% reduction in upfront
capital requirements to US$280 million.
Corporate and financial features
-- The Company announced on 15 July 2016 that the recommended
offer by CoAL for the entire issued and to be issued share capital
of Universal had lapsed.
-- Available cash at period end was US$20.0 million and restricted cash of $0.5million.
QUARTERLY COMMENTARY
Makhado Coking Coal Project - Soutpansberg Coalfield (100% owned
- 74% post broad-based black economic empowerment ("BBBEE")
transaction)
The Makhado Project recorded no LTIs (FY2016 Q3: nil) during the
quarter.
Makhado's 26-month construction phase is expected to begin as
soon as all regulatory approvals are in place (expected during
CY2017). This is a delayed start up and reflects the complex
environment in which mining operates, but as a company we commit to
ensuring that the requisite processes are completed as efficiently
and as quickly as possible. A further four month ramp-up phase will
result in the production of 5.5 million tonnes per annum ("Mtpa")
of saleable product. The Optimisation Study and FEED for the
Makhado Colliery has been completed by the international
engineering and project delivery group DRA Project South Africa
("DRA"). The study follows on the original works performed by DRA
during the Definitive Feasibility Study ("DFS") completed in June
2013 and includes the infrastructure components of the project, and
also the integration of the work of a number of specialist
consultants.
The Optimisation Study and FEED focused on the identification of
opportunities for improving the functionality of the project as
well as the reduction of both capital and operational costs,
without compromising the ability to achieve the designed production
throughput and product quality.
The DFS was further enhanced through the (recently completed)
FEED process by;
-- improving the coal handling and product stockpiling infrastructure;
-- improving the coal processing plant efficiency on the back of
additional coal quality information obtained post the DFS;
-- improving the flotation tailings handling by changing
equipment selected during the DFS to ensure a higher tolerance for
variation in super fines content; and,
-- significantly reducing the infrastructure capital with the
introduction of "fit for purpose" buildings, roads, terraces and
water reticulation.
The project capital estimate was updated as part of the FEED
deliverables. The total capital cost of US$ 406million quoted in
the June 2013 DFS was reduced to US$280 million which equates to a
reduction of 31%.While the Company is pleased with the reduction in
the capital cost in US$ terms, the majority of the saving is due to
the weakening of the rand since June 2013.
During FY2016 Q2 the Company was granted a 20 year IWUL for the
Makhado project. Following an appeal to the DWS submitted by the
Vhembe Mineral Resources Forum and other parties this IWUL was
suspended. The appeal automatically suspended the IWUL in terms of
Section 148 (2) (b) of the South African National Water Act No 36
of 1998. This appeal had been anticipated, and CoAL has submitted
urgent representation to the Minister of Water and Sanitation to
request that the IWUL remain in full force and effect pending the
final conclusion of the appeal by the Water Tribunal. Discussions
are ongoing.
An interim court interdict seeking to halt any mining or
construction activity was issued against the Makhado Project during
Q2 FY2014. The matter was heard in the North Gauteng High Court on
3 December 2015 with judgement handed down on Tuesday 8 December
2015 on two matters. The first relates to the condition to compel
CoAL to conduct a Strategic Regional Impact Assessment and secondly
a review of the Environmental Authorisation ("EA"). The condition
compelling CoAL to conduct a Strategic Regional Impact Assessment
has been set aside. The interim interdict against the EA remains in
place pending the review of the authorisation.
The Company applied to the South African Department of Mineral
Resources ("DMR") and Limpopo Department of Economic Development,
Environment and Tourism ("LEDET") to amend the EA, amending the
holder of the authorisation from CoAL to Baobab, the legal
operating entity of the Makhado Project, thus ensuring the
alignment of the ownership of the full suite of regulatory
authorisations for the Project within the appropriate vehicle. The
Company also applied for an extension of the validity period of the
EA. Both the DMR and LEDET have granted the extension of the
validity period of the EA for an additional five years and have
granted the transfer of the EA from CoAL to Baobab.
CoAL remains committed to the sustainable development of the
Makhado Project, whilst recognising its potential to drive
significant socio-economic transformation. The Company continues to
engage with all stakeholders to ensure the on-going implementation
of a co-existent model, seeking co-operation between mining,
agriculture and heritage land uses.
Mooiplaats Colliery - Ermelo Coalfield (74% owned)
The Mooiplaats thermal coal colliery was placed on care and
maintenance during the September 2013 quarter and recorded no LTIs
during the period (FY2016 Q3: nil).
During the quarter the Company continued discussions with other
potential purchasers and is assessing options regarding a
transaction at the colliery. The Company is in various stages of
due diligence with interested parties.
Vele Colliery - Limpopo (Tuli) Coalfield (100% owned)
The Vele coking and thermal coal colliery ("Vele Colliery")
recorded no LTIs during the quarter (FY2016 Q3: nil).
The IWUL for the Vele Colliery has been renewed for a further 20
years and has also been amended in line with the requirements for
the Plant Modification Project ("PMP") at the Colliery.
During H2 2015, the Company commenced a process to obtain
approval relating to a non-perennial stream diversion. This
decision is anticipated in H2 2016. Once this regulatory approval
in respect of the Colliery has been received, the final decision to
proceed with the PMP will be placed before the board, such decision
will include an assessment of forecast global coal prices.
Greater Soutpansberg Project (MbeuYashu) (74% owned)
The MbeuYashu Project recorded no LTIs (FY2016 Q3: nil) during
the period.
No other significant matters to report.
Corporate
In November 2015 the Company announced the terms of a
recommended offer to be made by CoAL for the acquisition of
Universal Coal. Following numerous delays the company was unable to
extend the closure date any further than 15 July 2016 and due to
the fact that certain conditions remain unfulfilled on this date
the offer has subsequently lapsed. The Company is currently
evaluating various opportunities to acquire a cash generating
concern, including the possibility of a revised offer for Universal
Coal.
David Brown, CEO commented: "The lapse of the Universal offer is
disappointing to both parties involved but it's crucial for any
acquisition made by the Company to be sustainable and accretive.
The company is focused on evaluating opportunities to acquire a
cash generator to boost company cash flow during the construction
period of the Makhado Project."
Authorised by
David Brown
Chief Executive Officer
For more information contact:
Chief Executive +27 10 003
David Brown Officer Coal of Africa 8000
Chief Financial +27 10 003
De Wet Schutte Officer Coal of Africa 8000
+27 10 003
Celeste Riekert Investor Relations Coal of Africa 8000
Endeavour Corporate +61 08 9316
Tony Bevan Company Secretary Services 9100
Company advisors:
Matthew Armitt/Ross Nominated Adviser Peel Hunt +44 20
Allister and Broker LLP 7418 8900
Jos Simson/Emily Financial PR +44 20
Fenton (United Kingdom) Tavistock 7920 3150
Charmane Russell/Olwen Financial PR Russell & +27 11
Auret (South Africa) Associates 880 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 /MbeuYashu, including CoAL's Makhado Project
(coking and thermal coal).
This information is provided by RNS
The company news service from the London Stock Exchange
END
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