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CZA
CZA
CZA - Coal of Africa Limited - Report for the June 2009 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`)
23 July 2009
REPORT FOR THE JUNE 2009 QUARTER
Coal of Africa Limited, the AIM/ASX/JSE listed coal mining and development
company operating in South Africa announces its operational report for the
quarter ended 30 June 2009. A full copy of this report is available on the
Company`s website, www.coalofafrica.com.
Highlights
* Increased coal production at the Mooiplaats thermal coal project
("Mooiplaats Project").
* Commissioning of the Mooiplaats Project Coal Handling and Preparation
Plant ("CHPP") with the capacity to process 110,000 tonnes of run-of-mine
coal per month.
* Finalisation of revised mining layout for the Mooiplaats Project
following an extensive reassessment of the mine plan and geological
conditions.
* Submission of the Environmental Impact Assessment ("EIA") and
Environmental Management Programme ("EMP") for the Vele coking coal
project ("Vele Project").
* Railed over 7,000 tonnes of third party coal to the Matola Terminal in
Maputo, Mozambique.
* Commencement of construction of the laboratory in Polokwane to reduce
time delays for thermal and coking coal sample analysis.
* Appointment of Mr Paul Holmes as Managing Director of the Nimag Group of
companies.
* Cash balance at the end of the quarter of A$87 million - the Company has
no debt.
Commenting on the results today, Simon Farrell, Managing Director of CoAL
said, "I am pleased to report that the Company has successfully commissioned
the CHPP at Mooiplaats and the mine is operational with the required
infrastructure to deliver coal to the domestic and international markets. The
development of the Mooiplaats Project is almost complete and is below the
original CAPEX budget. Furthermore, we have no debt and sufficient cash to
complete this development, as well as phase one of the Vele Project. This
positions the Company ideally to take advantage of improving international
coal prices during the 2010 financial year."
DISCUSSION OF RESULTS
Mooiplaats Thermal Coal Project - Ermelo Coalfield (100%)
At the end of June 2009, approximately 3,400 metres had been cut, yielding
over 49,500 tonnes of coal. The Company is currently mining over 30,000 tonnes
of run of mine ("ROM") mid-volatile lean coal, which can be quickly ramped up
to 80,000 ROM tonnes per month if required. Low volatile, high calorific
value (>27MJ/kg) coal currently mined at Mooiplaats is being stockpiled.
Negotiations with potential buyers are continuing.
A revised mining layout for the project has been finalised following an
extensive reassessment of the mine plan and geological conditions at
Mooiplaats. The Company is undertaking additional vertical as well as
horizontal drilling programmes to re-affirm the amended mine layout. By the
end of June, 44 holes for the vertical drilling programme were complete and
the horizontal drilling machine had finished four holes comprising over 246
metres. Results from the drilling programmes will also be used to better
determine the transition from lean to export quality thermal coal.
By the end of June, the majority of the mine infrastructure was complete, with
the CHPP commissioned earlier in the month. Kwena Mineral Processing Services,
a leading black owned mining and metallurgical processing company, will
operate the plant and assumed this function at the end of May. The second
phase of the CHPP module is expected to be commissioned in Q4 of 2009. Once
the high volatile coal is being mined and processed, the CHPP will produce an
export quality thermal coal as well as a lower grade middlings product,
suitable for the domestic power station market.
The remaining road, conveyor and workshop infrastructure is expected to be
completed by the end of July and the phase one wash plant workshop is due for
completion in mid-August. Agreement has been reached with the owner of a
nearby siding, which will be used while the Overvaal siding is being re-
commissioned. The work required to re-commission the Overvaal siding is
expected to be completed by Q1 2010, pending relevant approvals.
The Company has reached, in principle, an agreement with two international
coal trading companies for a minimum of 70% of the export thermal coal
expected to be produced at Mooiplaats. Formal agreements will be concluded
early in the next quarter. The terms and conditions proposed by the traders
are favourable, offering significant upside over what are considered standard
terms in the industry.
An application to amend the current New Order Mining Right to include the
farms Klipbank and Adrianople has been lodged with the Department of Minerals
and Energy ("DME"). The extension will result in the development of the south
decline and increase the life of the mine.
Vele Coking Coal Project - Tuli Coal Field (74% - subsequent to 30 June 2009,
agreements were concluded enabling CoAL to acquire the remaining 26% of the
Vele Project)
During the quarter, the Company refined the development of the Vele project
into two phases with the first phase comprising the establishment of a modular
coal treatment plant with a capacity to deliver approximately one million
saleable tonnes of coking coal per annum. The capacity of the modular plant
can be doubled dependant on market conditions. Phase two of the project will
enable the delivery of 5 million tonnes of coking coal per annum.
Work on the feasibility document continued during the quarter with initial
results of the study expected in Q3 of 2009. Phase one of the engineering,
procurement and construction management proposal to provide services and
infrastructure for the modular plant has been implemented and discussions with
MCC Contracts ("MCC"), the appointed open cast mining contractor, are ongoing.
The mining contract with MCC is due to be signed early in the next quarter.
Exploration to gather geotechnical data for the assessment of the decline site
conditions continued and exploration confirmed that the overall dip of the
coal is one degree and not the previously modelled 2 to 3 degrees. Drilling on
areas where significant infrastructure will be positioned has been completed
and infrastructure planning will be finalised during the next quarter.
