| Thu 28 Oct 2010, 8:39 | | CZA - Coal of Africa Limited - Report for the quarter ended 30 September 2010 |
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CZA
CZA
CZA - Coal of Africa Limited - Report for the quarter ended 30 September 2010
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 30 SEPTEMBER 2010
Coal provides its operational report for the quarter ended 30 September 2010. A
full copy of this report is available on the Company`s website,
www.coalofafrica.com.
Highlights
- Achievement of 1000 fatality free production shifts at Mooiplaats thermal
coal project ("Mooiplaats Colliery") during September 2010.
- Approval received from the Department of Mineral Resources ("DMR") for the
exchange of New Order Prospecting Rights for the Makhado property between
CoAL and Rio Tinto controlled entities.
- 93% increase in run of mine ("ROM") production and 30% increase in sales
from the Mooiplaats Colliery.
- Appointment of Mr David Murray as Senior Independent Non-Executive
Director.
- Increased quarter on quarter total ROM coal production to 1,113,070 tonnes.
- Cash balance at the end of the quarter of A$42.7 million.
Commenting on the results today, John Wallington, Chief Executive Officer of
CoAL said: "The Company has faced some significant challenges during this past
quarter, particularly relating to the cessation of operations at the Vele
Colliery. We have actively engaged with the Department of Environmental Affairs
and remain confident the issues will be satisfactorily resolved to re-commence
development before year end. Production ramp up at Mooiplaats was significantly
enhanced during the quarter and the Woestalleen Collieries continue to progress
as planned."
DISCUSSION OF RESULTS
Mooiplaats Colliery - Ermelo Coalfield (100%)
Mooiplaats achieved the important milestone of 1000 fatality free production
shifts on 15 September 2010. Safety management is given a high priority at all
of CoAL`s operations, which this achievement bears testimony to.
Operations at the Mooiplaats Colliery continued with the three underground
sections all producing high quality bituminous (thermal) coal. During the
quarter, the Colliery produced 182,230 tonnes of ROM coal, compared to 94,514
tonnes during the previous three month period. This quarter on quarter increase
was attributable to the recent addition of section 3 as well as production from
sections 1 and 2.
The plant processed 361,112 tonnes of ROM coal (including 154,957 tonnes of
purchased ROM coal (Q4 2010: 154,277 tonnes)) producing a total of 197,690
tonnes of primary export quality product, a 72% increase compared to the
previous quarter. The second wash plant produced a further 55,870 tonnes of
middlings product for the domestic market (Q4 2010: 82,690 tonnes).
During the quarter, 172,022 tonnes of export quality thermal coal was railed to
the Matola Terminal in Maputo, Mozambique ("Matola Terminal") and 83,167 tonnes
of middlings product was sold to Eskom`s Camden Power Station. The 172,022
tonnes of coal railed to the Matola Terminal (Q4 2010: 138,161 tonnes) included
both the Mooiplaats and Woestalleen export quality product and resulted in sales
of 181,492 tonnes to international customers, a 30% increase on the previous
quarter`s export sales. Sales revenue generated from the Mooiplaats Colliery for
the September quarter totalled ZAR106 million (A$15.8 million) vs. ZAR122
million (A$18.5 million) during the previous quarter.
Development of further sections at the Mooiplaats Colliery is progressing and an
additional continuous miner is due to be delivered early in the next quarter.
The ramp-up of Mooiplaats is expected to be completed in early 2011, with five
sections producing some 190,000 tonnes per month of ROM coal expected
thereafter.
Woestalleen Mines and Processing Plant - Witbank Coalfield (100%)
The Zonnebloem operation continues its impeccable safety record, with the site
not recording a single lost time injury since start-up in 2008.
Woestalleen`s open cast mines produced 930,840 tonnes of ROM coal during the
quarter, comprising 750,130 tonnes from Zonnebloem (Q4 2010: 785,980 tonnes),
25,968 tonnes from Klipbank (Q4 2010: 45,076 tonnes) and 154,742 tonnes from
Hartogshoop (Q4 2010: 161,373 tonnes). The ROM coal was processed at the
Woestalleen processing facility, producing 447,117 tonnes (Q4 2010: 443,759
tonnes) of export quality coal and 104,082 tonnes (Q4 2010: 69,195 tonnes) for
sale to the domestic market.
