| Fri 29 Jan 2010, 12:50 | | CZA - Coal of Africa Limited - Report For The Quarter Ended 31 December 2009 |
|
CZA
CZA
CZA - Coal of Africa Limited - Report For The Quarter Ended 31 December 2009
Coal of Africa Limited
(previously, "GVM Metals Limited")
(Incorporated and registered in Australia)
(Registration number ABN 008 905 388)
JSE Share code: CZA
ASX Share code: CZA
ISIN AU000000CZA6
("CoAL" or the "Company")
REPORT FOR THE QUARTER ENDED 31 DECEMBER 2009
CoAL provides its operational report for the quarter ended 31 December 2009. A
full copy of this report is available on the Company`s website,
www.coalofafrica.com.
Highlights
Placement of 59,867,731 ordinary shares at 95 pence per share raising
approximately GBP56.9 million to fund the acquisition of Nucoal Mining (Pty) Ltd
("NuCoal").
Execution of agreements with subsidiaries of the Rio Tinto Group to formalise
the Farm Swap memorandum of understanding (as previously announced).
Execution of formal agreements with Broad Based Black Economic Empowerment
("BBBEE") partners as part of efforts to ensure compliance with South African
legislative requirements for empowerment groups to hold at least 26% of mining
companies by 2014.
Completion of the acquisition of 6% of the Vele coking coal project ("Vele
Project") and extension of the Agreement to acquire the remaining 20% of the
Vele Project.
Granting of a New Order Prospecting Right ("NOPR") for coal bed methane over an
area measuring 564 km2 in the Limpopo Province which includes the Makhado coking
coal project ("Makhado Project") as well as neighbouring areas.
Renewal of the employment contracts of the Managing Director and Finance
Director.
Cash balance at the end of the quarter of A$94 million - the Company has no
debt.
Post Period Highlights
Completion of the acquisition of NuCoal, a company producing 4.2 million tonnes
per annum ("Mtpa") run of mine ("ROM") coal, transforming CoAL into a multiple
product producer.
Commenting on the results today, Simon Farrell, Managing Director of CoAL said:
"The acquisition of NuCoal will transform the Company into a multiple producing
mine entity and allows us to take advantage of the positive trend in
international thermal coal prices. It also ensures that we fully utilise our
port allocation at the Maputo Terminal, while our Vele mining application awaits
approval, which will increase to 3 million tonnes per annum in the third quarter
of this calendar year."
DISCUSSION OF RESULTS
Mooiplaats Project - Ermelo Coalfield (100%)
Following the reconfiguration of the Mooiplaats mining layout as a result of
geological conditions, the Company is still on track to commence production of
export quality coal during the first quarter of 2010. During the December
quarter, 2,381 metres were mined with mining targets exceeded in both November
and December, resulting in the production of 26,000 tonnes of lean coal.
The second module of the wash plant was commissioned during the quarter,
allowing for the processing of 200 tonnes per hour of ROM coal. At the end of
the quarter, over 47,000 tonnes of lean coal had been railed from the Umlabo
siding to the Matola Terminal in Maputo, Mozambique ("Matola Terminal"), with
the first shipment of lean coal due to be loaded and depart by the end of
January 2010.
The Environmental Management Plan for the extension of the New Order Mining
Right ("NOMR") to include the farms Klipbank and Adrianople was submitted to the
Department of Mineral Resources ("DMR") during the quarter, completing the
documents required by the Department for approval of the extension to the
Mooiplaats Project, facilitating the regulatory approval for the development of
the south decline.
Safety management continues to be a key focus at CoAL`s projects and no
reportable safety issues occurred at the Mooiplaats Project during the quarter.
Vele Project - Tuli Coal Field (80% - will be 100% on granting of the NOMR)
On 23 October 2009, the Company issued 1,990,000 fully paid ordinary CoAL shares
to Shangoni Bezwe Management Services (Pty) Ltd to acquire 6% of Limpopo Coal
Company (Pty) Ltd ("Limpopo Coal"), the company that owns the Vele Project,
taking the Company`s interest to 80%. As announced on 14 July 2009, the Company
executed an agreement with Tranter Holdings (Pty) Ltd ("Tranter") to acquire the
remaining 20% of Limpopo Coal for 5,625,750 ordinary shares subject to, amongst
other things, the granting of a NOMR by 31 December 2009. The NOMR Application
is currently under review by the DMR and the suspensive condition requiring NOMR
approval by the end of the period was extended to 31 March 2010.
A further 34 exploration holes totalling over 2,060 metres, were drilled on the
mine area during the quarter. The exploration holes drilled improved the
drilling density and the results thereof will be used to confirm the structure
and composition of the coal. All cores have been geophysically logged and core
samples sent to the Company`s laboratory in Polokwane for analysis.
