| Tue 23 Mar 2010, 7:50 | | CZA - Coal Executes New Order Mining Right For Vele Project |
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CZA
CZA
CZA - Coal Executes New Order Mining Right For Vele Project
Coal of Africa Limited
(previously, "GVM Metals Limited")
(Incorporated and registered in Australia)
(Registration number ABN 008 905 388)
JSE/ASX Share code: CZA
ISIN AU000000CZA6
("CoAL" or "the Company")
COAL EXECUTES NEW ORDER MINING RIGHT FOR VELE PROJECT
Further to the Company announcement dated 2 February 2010, CoAL is pleased to
announce that the New Order Mining Right ("NOMR") granted by the South African
Department of Mineral Resources ("DMR") for its 100% owned Vele coking coal
project ("Vele Project") near Musina in the Limpopo Province has now been
executed. The formal execution of the NOMR includes approval of the
Environmental Management Plan ("EMP") submitted as part of the NOMR application.
The Company will now proceed with immediate development of the Vele Project.
The Company has undertaken a significant amount of preparation in anticipation
of the granting and execution of the NOMR to accelerate development at the Vele
Project. To this end, the Engineering, Procurement, Construction and Management
contractor will commence immediately with earthworks and civil construction for
the erection of the modular plant, to be transported by road from Cape Town. The
mining contractor will be mobilised at the same time to begin preparation for
the excavation of the initial box-cut. The construction and preparation is
planned to be completed to produce the first coking coal product in Q3 2010.
CoAL will develop its Vele Project in two phases. Phase 1 will initially
comprise the establishment of a modular coal treatment plant with the ability to
deliver an estimated 1 million saleable tonnes (yield dependant) of coking coal
per annum, and expects to attain this annualised production target rate by the
end of 2010. Phase 2 is planned to deliver 5 million tonnes per annum ("mtpa")
of saleable coking coal, the development of which will be dictated by market
conditions.
It is anticipated that 100% of Phase 1 production from Vele will be the subject
of an off-take agreement with ArcelorMittal South Africa ("Mittal"). As
previously announced, the Company signed a Letter of Intent in April 2008
("Mittal LOI") which provides for the off-take from the Company`s coking coal
properties of a minimum of 2.5 mtpa, with an option for Mittal to increase this
to 5 mtpa. Under the terms of the Mittal LOI, CoAL will be obliged to deliver
the coal on a free on rail basis in return for a free on board index related
price.
Recent reports suggest that the 2010 contracts for hard coking coal have been
agreed and settled at US$200/t, which bodes very well for the Vele Project to
deliver robust economics.
Formal negotiations with Mittal to convert the Mittal LOI, referred to above,
into a formal off-take agreement are continuing.
Due to the delay in receiving the initial grant of the NOMR and subsequent delay
in execution of the NOMR, the Company has incurred a number of additional
charges that were not part of the original budget, including, but not limited
to, standing time penalties, storage and transportation costs. Furthermore,
certain costs have increased from the time of preparation of the original budget
until now, being physical mobilisation of the project. Therefore, the total
capital expenditure budget for Phase 1 has been revised upwards from the
originally stated ZAR350 million to ZAR450 million.
The Company notes that, as at the end of February 2010, a total of ZAR260
million of the above mentioned budget has already been expended, leaving ZAR190
million outstanding to complete Phase 1. It is anticipated that the remaining
capital expenditure will be spent between now and the end of 2010. Furthermore,
the Company expects that a doubling of the Phase 1 capacity can be achieved with
a further capital expenditure of approximately ZAR200 million.
Commenting today, Simon Farrell, Managing Director of CoAL, said: "This
development paves the way for immediate mobilisation to bring the Vele Project
into production. CoAL has undertaken a significant amount of preparation work in
anticipation of the NOMR which will allow first production of coking coal in Q3
this year. The Company looks forward to developing Vele at a time when coking
coal prices are being settled around $200/t, 55% higher than 2009/10 prices."
AUTHORISED BY:
Shannon Coates
Company Secretary
For more information contact:
CoAL Tel: +61 (0) 417 985 383 or
Simon Farrell, Managing Director Tel: +61 (8) 9322 6776
Evolution Securities
Simon Edwards/Chris Sim Tel: +44 (0) 20 7071 4300
Conduit PR
Jos Simson/Leesa Peters Tel: +44 (0) 20 7429 6603
Macquarie First South Advisers
Melanie de Nysschen Tel: +27 (0) 11 583 2000
Johannesburg
23 March 2010
Sponsor
Macquarie First South Advisers (Pty) Limited
About CoAL:
Coal of Africa Limited ("CoAL") is an AIM/ASX/JSE listed coal mining and
development company operating primarily in South Africa. CoAL has 4 key
projects including the 113 million tonne (`mt`) Mooiplaats thermal coal mine,
the 656 mt Vele coking coal project, the 1.3 billion tonne Makhado
coking coal project ("Makhado Project") (including resources to be acquired
under the Rio Tinto farm swap arrangements) and the recently acquired
Woestalleen Colliery and associated mining operations producing in excess of
2mpta export quality thermal coal.
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.
Date: 23/03/2010 07:50:02 Produced by the JSE SENS Department.
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