During the quarter, total sales revenue from Woestalleen was ZAR254 million
(A$37.9 million). This revenue was generated from export sales as well as
115,141 tonnes of lower grade middlings sold to Eskom (Q4 2010: 85,724 tonnes)
and a further 560,036 tonnes (Q4 2010: 362,977 tonnes) of export quality coal
sold free on rail under historical off-take agreements. Woestalleen`s remaining
export quality coal is railed to the Matola Terminal and sold together with the
Mooiplaats coal.
Vele Coking Coal Project - Tuli Coal Field (100%)
Safety management at Vele coking coal project ("Vele Colliery") was commendable,
with only one lost time injury recorded during the full construction phase to
date.
The development phase of the Vele Colliery is almost complete with the
construction of the open cast mining pit, processing plant and related mining
infrastructure near completion. Pending the grant of the Integrated Water Use
Licence ("IWUL"), production was expected to commence, followed soon thereafter
by first sales of coal. During the development phase of the project,
approximately 850 job opportunities were created, the majority of which were
staffed by residents from the nearby towns of Musina and Alldays. Following the
development phase, the Company expects the production phase to create a further
460 job opportunities.
The Company was served with a Compliance Notice by the Department of
Environmental Affairs ("DEA") during the quarter and is in the process of
submitting rectification papers in terms of section 24G of the South African
National Environmental Management Amendment Act, 1998 (Act No. 107 of 1998) to
continue with the activities relevant to the Compliance Notice. CoAL has fully
adhered to the instructions contained within the Compliance Notice and the
Company has held several constructive meetings with all appropriate
representative levels of the DEA in a bid to resolve the issues identified. The
Company has also applied to the Minister of the DEA for the suspension of the
Compliance Notice during this process and hopes that a ruling will be made soon.
CoAL awaits approval of its application for an IWUL for the Vele Colliery, which
was submitted to the South African Department of Water Affairs ("DWAF") on 10
November 2009. The Company is working closely with the relevant authorities on
an ongoing basis to facilitate the granting of the IWUL, which is required
before any coal mining or processing activities can commence at the Colliery.
The Company has appointed an Independent Environmental Assessment Practitioner
("EAP") to assess the current and proposed activities in conjunction with the
IWUL application process. Furthermore, CoAL has made significant progress in
satisfying the technical requirements raised by the DEA and DWAF and is
confident that with continued liaison between itself and these departments, the
issues will be satisfactorily resolved.
The execution of the NOMR in March 2010 and approval of the Environmental
Management Plan was the result of an extensive and exhaustive process spanning a
period of more than 18 months, including public and government participation
(including DMR, DWAF and the DEA) and the engagement of over 12 independent
experts who contributed to a comprehensive Environmental Impact Assessment. The
Company is confident that it has addressed the concerns and designed sufficient
mitigation into the mining layout and processes to ensure co-existence with eco-
tourism and agriculture in the area. The Project will introduce much needed
investment, employment and economic growth into one of the poorer regions of
South Africa. The dual benefits of reduced imports of coking coal as well as
potential exports from the Colliery to the national balance of payments are
likely to be substantial.
The timelines required to complete the processes have resulted in the Company
having no choice but to reduce the workforce at the Vele Colliery by 596 people.
This process is taking longer than originally envisaged, with a resolution now
expected before year end.
During March 2010, the Company announced that the estimated capital expenditure
required to develop the Vele Colliery was ZAR450 million. This estimate has now
been revised to ZAR571.4 million and includes expenses attributable to the
suspension of activities on site, primarily the de-mobilisation of equipment and
manpower, box-cut design and infrastructure plan adjustments as well as
processing plant scope changes. By the end of September 2010, the Company had
incurred ZAR525.3 million, requiring ZAR46.1 million to complete the
construction of phase 1.
