| Tue 12 May 2009, 16:54 | | SNU - Sentula Mining - Salient Features of a Competent Persons` Report |
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SNU
SNU
SNU - Sentula Mining - Salient Features of a Competent Persons` Report
and General Update
Sentula Mining Limited
Incorporated in the Republic of South Africa
(Registration number 1992/001973/06)
Share code: SNU & ISIN: ZAE000107223
("Sentula" or "the company" or "the group")
SALIENT FEATURES OF A COMPETENT PERSONS` REPORT AND GENERAL UPDATE
Sentula wishes to provide its shareholders with the salient features of a
recently completed Competent Persons` Report, covering the company`s
operating and near production mining assets, the effective date of which is 1
March 2009, as well as a general operational update.
COMPETENT PERSONS` REPORT
Purpose and Project Outline
Sentula began business as a mining contractor more than three decades ago and
over the years acquired coal mining assets, or entered into agreements with
owners of such assets, which led to the company becoming an owner and
operator of mines and processing plants, in addition to its mining services
business.
The coal mining entities can be categorised under four functional
definitions:
- Operating Assets: assets that are currently in production;
- Near Production Assets: assets that are expected to come into production
within 12 months;
- Exploration Projects: assets that are expected to come into production
in a period greater than 12 months but less than 24 months; and
- Long Term Projects: assets that are expected to come into production in
a period greater than 24 months.
SRK Consulting (South Africa) (Proprietary) Limited ("SRK") has been mandated
by Sentula to compile an Independent Competent Persons` Report ("CPR") on the
following coal mines/projects and associated infrastructure located in South
Africa, which fall into the operating and near production asset categories:
- Nkomati Mine;
- Koornfontein Mines;
- Bankfontein Project; and
- Schoongezicht Project,
hereinafter, collectively referred to as the "Material Assets".
The Material Assets evaluated in terms of the CPR, the salient features of
which are set out below, comprise the following Operating and Near Production
Assets:
Operating Assets
- Nkomati Mine, in which Sentula has a 60% equity interest, is located
close to Komatipoort in Eastern Mpumalanga. The mine operates under a Mining
Licence which is valid until 19 October 2015 and covers an area of 10 000
hectares ("ha"). Opencast and underground mining areas, with a 12 year life-
of-mine ("LoM") have been identified, on the basis of 6.981 million metric
tonnes ("mt") of run-of-mine ("RoM") coal mined; and
- Koornfontein Mines, in which Sentula has a 49.98% stake, is located in
close proximity to Hendrina and operates under a New Order Mining Right which
is valid until 24 October 2032. The license covers an area of 13 952 ha with
underground and potential opencast operations making up an 18 year LoM on the
basis of 42.261mt of RoM coal mined.
Near Production Assets
- Bankfontein Project, in which Sentula has a 50% stake, is located in the
Ermelo district. Application for a New Order Mining Right has been accepted
by the Department of Minerals and Energy ("DME") and the issue thereof is
pending. The project covers an area of 513 ha and entails both opencast and
underground resources. The mine has a 5 year LoM beginning in 2010, based on
3.080mt of RoM coal being mined; and
- Schoongezicht Project, in which Sentula has a 50% equity interest, is
located in close proximity to Delmas. Application for a New Order Mining
Right has been accepted by the DME and the issue thereof is pending. The
project covers an area of 94.3 ha. Opencast mining operations with a 10 year
LoM, commencing in 2010 have been planned, on the basis of 7.500mt of RoM
coal being mined.
Exploration Programme and Budget
Exploration will be undertaken on an ongoing basis and since the assets are
in production or close to production, these costs have been included in the
operating costs, details of which are set out in Section 12 of the CPR.
Coal Resource and Coal Reserve Statement
A brief summary of the Material Assets` Coal Resources and Coal Reserves at
28 February 2009 is set out below. Sections 4 and 5 of the CPR summarise the
methods used by Sentula to derive and classify its latest coal resource
estimates, and the coal mining methods used, respectively.
Coal resources have been reported in accordance with the classification
criteria of the South African Code for the Reporting of Mineral Resources and
Mineral Reserves (the SAMREC Code). Coal Resources are inclusive of Coal
Reserves. Coal Resources are not Coal Reserves and do not have demonstrated
economic viability. Coal Resources are reported on an air-dried,
uncontaminated basis.
Nkomati Mine
Nkomati Mine Coal Resources: Total gross in situ resources ("GTIS") of 13.55
mt are located in the:
- Mangweni Block: comprising measured and indicated resource areas of
21.8382 ha and 20.1650 ha, respectively, and GTIS of 4.07mt;
- Matadeni Block Area I Opencast: comprising a total measured resource
area of 27.5348 ha with GTIS of 3.55mt;
- Matadeni Block Area II Opencast: comprising a total measured resource
area of 16.6801 ha with GTIS of 2.01mt; and
- Matadeni Block Underground: comprising an indicated resource area of
73.0073 ha with GTIS of 3.91mt.
Nkomati Mine Coal Reserves:
The probable reserves of the Nkomati Mine comprise 9.6mt on a GTIS basis,
7.7mt of mineable tonnes in situ ("MTIS") basis, 7.0mt of RoM and 5.1mt of
saleable reserves.
