| Thu 25 Sep 2008, 9:00 | | CZA - CoAL of Africa Limited - Projects update |
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CZA
CZA
CZA - CoAL of Africa Limited - Projects update
Coal of Africa Limited
(previously "GVM Metals Limited")
(Incorporated and registered in Australia)
(Registration number ABN 008 905 388)
Share code on the JSE Limited: CZA
ISIN AU000000CZA6
Share code on the Australian Stock Exchange Limited: CZA
ISIN AU000000CZA6
(`CoAL` or `the Company`)
24 September 2008
PROJECTS UPDATE
* Vele resource upgrade from 441 mt to 721 mt;
* Makhado coking coal project to produce 5 mtpa at a mining cost of US$43 per
saleable tonne;
* Vele coking coal project to produce 5 mtpa at a mining cost of US$54 per
saleable tonne;
* Mooiplaats FOB cost Richards Bay US$ 37 per saleable tonne;
* Port capacity secured at both Richards Bay and Maputo;
* Mooiplaats thermal coal project on track for mining commencement in Q4
2008;
* Current cash resources of A$240 million, no debt.
Coal of Africa Limited, the AIM/ASX/JSE listed coal development company
operating in South Africa, is pleased to announce that significant progress
continues to be made toward the development of the Company`s coal projects in
South Africa. An update of work in progress and of that planned on each project
is set out below:
Makhado Coking Coal Project - Soutpansberg Coalfield
The latest coal resource update for the Makhado Project, announced on 22 July
2008, has increased resources to in excess of 1.3 billion tonnes, of which over
230 million tonnes are in the "measured" category.
Exploration drilling on Fripp has been completed and has commenced on the
adjoining farm, Tanga. The initial results of drilling are revealing a high
quality coking coal with a low phosphorous content.
The New Order Mining Right Application is anticipated to be submitted by the end
of October, which will include the extension from Fripp and Tanga to include
contiguous farms gained from the Rio Tinto transaction, as announced on 8 July
2008.
Production schedules for various mining scenarios have been generated and an
XPAC model has been developed. This includes scenarios where 100% of the
middling`s suitable for power generation are discarded, which still produces
very robust financial results. Production schedules indicate a consistent 5mtpa
saleable coking coal at an average mining cost of US$43/tonne over the Life of
Mine, which is in excess of 20 years.
The Company has entered into a supply agreement with a global Independent Power
Producer ("IPP"), who has submitted a bid in the recent Eskom tender for base
load power. In the event that this tender proves successful, the economics
improve significantly for the Project.
Due to lengthy lead times in the supply of large mining equipment, the Company
has gauged interest and capacity from several large South African contract
mining operators and a tender process will be initiated shortly. In addition,
the Company intends on securing manufacturing slots from equipment suppliers as
soon as mine design and capacity requirements have been finalised.
The Company has secured long term port allocation through Maputo in Mozambique,
as per the announcement made on 25 August 2008. This terminal facility is
operated by subsidiaries of Grindrod Limited. Throughput agreements signed
provide for an allocation of 1 million tonnes of coal per annum ("mtpa") through
the Matola dry bulk coal terminal in Maputo, commencing in 2009. The Company has
also secured the rights to up to 100% of any increased capacity at the Maputo
Terminal, in return for participating in the funding of any proposed expansions
at this terminal. The first phase of expansion is expected to provide a further
2 mtpa, taking CoAL`s allocation to 3 mtpa. The second expansion phase will lift
capacity to 10 mtpa, of which CoAL`s allocation will be 7 mtpa.
Initial marketing focus will be on completing the formal off-take agreement with
ArcelorMittal, as agreed in the Letter of Intent announced on 21 April 2008. The
balance of marketing will be a function of whether ArcelorMittal exercises its
option to increase its off-take to 5mtpa. Other major consumers of coking coal
have already expressed strong interest in securing supply from Makhado and
discussions remain ongoing.
Vele Coking Coal Project- Tuli Coalfield
The coal resource update for the Vele Project (announced on 18 June 2008)
increased the resources to 441 million tonnes, of which over 133 million tonnes
is "measured".
Incorporation of the latest drilling results and analysis has resulted in a
further resource upgrade to :
Total Gross Insitu Mineable(2)
Insitu Insitu(1)
721 mt 641 mt 593 mt (including 158 mt Measured and 324 mt
Indicated)
1) Gross Insitu only incorporates opencastable coal.
2) Insitu Mineable incorporates potential Geological losses
A New Order Mining Right Application is scheduled for submission by the end of
September 2008. A 65-hole geological drilling program has been completed and
three bulk sample sites consisting of 31 large diameter cored boreholes have
been completed, logged and submitted for preliminary analysis. Initial results
indicate a significant improvement of coking coal qualities and yield when
compared to historical results, indicating the primary resource is a classic
hard coking coal rather than the expected semi-soft. Testing indicates a washed
product with phosphorous levels below .01%.
Mineral Resource Management (MRM) has completed various scenarios of mine
scheduling for opencast mining, of which the base case (no middling`s sales)
indicate robust financial results based on current pricing. Production is
scheduled for 5mtpa of saleable coal at an average mining cost of US$54/tonne
over the Life of Mine, which is in excess of 20 years.
As with Makhado, the Company has entered into an agreement with another IPP as
part of the recently released Eskom tender for base load power and if
successful, the economics of the Vele Project similarly improve substantially.