Makhado Coking Coal Project - Soutpansberg Coal Field (100%)
The extraction of the bulk sample at the Makhado coking coal project ("Makhado
Project") commenced during the quarter and is progressing according to schedule.
By the end of September 2010, over 80,700 bulk cubic metres ("BCM") of over
burden had been removed. The first raw coal for the sample is expected to be
extracted in the third quarter from where it will be sent to Exxaro`s
Tshikondeni mine for processing. The coking coal sample yielded from the wash
process will be sent to ArcelorMittal`s works in Vanderbijl park for coking
tests. A portion will also be assessed at the Company`s analytical laboratory in
Polokwane.
The definitive feasibility study ("DFS") continued during the quarter and was
approximately 75% complete by the end of the quarter. The DFS is on track for
completion in Q1 of 2011 calendar year . During the quarter, the Company has
commenced the process of interacting with all stakeholders.
CoAL also received confirmation from the DMR that the application for
Ministerial consent in terms of the MPRDA to effect the Rio Farm Swap Agreement
with Kwezi Mining and Exploration (Proprietary) Limited ("Kwezi") and Chapudi
Coal (Proprietary) Limited ("Chapudi"), joint venture companies held by the Rio
Tinto Group and the Kwezi Group of South Africa, had been approved.
The rationalisation of the farms owned by Chapudi, Kwezi and CoAL provides
significant benefits to all parties in terms of creating numerous contiguous,
well defined and economic coal projects and allows CoAL to lodge a NOMR
application for the Company`s flagship Makhado Project. The NOMR application is
expected to be lodged before the end of the calendar year, followed closely by
an application for an IWUL and further relevant approvals, as required.
The Rio Farm Swap Agreement creates a further three significant coal projects
around the Makhado Project, namely the Mount Stuart coking coal project ("Mount
Stuart Project"), the Voorburg coking coal project ("Voorburg Project") and the
Jutland coking coal project ("Jutland Project"), together with an additional two
farms which will form a natural extension to the Makhado Project.
During the 1980`s Iscor undertook a drilling campaign across the Mount Stuart,
Voorburg and Jutland Projects.
The Mount Stuart Project was subject to an intensive drilling program by Iscor
in the early 1980`s with some 331 boreholes drilled on the project area. This
exploration work previously undertaken by Iscor compares to the 351 boreholes
that were drilled by Iscor on the seven farms comprising the Makhado Project
(including the two farm extension to the east). The historical data indicates
that there is a substantial resource of open-castable coal with size and quality
similar to that identified at the Makhado Project. The yields of coking coal
appear to be higher than those at Makhado providing an exciting opportunity to
create a meaningful addition to CoAL`s coking coal portfolio.
On the Voorburg Project, Iscor drilled 44 boreholes and the exploration
information was then the subject of a detailed Iscor internal pre-feasibility
study, which CoAL is currently assessing.
A detailed internal pre-feasibility study of the Jutland Project was also
completed by Iscor with exploration comprising some 80 boreholes. The Iscor
internal report studied different mining methods covering the middle lower and
bottom upper coal seams and suggested reasonable yields from the two seams. A
potential life span of greater than 20 years was determined for the project.
Polokwane Analytical Laboratory (100%)
Construction of bulk sample storage areas at the Company`s analytical laboratory
in Polokwane in the Limpopo Province were completed during the quarter. This
facility, which is independently managed by international laboratory group,
Inspectorate, has applied for SANAS 17025 accreditation for the majority of the
procedures undertaken at the facility. The accreditation reviews undertaken to
date have been favourable and SANAS approval is expected during the next
quarter.
Appointment of a Senior Independent Non-Executive Director
In September 2010, the Company announced the appointment of Mr David Murray as
Senior Independent Non-Executive Director. Mr Murray has held a number of senior
positions in the global coal industry, including Managing Director of Ingwe Coal
Corporation (formerly Trans-Natal Coal Corporation Limited), Chief Executive of
BHP Billiton Mitsubishi Alliance and President of Energy Coal Sector Group at
BHP Billiton Limited, a position he held until December 2009.
