23rd Apr 2009 11:25
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REPORT FOR THE MARCH 2009 QUARTER |
Coal of Africa Limited ("CoAL" or "the Company") is pleased to announce its operational report for the quarter ended 31 March 2009. A full copy of this report, as released today on the ASX, is available at the Company's website, www.coalofafrica.com.
Highlights
Increased coal production from the two continuous miners and sustained progress in the development of infrastructure at the Mooiplaats thermal coal project.
Agreement reached with Transnet Freight Rail ("TFR") to transport 1 million tonnes per annum ("mtpa") to the Matola dry bulk terminal in Maputo, Mozambique ("Matola Terminal").
Agreement to provide funding to expand the Matola Terminal, securing an additional 2 mtpa port allocation with an anticipated completion date of 1 August 2010.
CoAL have agreed to grant Exxaro Coal (Pty) Ltd an option to acquire up to 30% of the Makhado hard coking coal project for a cash consideration equal to the Project's NPV, less a 20% discount.
Selection of MCC Contracts ("MCC"), a division of Eqstra Holdings Limited as preferred partner for the Vele Project opencast mining operations.
Appointment of ELB Engineering Services (Pty) Ltd ("ELB") to construct a temporary 340 tonnes per hour ("tph") coal beneficiation plant to facilitate coking coal production at the Company's Vele coking coal project from end November 2009.
Memorandum of Understanding signed with Dowding, Reynard and Associates ("DRA") for the process design criteria and potential construction of the 15mtpa permanent coal beneficiation plant for the Vele Project.
Appointment of Morgan Stanley & Co. International Limited and Evolution Securities Limited as Joint Brokers to the Company. Evolution Securities also appointed as Nominated Advisor to CoAL.
Establishment of Coal of Africa King Toni Mphephu Scholarship Trust which has enabled the first intake of 32 scholars from the Vhembe district of the Limpopo Province to study at tertiary education institutions.
Appointment of Professor Ntshengedzeni Alfred Nevhutanda as Executive Director of CoAL.
Cash balance at the end of the quarter was A$122 million - the Company has no debt.
Commenting on the results today, Simon Farrell, Managing Director of CoAL said, "Current global conditions are challenging but the Company is in the fortunate position of having no debt, considerable cash reserves and projects that will supply significant quantities of coal to the market. The Mooiplaats thermal coal project is on track to produce saleable export quality thermal coal early in the new financial year and I am confident that production on the Vele coking coal project will commence by the end of 2009. We have managed to remove a major infrastructure challenge faced by bulk commodity miners in securing sufficient port and rail allocation, guaranteeing our ability to export coal to the more lucrative international markets."
DISCUSSION OF RESULTS
Mooiplaats Thermal Coal Project - Ermelo Coalfield (100%)
The Company is proud to announce that at the end of March it had recorded over 400,000 fatality free and lost time incident free man-hours. Progress on the underground and surface infrastructure continued according to schedule despite seasonal rainfall. The incline conveyor belt linking the underground operations to the surface infrastructure has been commissioned allowing for the transport of coal to the surface stockpile areas. Production, stockpile and auxiliary conveyor belts are complete with the installation and commissioning of the remaining conveyor belts due early in the next quarter. Road network construction on the project remains on course for completion by the end of April 2009.
Development of the underground infrastructure was delayed by the presence of a dyke but by the end of March, the two Continuous Miners had progressed over 150 metres yielding 16,900 tonnes of coal.
Erection of change houses, offices and workshops has commenced and are expected to be completed by the end of April 2009, when phase one of the wash plant is commissioned. Kwena Processing (Pty) Ltd will operate the wash plant and Portaclone (Pty) Ltd has been appointed to construct the second phase of the plant. The slurry dams will be constructed and operated by ECMP (Pty) Ltd.
Discussions with third parties regarding the use their coal sidings continued and finalisation of commercial terms are expected by the end of April. Negotiations regarding long term off-take agreements for the export of thermal coal as well as the lean coal produced are ongoing. In addition, discussions regarding the sale of lower quality thermal coal to Eskom continued.