Koornfontein Mines
Koornfontein Mines Coal Resources: Total GTIS of 171.15mt comprising:
- Total Underground Resources of 126.28mt on a GTIS basis, comprising
indicated and measured resources of 5,69mt and 120,59mt respectively; and
- Total Opencast Resources of 44.87mt on a GTIS basis, comprising
indicated and measured resources of 27,77mt and 17,10mt respectively.
Koornfontein Mines Coal Reserves:
The probable Underground and Opencast reserves of the Koornfontein Mines
comprise 171.2mt of GTIS, 136.9mt of MTIS, 45.3mt of RoM and 38.4mt of
saleable reserves.
Bankfontein Projects
Bankfontein Projects Coal Resources:
- The total inferred resources comprise total GTIS of 5.2mt and MTIS of
4.1mt.
Bankfontein Projects Coal Reserves:
No Coal Reserves have been declared for the project.
Schoongezicht Project
Schoongezicht Project Coal Resources:
- The total measured resources indicate GTIS of 9.8mt.
Schoongezicht Project Coal Reserves:
The probable reserves comprise 9.8mt of GTIS, 8.8mt of MTIS, 7.5mt of RoM and
6.5mt of saleable reserves.
Competent Person Validation
The Competent Person, Hilton Ashton, hereby declares that the salient
features are a true reflection of the full CPR.
Equity Value
The summary valuation for Sentula`s Coal assets is based on an aggregation of
the following:
- the Net Asset Value ("NAV") for the Material Assets as represented by
the Net Present Values ("NPVs") determined in Section 14 of the CPR;
- the Present Value of unallocated corporate expenses valued on the basis
of a Discounted Cash Flow ("DCF") approach for the duration of the LoM; and
- balance sheet adjustments to account for debt and cash position at 28
February 2009.
The summary equity valuation for Sentula, which includes any impact of
Secondary Taxation on Companies, is presented in the table below.
Asset / adjustment Applied Value Attri-
Real Real Equity butable to
WACC Discount NPV Stake Sentula
% Rate (Rm) %
%
Nkomati Mine 5.59% 6.59% 343 60.00 206
Koornfontein Mines 5.59% 6.59% 1 519 49.90 759
Bankfontein Project 5.59% 8.59% 61 50.00 31
Schoongezicht Project 5.59% 8.59% 268 50.00 134
Value of Material Assets 2 192 1 129
Adjustments
Unallocated Corporate (22)
Expenses
Exploration Expenditure -
Mark-to-Market Value of -
Financial Instruments
Net debt/cash position (1 -
March 2009)
Equity Value 1 107
(1) Unallocated corporate expenses (general and administrative, head office
and other costs that cannot be allocated by activity of R1.5 million per
annum) for LoM, discounted at the base case real WACC DCF.
(2) Net debt/cash position supplied by Sentula as at 1 March 2009.
Conclusion
In considering the derived valuation, SRK makes reference to the sensitivity
of the valuation of Sentula`s coal assets to coal price forecasts. Non-
achievement of the forecast coal prices will have a significant effect on the
valuation of Sentula.
SRK has conducted a comprehensive review and assessment of all material
issues likely to influence the future operations of the assets based on
information available up to 28 February 2009. The LoM plans as provided to
SRK, have been reviewed in detail for appropriateness, reasonableness and
viability. Where material differences were found, they were discussed with
Sentula and adjusted where considered appropriate.
SRK considers that the resulting Equity Value of R1 107 million is based on
sound reasoning, engineering judgement and technically achievable plans,
within the context of the risks associated with the South African mining
industry.
Availability of CPR
The CPR, which includes inter alia, location maps indicating areas of
interest, legal aspects & tenure, geological settings & description, key
modifying factors & environmental issues and project risks, is available for
inspection at the office of Sentula, Ground Floor, Building 14, Woodlands
Office Park, Woodmead, Johannesburg, 2080.
GENERAL UPDATE
The company and its consortium of bankers are in advanced negotiations for
the restructure of its senior debt facility of R1.1 billion. The facility is
being restructured to ensure the company`s debt serviceability is robust and
its liquidity secure in the context of the current market conditions and the
misappropriation of funds from the company during the 2008 financial year.
Sentula`s capex budget for the 2010 year is R155 million (2008: R850 million)
of which approximately R75 million relates to refurbishment of plant and
equipment while approximately R80 million, which is new capex, relates to the
purchase of excavators and other support equipment. There is no need for
significant new capex for the next two years.
Sentula has also appointed a financial advisor to review the company`s
capital structure with a view to continue to unlock value from the business.
Shareholders are referred to the SENS announcement dated 5 March 2009 which
stated that as the forensic investigation had been largely completed, the
misappropriated assets had been fully provided for, no further losses were
anticipated and that the board of directors believed that the issues
addressed in the announcement had ceased to have any effect on the company,
the cautionary had been withdrawn. The board also believes that the issues
that gave rise to 2008 financial year audit qualification have been
addressed. New management and control systems have been implemented across
the organisation to mitigate risk of the past financial irregularities
reoccurring. The recovery of misappropriated assets is progressing with a
number of legal and criminal actions against implicated individuals and
entities both domestically and offshore. The recoveries of any
misappropriated assets will ultimately be written back through the income
statement.
Sentula`s financial results for the year ended 31 March 2009 are expected to
be released on or about Wednesday, 24 June 2009.
Johannesburg
12 May 2009
Sponsor - Merchantec (Proprietary) Limited
Communications advisors - College Hill South Africa
Date: 12/05/2009 16:54:33 Produced by the JSE SENS Department.
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