Mr Murray holds a Bachelor of Science Degree (Civil Engineering) from the
University of KwaZulu-Natal and a Post Graduate Diploma in Mining Engineering
from the University of Pretoria. He has also completed the Advanced Executive
Program from the University of South Africa.
Corporate Activity
Main Board Listing
The Company previously announced that it intends to transfer its primary listing
from the Australian Securities Exchange and would seek approval for admission to
listing on the Official List of the UK Listing Authority and to trading on the
London Stock Exchange`s Main Market ("LSE"). As a result of the delay in the
commencement of the Vele Colliery, the CoAL Board considers it prudent that the
transfer to the LSE be delayed pending the outcome of discussions with the
Department of Environmental Affairs regarding the Vele Colliery.
Funding Options
The Company continues to evaluate various financing options (including proposals
for export trade finance, equipment financing and further working capital
facilities), and negotiations to secure a new facility are at an advanced stage.
A further announcement will be made in due course.
NiMag Group of Companies (100%)
The NiMag Group returned a profit for the quarter as a result of stable nickel
prices but was adversely affected by lower than expected orders for alloys and
the strengthening of the South African currency. During the quarter, NiMag
acquired 51% (with an option to acquire the remaining 49%) of a foundry and
tooling facility situated in Rustenburg in the North West Province. The
acquisition was funded from NiMag generated cash flows. Further research,
development and analysis of new alloy products continued during the quarter and
NiMag management will continue to evaluate additional potential acquisition
targets.
Holfontein Coal Project (100%)
The Company continues to classify its Holfontein project as a non core asset
available for sale. The Company has been tentatively approached by interested
parties and commenced the processes required for a formal sale process. Further
announcements on any progress in this regard will be made once they are known.
Madagascar Coal Project (50%)
CoAL holds a 50% interest in the Imoloto Project located in south west
Madagascar. The project covers approximately 90% of the Imoloto basin and
comprises 43 blocks, totalling 270 km2, as well as a further 90km2 in 14 blocks
in adjacent coal basins. The geology of the area is well understood and is
similar to the Witbank coal field in Mpumalanga, South Africa.
The exploration project undertaken during the June 2010 financial year consisted
of a desktop study and initial drilling programme. The drilling programme
comprised 19 holes, totalling 2,522 metres, and additional exploration
programmes are required to generate a Competent Person Report.
The Company intends facilitating an offering of this coal asset during the first
half of 2011. It is also the Company`s intention that CoAL shareholders receive
a priority entitlement to this offering.
Authorised by
JOHN WALLINGTON
Chief Executive Officer
28 October 2010
For more information contact:
John Wallington CoAl +27(0)11 575 4363
Blair Sergeant
Simon Edwards Evolution Securities +44(0)20 7071 4300
Chris Sim
Jos Simson Conduit PR +44(0)20 7429 6603
Leesa Peters
Melanie de Nysschen Macquarie First +27(0)11 583 2000
Annerie Britz South Advisers
Yvette Labuschagne
www.coalofafrica.com
About CoAL
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
Mooiplaats thermal coal mine, the Vele coking coal project and the Makhado
coking coal project.
The Mooiplaats coal mine commenced production in 2008 and is currently ramping
up to produce 2 million tonnes per annum ("Mtpa"). CoAL`s Makhado coking coal
project is expected to start production in 2012 and timing for Vele to reach
production is expected to commence Q1 2011. These operations are targeted to
collectively produce an initial 2 Mtpa ramping up to a combined annual output of
10 Mtpa of coking coal.
In 2010, CoAL completed the ZAR467m 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 processes approximately 2.5Mtpa
of saleable coal for domestic and export markets. NuCoal also owns two
beneficiation plants, one fully operational mine producing approximately 300kt
per month of ROM coal and has recently commenced production at a second mine.
CoAL currently has 1 Mtpa export capacity at the Matola Terminal in Maputo,
Mozambique, increasing to 3 Mtpa on completion of the next phase of expansion at
the terminal. CoAL also has the option to participate in further expansion at
the Matola Terminal, which is expected to increase the capacity at the terminal
by an additional 10 Mtpa.
Date: 28/10/2010 08:39:05 Produced by the JSE SENS Department.
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