Vele Coking Coal Project - Tuli Coal Field (74%)
During the quarter, specialist studies required for the Environmental Impact Assessment and Environmental Management Plan were completed. These specialist studies will be discussed with all Interested and Affected Parties during April 2009 prior to submission to the Department of Minerals and Energy ("DME") as part of the New Order Mining Right ("NOMR") Application, submitted in October 2008. The Company remains hopeful of receiving a granted New Order Mining Right by July of this year.
The remaining 12 holes of the bulk sample drilling programme was completed in early 2009, allowing for better definition of the proposed bulk sample box-cut site. A full suite of geotechnical analysis as well as an incline drilling programme commenced during the quarter. The analysis to be undertaken includes a 70 hole drilling programme that will improve the project drilling density and resource modelling, assist in assessing underground mining roof and floor conditions as well as identifying the presence of faulting and the continuity of the select mining horizon. CoAL will advise the market once all testing has been completed and the results received. The incline drilling programme will improve the data on the site identified for the extraction of the 5,000 tonne bulk sample for analysis by ArcelorMittal and other potential customers.
The tender process for the supply of a modular plant was finalised during the March quarter with a letter of intent sent to ELB for the construction of the plant. ELB has partnered with PBA Projects to design and construct the modular plant, which will be based on PBA's processing plant designs used in the marine diamond industry. A Memorandum of Understanding has been signed with DRA to design, construct and operate (via Minopex) the larger, permanent Vele coking coal wash plant. The modular wash plant will be relocated to the Makhado coking coal project once the larger wash plant at Vele has been commissioned.
GRD Minproc has been mandated to complete a Project Feasibility Study [is this "Bankable" or "Definitive" Feasibility Study? - or only a pre-feasibility study?] document on the Vele coking coal project, results of which are expected by August 2009. This study will include both the underground and open cast sections of the project.
Agreements with surface rights owners have been finalised, allowing for the development of the required infrastructure and bulk sample box-cut once legislative approval for the sample has been granted.
MCC has been appointed as the preferred partner to conduct opencast mining operations at the Company's Vele coking coal project. MCC has been a leader in the field of surface contract mining for over 25 years and has vast experience in both hard rock and coal mining. Current contracts performed by MCC involve the excavation of over 15 million tonnes of ore and waste rock per month. Formalisation of the open cast mining agreements with MCC is expected to be finalised by the end of the June 2009 quarter.
Makhado Coking Coal Project - Soutpansberg Coal Field (100%)
The Company reached agreement with Exxaro Coal (Proprietary) Limited , a wholly owned subsidiary of Exxaro Resources Limited ("Exxaro"), whereby CoAL has granted Exxaro an option, subject to certain conditions, to acquire up to 30% of the Makhado Coking Coal Project for cash consideration equal to the NPV of Project, less a 20% discount.
Importantly, Exxaro (originally part of Iscor) was responsible for all of the historical drilling and exploration activities undertaken in the Soutpansberg Coal Field, including Coal of Africa's Makhado Coking Coal Project. Further, it is currently the only hard coking coal producer in South Africa and the sole South African based supplier to ArcelorMittal SA and as a result, they can bring to CoAL a depth of coking coal experience unrivalled in the South African context. Exxaro is willing to commit its extensive resources and assist CoAL in inter alia, the analysis of the project geology, mine planning, beneficiation and marketing of the coal produced.
Exxaro is South Africa's largest black-controlled, diversified mining company, listed on the JSE Limited. Exxaro has a diverse and world-class commodity portfolio in coal, mineral sands, base metals and industrial minerals, with exposure to iron ore through a 20% interest in listed Kumba Iron Ore . As the fourth-largest South African coal producer with capacity of 45 million tonnes per annum and the third-largest global producer of mineral sands, Exxaro is a significant participant in the coal and mineral sands markets and provides a unique listed investment opportunity into these commodities.
A large diameter 20 hole drilling programme was completed during the quarter and laboratory results of the core samples yielded good quality hard coking coal. Initial logging information confirmed thicker coal zones than previously reported and further results of laboratory analysis will be included in upgraded resource statements. [timeline?]