CoAL is set to launch Phase 1 of the Vele Project upon the granting of a NOMR,
approval of which is expected in early 2010. The total capital expenditure to
complete Phase 1 of the Vele Project is estimated at ZAR350 million and
comprises the establishment of a modular coal treatment plant with the ability
to deliver 1 million saleable tonnes (yield dependant) of coking coal per annum.
A substantial amount of preparation for Phase 1 has been completed and a
significant portion of the capital required for Phase 1 has already been
committed. Dry and wet commissioning of the modular plant has been successfully
completed and construction of the supporting infrastructure is progressing
according to schedule. Work has commenced on the upgrading of the rail siding in
Musina and is expected to be concluded in Q1 of 2010.
The capacity of the modular plant can be doubled should ArcelorMittal SA
("Mittal") wish to increase its off-take from the Vele Project. In principle,
the Letter of Intent with Mittal signed in April 2008 ("Mittal LOI") provides
for the potential off-take from the Company`s coking coal properties of 2.5 -
5Mtpa. An additional ZAR200 million is required to double the Phase 1 capacity
and a further ZAR2.65 billion will be required to complete Phase 2 of the Vele
Project, which will have capacity to deliver 5Mtpa of saleable coking coal. The
Mittal LOI in principle, provides for a free on rail ("FOR") delivery in return
for a free on board ("FOB") indexed price, delivering a significantly better
margin than would have otherwise been enjoyed through exporting the coal.
Initial mining will utilise opencast methods, which also contributes to lower
initial mine establishment costs. Phase 2 of the Project will deliver the
planned full capacity of 5Mtpa of saleable coking coal from the Vele Project and
the implementation thereof will be dictated by market conditions. A Memorandum
of Understanding for the mining contract was previously signed with MCC
Contracts, the appointed open-cast mining contractor, and discussions between
the two parties continued during the current quarter. The mining contract is
expected to be signed in early 2010.
Makhado Coking Coal Project - Soutpansberg Coal Field (100%)
During the quarter, the Company completed an additional 20 exploration holes
bringing the total metres drilled on the Makhado Project to over 9,000 metres.
The exploration boreholes provided additional information for the revised
geological model, which will include both sedimentology as well as geological
structure and will be used to update the mine model. A high level study on the
processing plant required for the project has commenced and a modular wash plant
similar to that built for the Vele Project is being considered.
As announced on 29 October 2009, CoAL entered into an Exchange of Prospecting
Rights Agreement ("Farm Swap") with Kwezi Mining and Exploration (Pty) Ltd
("Kwezi") and Chapudi Coal (Pty) Ltd ("Chapudi"), joint venture companies held
by the Rio Tinto Group and the Kwezi Group of South Africa. The Farm Swap cedes
ownership of certain Chapudi and Kwezi NOPR that are contiguous to the Company`s
Makhado Project to CoAL. In return, the Company will cede certain NOPR and
interests therein to Chapudi. In addition, and on satisfaction of conditions
precedent, Regulus Investments (Pty) Limited, a subsidiary of CoAL, will pay
Chapudi a premium of ZAR12.5m.
During the December quarter, the Company submitted an application to the DMR for
the extraction of a bulk sample from the Makhado Project. Approval of the
application is expected in Q1 of 2010 and the sample extracted will yield 1,000
tonnes of coal for analysis by ArcelorMittal SA in their coking ovens.
The Company has commenced preparing the documentation required for the NOMR
Application. The application is based on the planned 5Mtpa production profile of
the Makhado Project and will be submitted once approval has been granted by the
DMR for the Rio Tinto Farm Swap.
Holfontein Coal Project (100%)
The Company continues to classify Holfontein as an asset available for sale
while it awaits the grant of a NOMR, applied for in February 2008.
Acquisition of NuCoal Mining (Pty) Ltd and Share Placement
During the quarter, the Company agreed to acquire 100% of NuCoal, a thermal coal
producer with assets located close to CoAL`s Mooiplaats Project, for ZAR650m.
NuCoal`s Woestalleen Colliery produces 2.5Mtpa of saleable coal for domestic and
export markets and has a number of off-take contracts in place. NuCoal has two
beneficiation plants and a fully operational mine producing 350,000 tonnes per
month of ROM coal. Furthermore, NuCoal has a number of potential open cast and
underground projects suitable for the local and export markets which CoAL will
evaluate in the context of the Company`s overall corporate strategy.
The acquisition was funded by proceeds of the share placement completed at the
end of October 2009 which raised GBP56.9m (ZAR731m).
On 26 January 2010, CoAL confirmed the completion of the acquisition of NuCoal.
The final adjusted purchase price due to NuCoal is ZAR467m after a 10% retention
and adjustments to reflect the working capital position (including certain non-
current liabilities) as at 31 December 2009. A retention of ZAR65mwill be
withheld in relation to certain warranties and in accordance with the terms of
the Nucoal acquisition agreement. CoAL will apply the remaining proceeds of the
placement to, amongst other things, accelerating capital expenditure at its Vele
Project and general working capital requirements.
