| Mon 27 Oct 2008, 10:03 | | CZA - Coal of Africa Limited - Report for the September 2008 quarter |
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CZA
CZA
CZA - Coal of Africa Limited - Report for the September 2008 quarter
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`)
REPORT FOR THE SEPTEMBER 2008 QUARTER
Coal of Africa Limited (`CoAL` or `the Company`) is pleased to announce its
operational report for the quarter ended 30 September 2008. A full copy of this
report, as released today on the ASX, is available at the Company`s website,
www.coalofafrica.com.
HIGHLIGHTS
* Rio Tinto and CoAL sign a Memorandum of Understanding to swap certain
prospecting rights and enter into a Joint Venture on other prospecting
rights, all located in and around CoAL`s Makhado hard coking coal project.
* CoAL secures long term port allocation at the Richards Bay and Maputo ports
for the export of its coal.
* The Company`s Black Economic Empowerment partner receives approval from the
Australian Foreign Investment Review Board to increase its stake beyond 15%
to 17.3%, raising an additional GBP15.6 million.
* CoAL upgrades the resource on the Makhado project from 713mt to 1.335
billion gross in situ tonnes.
* The Vele project resource is upgraded from 441mt to 721 million gross in
situ tonnes.
* At the end of the quarter, the Company`s coal resources totalled 2.2
billion gross in situ tonnes with approximately 95% of the resources
located in the higher value coking coal projects.
* Discussions with Transnet Freight Rail and Mozambique`s CFM continued with
finalisation of the rail allocations expected in the next quarter.
* Cash balance at the end of the quarter was A$235 million. The Company has
no debt.
Commenting on the results today, Simon Farrell, Managing Director of CoAL, said,
"Development of the Company`s coal projects continued according to schedule
during the September quarter, resulting in the first coal being extracted from
the Mooiplaats box-cut in October. In the face of challenging global economic
conditions, CoAL`s cash position and the absence of debt ensures the Company is
well placed to be able to bring the Mooiplaats thermal coal project and the
Makhado and Vele coking coal projects into production within the next two years.
Furthermore, the securing of long term port allocation at the Richards Bay and
Maputo ports guarantees that the Company has access to infrastructure to be able
to deliver mined coal to customers. The port allocations, combined with the
significant coking coal reserves, positions CoAL uniquely as it will enable the
Company to take advantage of international coking coal supply shortages."
DISCUSSION OF RESULTS
Mooiplaats Coal Project (100%)
During the quarter, rehabilitation of the decline shaft and preparation of the
surrounding areas for mining activity continued. The development of the box-cut
is progressing according to plan and mining is expected to commence towards the
end of 2008 followed soon thereafter by production. Negotiations with the
contract miner have been finalised and the supply of mining equipment,
infrastructure and wash plant have been secured with delivery of the first
continuous mining machine scheduled for October 2008. De-sliming of the box-cut
and stabilisation of the decline walls was completed allowing for the
contractors to sink to coal and concrete the mine floor which will be done early
in the next quarter. Surface infrastructure is currently being established and
wash plant design has been finalised, with the first wash plant modules
scheduled for commissioning during the March quarter.
Additional production related drilling and drilling to identify the site for the
second decline shaft commenced on the neighbouring farms, Klipbank and
Adrianople. Exploration on other neighbouring farms has begun, allowing for the
expansion of the Mooiplaats project mining area.
The Company has secured long term port allocation for the export of coal mined
at Mooiplaats through the Richards Bay dry bulk terminal operated by Grindrod
Limited. The throughput agreement provides CoAL with an allocation of 900,000
tonnes of coal per annum commencing in 2009 and the potential to increase its
export capacity to 3 million tonnes per annum once the terminal expansion has
been completed, in return for CoAL participating in the funding of the
expansion.
Discussions with potential off-take customers continued during the quarter and
are expected to be finalised early 2009.
Makhado Coal Project (formerly Baobab) (100%)
CoAL and Rio Tinto announced in July 2008 that they had entered into a joint
venture and farm swap agreement relating to the New Order Prospecting Rights
forming part of Rio Tinto`s Chapudi and CoAL`s Makhado project.