An agreement with the surface rights owner of the farm Tanga 849 MS has been finalised while negotiations with other Makhado project surface right owners are ongoing and will be finalised pending the DME's approval of the exchange of New Order Prospecting Rights between Rio Tinto and CoAL.
Holfontein Coal Project (100%)
The Holfontein Coal Project is recognised as an asset available for sale. Discussions continue with the DME regarding the NOMR application. This application was submitted in early 2008 and CoAL is confident that the approval will be granted in the near future.
Rail Allocation Secured for Coking Coal Projects
Agreement was reached with TFR, a division of Transnet, the South African Government owned rail and freight organisation for the rail allocation of 1 mtpa to the Matola Terminal. This rail allocation matches the Company's port allocation of 1 mtpa through the Matola Terminal, secured through an agreement with Terminal De Carvao Da Matola Limitada.
During the March quarter, CoAL successfully railed over 38,000 tonnes of third party coal to the Matola Terminal. Of the coal railed, over 22,000 tonnes were shipped from the Terminal during the period, ensuring the viability of the rail and port allocation while at the same time generating income from the allocation. The Company also notes that TFR announced during the quarter a record of 50,000 tonnes railed in one week via the Maputo corridor, further evidence of the practical viability of this export route as an alternative to Richards Bay Coal Terminal.
Increase in Export Allocation at the Matola Terminal
CoAL announced earlier in the financial year that it had secured the rights to up to 100% of any increased capacity at the Matola Terminal in return for contributing loan funding. During the March quarter, the Company agreed to loan the required funds for the proposed 2 mtpa expansion at the Matola Terminal which will increase CoAL's export allocation at the port to 3 mtpa. The increased port capacity is expected to be effective from 1 August 2010 and discussions with TFR to secure an additional 2 mtpa rail capacity are ongoing.
Establishment of the Coal of Africa King Toni Mphephu Scholarship Trust ("the Trust")
At the Company's launch of its Makhado coking coal project in 2008, it was announced that an educational trust would be established for the benefit of scholars residing in the vicinity of CoAL's projects. In early 2009, the Company committed R2.5 million to the Trust enabling 32 scholars from the area to study mining related courses at tertiary institutions.
The Trust will be overseen by his Highness Thovhele Toni Mphephu Ramabulana, King of the VhaVenda, together with the VhaVenda chiefs, a senior Limpopo Education Department employee, CoAL representatives and independent trustees [who are the trustees and how do they fit in?]. Annual contributions by the Company to the Trust are expected to increase as the project approaches production.
Nimag Group of Companies (100%)
As a result of cost cutting and restructuring measures implemented by Management of Nimag, the Group returned a small loss for the quarter despite continued difficult trading conditions.
Authorised by
Simon Farrell
Managing Director
20 April 2009
For more information contact:
Simon Farrell, Managing Director CZA +61 417 985 383 or +61 8 9322 6776
Jos Simson / Gareth Tredway Conduit PR +44 0 20 7429 6603
Simon Edwards/ Chris Sim Evolution Securities +44 0 20 7071 4300
About CoAL:
Coal of Africa Limited ("CoAL"), is primarily focused on the acquisition, exploration and development of metallurgical and thermal coal projects. The Company's key projects, along with its leading metals processing company NiMag Group (Pty) Ltd are in South Africa. The Company was incorporated in Western Australia and listed in 1980. Since 2005, the Company has also listed on both the AIM and JSE markets, allowing further growth in the Company's coal assets.
Resource Estimation:
Resource estimations have been compiled by Mr John Sparrow (Member of the South African Council of Natural Science Professions SACNASP) 400109/03, an independent geological and technical consultant with 26 years experience in the Southern African and Australian regions. Mr Sparrow has sufficient experience relevant to the assessment of this style of mineralization to qualify as a Competent Person as defined in the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves - the JORC Code - and has compiled a number of Competent Person's reports for various organizations for the JSE, ASX and TSE. Mr Sparrow consents to the inclusion of the information in this report in the form and context in which it appears.
www.coalofafrica.com
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