Rail logistics design is in progress to link the Vele Project to both the South
African domestic rail system and the Matola terminal in Mozambique, whilst
initial road haulage routes are being finalised.
Mooiplaats Thermal Coal Project - Ermelo Coalfield
The Mooiplaats Project currently has coal resources of 113 million tonnes, of
which 88.2 million tonnes are "measured". The structural model for the
Mooiplaats Farm, where the first decline will be located, has been completed.
Drilling on Klipbank and Adrianople is continuing in order to firm up the
structural model and exact position of the planned second decline. Work is also
in progress to expand the mining area onto neighbouring farms.
Decline desliming and additional topsoil stripping has been completed, and
blasting has commenced. Contractors will stabilise the decline walls, sink to
coal and concrete the floor, which is expected to be completed by the end of
October.
The first JOY continuous miner is ready for handover, and the contract with the
mining contractor is anticipated to be finalised this month.
Initial coal mining by continuous miner is now planned to commence in November
2008, following the establishment of access portals, ventilation fans, incline
conveyor and temporary stockpiles.
Surface infrastructure is being established, and plant design has been
finalised. The first plant modules are scheduled for commissioning in February
2009.
The Company has secured long term port allocations through the Dry Bulk Terminal
("DBT") at Richards Bay, which is operated by subsidiaries of Grindrod Limited.
Throughput agreements signed provide for an allocation to CoAL of 900,000 tonnes
of coal per annum commencing in 2009. The Company furthermore secured the rights
to up to 50% of any increased capacity to the DBT, in return for participating
in the pro-rata funding of any proposed expansions at this terminal. COAL`s
share of final capacity will be 3 mtpa.
Production scheduling from mining both the Alpha and Beta declines reach a
target ROM of 3.4mtpa, matching the maximum export allocation via the DBT at a
weighted average cost per saleable tonne of US$37, which includes the expected
40% increase in rail tariff to the DBT.
Mooiplaats production will consist mainly of bituminous (thermal) and lean coal.
Washing of the bituminous coal provides an export thermal coal theoretical yield
of in excess of 75% with the balance yielding a middling`s fraction of
approximately 30% (post a second wash). International off- take opportunities
for the export portion is being evaluated, including discussions with various
international trading companies. Marketing discussions for the middling`s
portion of saleable coal have been scheduled with Eskom in October, with a view
to supplying coal to the nearby Camden power station.
Washing of the lean coal produces a theoretical yield of approximately 83%,
which will then be put through a subsequent calcine treatment to produce a very
low volatile coal suitable for domestic consumption. Oreport, a South African
based trading company appointed as non-exclusive marketing agents, continue to
explore the market possibilities for this type of coal but early indications
suggest a strong domestic market realising prices approaching R1,400/tonne.
Aerial photography of progress at the site as at the 20th September 2008 is
available for viewing on the company`s website.
Rio Tinto JV and Farm Swap Agreements
As announced on 8 July 2008, the Company and Rio Tinto entered into a Memorandum
of Understanding whereby the companies will swap certain farms in the Makhado
Project area, creating larger and more economic contiguous blocks for each
company. In addition, both Rio and CoAL will contribute certain farms to a new
joint venture operation in the region, to be operated by Rio Tinto.
Due Diligence being conducted by both parties is near completion and it is
anticipated that application for Section 11 approval will be submitted to the
Department of Minerals and Energy during the current quarter. Formal
documentation regarding the proposed joint venture will be prepared post the
Section 11 application.
Rail Allocations
Following the recent securing of port allocations at both Richards Bay and
Maputo in Mozambique, CoAL has turned its attention to securing rail allocations
to match the throughput tonnage achieved. As previously mentioned, production
from Mooiplaats is planned for export through the DBT at Richards Bay whilst
production from both Makhado and Vele will be sent via Maputo. Discussions with
both Transnet Freight Rail and Mozambique`s CFM are progressing very well and
negotiations are expected to complete prior to the end of this calendar year.
Holfontein Thermal Coal Project
Although agreement has been reached to dispose of the Holfontein Project to ASX
listed Lachlan Star Limited, as announced on 7 May 2008, due diligence is
continuing and the last remaining condition precedent, namely Section 11
approval from the DME, is expected to be concluded prior to the end of the year.
Corporate
The Company remains in a strong financial position with over A$240 million cash
at bank and no debt whatsoever. Importantly, CZA has approximately A$40 million
in capital expenditure to be met between now and bringing the Mooiplaats Project
into production. Therefore, prior to the end of this calendar year, the Company
will still have close to $200m in cash, a producing coal asset in Mooiplaats and
no debt, providing a solid foundation in which to bring our coking coal
properties into production.
SIMON J FARRELL
Managing Director
For more information contact:
Simon Farrell, Managing Director
GVM
+61 417 985 383 or +61 8 9322 6776
Petronella Gorrie
The Event Shop
+27 82 827 8815
Jos Simson / Arabella Hobbs / Leesa Peters
Conduit PR
+44(0) 20 7429 6603
Olly Cairns / Romil Patel
Blue Oar Securities Plc
+61 8 6430 1631/ +44(0) 20 7448 4400
About CoAL:
Coal of Africa Limited 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
Sponsor
PricewaterhouseCoopers Corporate Finance (Pty) Ltd
Date: 25/09/2008 09:00:01 Produced by the JSE SENS Department.
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