Black Empowerment Transaction
As announced on 11 December 2009, the Company has executed formal agreements
with Firefly Investments 163 (Pty) Ltd ("Firefly"), its Broad Based Black
Economic Empowerment ("BBBEE") partners, ensuring CoAL takes a significant step
towards compliance with South African legislation which requires black empowered
groups to hold at least 26% in mining companies by 2014. The arrangement
replaces the previous agreement announced on 13 June 2008 with Coal Investments
Limited ("CIL") pursuant to which CIL subscribed for shares and was granted an
option to subscribe for 50 million CoAL shares.
The BBBEE consortium will be led by Firefly which is wholly owned and controlled
by historically disadvantaged South Africans. Firefly`s current shareholders
include Mosomo Investment Holdings (Pty) Ltd and Mtungwa Resources (Pty) Ltd
which are led by Kgomotso Brian Mosehla and Patrick Ntshalishali.
The BBBEE agreements which have been entered into by CoAL, CIL- and Firefly
provide BBBEE partners with the option to subscribe for a total of 50 million
CoAL shares for 60 pence each between 1 November 2010 and 1 November 2014 ("the
Option"). Firefly cannot exercise the Option prior to 1 November 2010 except in
limited circumstances such as a change in control of the Company. The Option
will be subject to certain regulatory approvals including the Australian Foreign
Investment Review Board.
Firefly will have the right to nominate two persons to the CoAL Board and has
undertaken to procure that the King of the VhaVenda, His Majesty Khosi Khulu
Toni Mphephu Ramabulana ("the King") holds a shareholding and beneficial
interest in Firefly within a period of three months of satisfaction of the
conditions precedent to the BBBEE Agreements. The King represents his
constituents of the Mudimeli, Musekwa, Makushu-Musholombi and Tshivhula
communities, relevant female empowerment and youth groups as well as a special
purpose vehicle to promote and develop entrepreneurs and other specific
community groups in the Limpopo province.
To facilitate the BBBEE transaction, the Company`s second largest shareholder,
African Global Capital I, L.P., an entity associated with Mvelaphanda Holdings
(Pty) Ltd, Palladino Holdings Limited and OZ Management LP, and its affiliate
CIL, which currently own in the aggregate 15.03% of the issued share capital of
CoAL, has entered into an agreement with Firefly in terms of which amongst other
provisions, they will cede their voting rights over their ordinary shares in
CoAL to Firefly.
Polokwane Analytical Laboratory
The Company`s analytical laboratory in Polokwane in the Limpopo Province
continued performing petrographic and thermal coal tests on samples from the
Company`s Vele and Makhado Projects. Initial results from the tests undertaken
during the quarter will be released once all of the results have been received.
Nimag Group of Companies (100%)
The implementation of cost cutting measures and improved nickel prices, together
with increased demand for the Nimag Group`s products, resulted in an unaudited
EBIT of ZAR5m for the first half of the year. Nimag`s management has been tasked
with growing the NiMag Group through acquisitions and the identification of new
clients and products.
Authorised By:
Simon Farrell
Managing Director
29 January 2010
For more information contact:
Simon Farrell, Managing Director - CZA
+61 417 985 383 or +61 8 9322 6776
Peter Bacchus/ Alastair Cochran - Morgan Stanley
+44(0) 20 7425 8000
Simon Edwards/ Chris Sim - Evolution Securities
+44(0) 20 7071 4300
Jos Simson/ Leesa Peters - Conduit PR
+44(0) 20 7429 6603
Melanie de Nysschen / Thembeka Mgoduso - Macquarie First South Advisers
+27(11) 583 2000
About CoAL:
Coal of Africa Limited ("CoAL") is an AIM/ASX/JSE listed coal mining and
development company operating in South Africa. CoAL`s key projects include the
Woestalleen Colliery, the 113 million tonne (`mt`) Mooiplaats thermal coal mine,
the 656 mt Vele coking coal project and the 1 billion tonne Makhado
coking coal project.
The Mooiplaats coal mine commenced production in 2008 and is currently ramping
up to produce 2 mtpa. CoAL`s Vele and Makhado coking coal projects are expected
to start production in H1 2010 and Q4 2011 respectively producing an
initial 2 mtpa rising to a combined annual output of 10 mtpa of coking coal.
In 2010, CoAL completed the ZAR650m acquisition of NuCoal Mining (Pty) Limited
("NuCoal"), a thermal coal producer with assets in South Africa in close
proximity to CoAL`s Mooiplaats mine. NuCoal owns the Woestalleen Colliery, which
has a number of off-take contracts in place and produces 2.5Mtpa of saleable
coal for domestic and export markets. NuCoal also owns two beneficiation plants,
one fully operational mine producing 350kt per month of run of mine ("ROM") coal
and has recently commenced production at a second mine.
Date: 29/01/2010 12:50:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