The rationalisation of the prospecting rights held by CoAL and Chapudi provides
significant benefits to both companies in terms of improving economics and
bringing the projects into commercial production.
CoAL anticipates submitting a New Order Mining Right Application in the second
half of 2008 that will include Rio Tinto`s coal prospect areas that are
contiguous with CoAL`s Fripp and Tanga farms. Detailed studies have been
completed and the life of mine is expected to be in excess of 20 years yielding
a saleable coking coal as well as a percentage of middlings suitable for power
generation. The Company has entered into a supply agreement with a global
Independent Power Producer who has submitted a bid in the recent Eskom tender
for base load power.
Initial marketing of the coking coal fraction will be finalised on completion of
a formal off-take agreement with ArcelorMittal who have indicated that they will
purchase between 2.5 and 5 million tonnes FOR Musina but paying FOB Kestrel
(east coast of Australia) coking coal prices. Other major consumers have already
expressed strong interest in securing a supply of hard coking coal from the
Makhado project and discussions in this respect are ongoing.
Included in the agreement signed with subsidiaries of Grindrod Limited, the
Company has secured long term port allocation through the Matola port in Maputo,
Mozambique. The agreement provides for an allocation of 1 million tonnes per
annum through the Matola dry bulk terminal commencing in 2009. Also included in
the agreement, CoAL has secured the rights to up to 100% of any increased
capacity at the Matola dry bulk terminal in return for the Company participating
in the funding of the expansion. The first phase of Grindrod Limited`s intended
2 phase expansion of the terminal will increase CoAL`s export capacity to 3
million tonnes per annum and on completion of the second phase of expansion,
CoAL will have a total capacity of 7 million tonnes per annum of the terminal`s
10 million tonne total capacity.
During the quarter, a 40 hole large diameter drilling programme commenced
yielding bulk samples for detailed coking coal analysis. Results of the
programme received to date are in line with managements` expectations.
Digitisation of the exploration data acquired from Exxaro Limited was finalised
during the quarter under review. This, together with results of exploration
work previously undertaken, resulted in the creation of geological models that
was included in the updated resource statement released in July that increased
the resource base to 1.33 billion tonnes. These models have been submitted to
independent mine planners who are in the process of generating life-of-mine
schedules which will be used in the Mining Right application. This is due to be
submitted in October.
Vele Coal Project (formerly Thuli) (74%)
Exploration on the Vele coal project included a 31 large diameter cored hole
programme, resulting in a resource upgrade from 441mt to 721 million gross in
situ opencastable tonnes. This includes 158 million tonnes in the `Measured` and
324 million tonnes in the `Indicated` categories. Detailed studies have been
undertaken and the New Order Mining Right Application was submitted in October
2008. The large diameter cores extracted in the drilling programme have been
submitted for detailed laboratory analysis and initial results indicate a
significant improvement in both coking coal qualities and yield when compared to
historical results. Indications are that the resource contains classic hard
coking coal with phosphorous levels below 0.01%, rather than the semi-soft
coking coal as previously reported.
As with the Makhado project, the Company entered into an agreement with an
Independent Power Producer to supply base load electricity to Eskom which, if
successful, will improve the economics of the Vele project significantly.
Holfontein Coal Project (100%)
CoAL previously reached agreement to sell 100% of the Holfontein coal project to
Lachlan Star Limited for A$25 million, payable in a mix of cash and shares on
the satisfaction of certain conditions. The due diligence for the transaction
commenced during the quarter and is expected to be finalised in the December
quarter.
Nimag Group of Companies (100%)
Due to depressed global commodity prices, the Nimag Group has continued to
experience difficult trading conditions. Given the focus on coal production, the
Nimag Group is considered non-core to CoAL and the Company is currently
undertaking a strategic review of this operation.
Authorised by
Simon Farrell
Managing Director
27 October 2008
For more information contact:
Simon Farrell, Managing Director
CZA
+61 417 985 383 or +61 8 9322 6776
Petronella Gorrie
The Event Shop
+27 82 827 8815
Jos Simson / Gareth Tredway
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 ("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
Sponsor
PricewaterhouseCoopers Corporate Finance (Pty) Ltd
Date: 27/10/2008 10:03:18 Produced by the JSE SENS Department.
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