In May, CoAL submitted the comprehensive EMP and EIA to the DME in which the
Company committed itself to the highest level of environmental and social
performance.
CoAL has committed to spending in excess of R18 million per annum on various
programmes inter alia rehabilitation and re-vegetation, biodiversity, dust
suppression and environmental monitoring and auditing. An additional R1
million per annum will be spent on archaeology and palaeontology to monitor
and manage heritage resources. Further funds have been committed to skills
development, infrastructure development and community services. Macro economic
impacts from the project are expected to be significant and include potential
job creation, benefits for the South African balance of payments due to
exports generated and the reduction of coal imports.
Makhado Coking Coal Project - Soutpansberg Coal Field (100%)
During the quarter, the Company acquired the surface rights for the farm Tanga
849 MS, which will be used for the establishment of project infrastructure.
Negotiations with other Makhado coking coal project ("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.
In June, the Company prepared an application for the extraction of a bulk
sample from the Makhado Project, which was submitted to the DME in early July.
The sample will yield 1,000 tonnes of coal for analysis by ArcelorMittal in
their coking ovens.
The first of three large diameter borehole bulk sample sites was completed,
bringing the total metres drilled and geologically logged from January to June
2009 to 2,322. Washability tests on the bulk sample cores have been completed
and specialist coking tests are now in progress. The exploration drilling
confirmed the presence of other coal horizons in the overburden of the deeper
coal to the north of the proposed open-cut. All new exploration data is being
incorporated into a Sable Dataworks corporate geological database which will
facilitate easier geological modelling.
Holfontein Coal Project (100%)
While discussions with the DME with regards to the New Order Mining Right
(`NOMR`) continued, the Company received Section 11 approval for the transfer
to CoAL of 51% of the project from Motjoli Resources (Pty) Ltd, the Company`s
previous BEE partners. The Section 11 and NOMR applications were submitted in
early 2008 and CoAL is confident that the Mining Right approval will be
granted in the near future. The Holfontein Project continues to be classified
as an asset available for sale.
ArcelorMittal South Africa acquires 16.3% stake in Coal of Africa
In April, ArcelorMittal South Africa ("ArcelorMittal SA") acquired a 16.3%
stake in CoAL from ArcelorMittal Group for R404.5 million in cash, replacing
its parent company as the second largest shareholder in CoAL. The transaction
will mitigate one of ArcelorMittal SA`s key variable input costs by securing
part of the company`s future coal needs. As part of the transaction,
ArcelorMittal SA has secured an option to enter into an off-take agreement
with CoAL for the supply of 2.5 million tonnes of metallurgical (coking) coal
annually, with an option to increase this in the future. CoAL expects that the
coking coal from its Vele Project will enable ArcelorMittal SA to increase the
quantity of South African sourced coal in its overall mix to feed its
furnaces, further enhancing management of input costs and satisfying an
important step in the company`s raw material backward integration strategy.
Extension of BEE Agreement
The agreement with Coal Investments Limited ("CIL") whereby CIL would
subscribe for CoAL shares and be granted an option which, if exercised, would
result in CIL, African Global Capital L.L.P. ("AGC") and their affiliates
holding in excess of 26% of the Company`s shares, was further extended to 31
July 2009.
AGC is a private equity initiative involving Mvelphanda Holdings (Pty) Ltd, OZ
Management LP (an operating entity of Och-Ziff Capital Management LLC (NYSE:
OZM)) and Palladino Holdings Ltd.
When implemented, the agreement will ensure that CoAL is fully compliant with
South African legislation requiring black empowered groups ("BEE Groups") to
hold more than 26% of a mining company`s equity by 2014. CIL, AGC and their
affiliates were unable to complete the required transactions due to, amongst
other and not limited to, regulatory and other approvals not in their direct
control. AGC, CIL and their affiliates will continue to use commercially
reasonable endeavours to transfer their holdings in the Company to a BEE Group
by the amended date.
Construction of Polokwane Analytical Laboratory
The construction of a world class analytical laboratory in Polokwane (capital
of the Limpopo Province) commenced during the quarter. The diversified, high
quality testing facility will be managed by international laboratory group,
Inspectorate, who will ensure that the laboratory is cost effective and
receives the relevant accreditation. The facility will be well equipped with
state of the art technology and will be able to perform extensive Petrographic
and thermal coal tests, removing delays experienced by coal exploration and
production companies in obtaining sample analysis results.
Samples from the Makhado and Vele Projects have already been delivered to the
facility and initial analysis is expected to commence in July 2009.
Nimag Group of Companies (100%)
The cost cutting and restructuring measures implemented by Nimag management
during the financial year ensured the Nimag Group produced positive cash
flows. Mr Paul Holmes, a qualified engineer (PhD), was appointed Managing
Director and has been tasked with returning the Group to full production
capacity, in addition to expanding the business.
Authorised by
SIMON J FARRELL
Managing Director
21 July 2009
For more information contact:
Simon Farrell, Managing Director
CZA
+61 417 985 383 or +61 8 9322 6776
Jos Simson / Leesa Peters
Conduit PR
+44 0 20 7429 6603 or +44 7899 870 450
Simon Edwards/ Chris Sim
Evolution Securities
+44 0 20 7071 4300
About CoAL:
AIM and JSE listed 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.
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: 23/07/2009 09:00:01 Produced by the JSE SENS Department.
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