| Mon 29 Nov 2010, 7:26 | | CZA - Coal of Africa Limited - Acquisition of Rio Tinto`s South African Coal |
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CZA
CZA
CZA - Coal of Africa Limited - Acquisition of Rio Tinto`s South African Coal
assets
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")
ACQUISITION OF RIO TINTO`S SOUTH AFRICAN COAL ASSETS
Highlights
- CoAL, via one of its black empowered subsidiaries, has entered into an
agreement to pay a total consideration of US$75 million for the Chapudi
Coal Project and several other coal exploration properties ("Related
Exploration Properties")
- The Chapudi Coal Project has an estimated 1,040Mt JORC resource and is
contiguous with CoAL`s Makhado Coking Coal Project
- The Soutpansberg Basin is the only coal basin in South Africa that hosts
significant premium hard coking coal and this acquisition establishes CoAL
as the dominant landholder in the Soutpansberg Basin
The Acquisition
Coal is pleased to announce that it has entered into a Sale and Purchase
Agreement ("SPA") for the acquisition of the Chapudi Coal Project and Related
Exploration Properties (collectively, the "Coal Assets") in the Limpopo Province
of South Africa, from joint venture companies held by Rio Tinto Minerals
Development Limited and Kwezi Mining (Proprietary) Limited (collectively, the
"Vendors"). The Coal Assets comprise both thermal and coking coal development
projects.
The acquisition of the Chapudi Coal Project provides CoAL with an additional
estimated 1,040Mt JORC resource (of which 90Mt is Measured, 220Mt Indicated and
730Mt Inferred, as defined in the 2004 Edition of the `Australasian Code for
Reporting of Exploration Results, Minerals Resources and Ore Reserves` ("JORC
Code") ), which is contiguous with its Makhado Coking Coal Project ("Makhado
Project"). In addition, CoAL will retain properties that were to be exchanged
with the Vendors in accordance with the Rio Farm Swap Agreement, the section 102
approval for which was announced on 13 September 2010.
The properties being acquired significantly extend the scale and scope of CoAL`s
existing Voorburg and Jutland coal projects, together with adding new project
areas including the Generaal, Wilderbeesthoek, Chapudi and Chapudi West coal
projects. CoAL`s working knowledge of this acreage, which has been established
during its period of ownership, exploration and resource delineation of Makhado,
will aid in further exploring the contiguous acreage which it has now acquired.
John Wallington, CoAL`s Chief Executive Officer, today commented: "The
acquisition of the Chapudi Coal Project and the Related Exploration Properties
bolsters our existing coking coal projects with the Chapudi Coal Project alone
doubling our Makhado Project`s 947Mt resource, thereby cementing CoAL`s position
as the dominant landholder in one of South Africa`s most prospective coal
basins. The acquisition also comes at a critical time with the results from the
Makhado Project definitive feasibility study ("DFS") due in early 2011 and we
believe that the acquisition will strengthen our application for New Order
Mining Rights for the Makhado Project."
Related Exploration Properties
Separately from the 1,040Mt Chapudi Coal Project, all of the farms comprising
the Related Exploration Properties are contiguous to one or more of CoAL`s
existing Voorburg, Jutland, Mt Stuart and Makhado Coal Projects, significantly
expanding both the scale and scope of each of these project areas (see map on
CoAL`s website at www.coalofafrica.com ).
Coal Assets Highlights and Acquisition Rationale
Scale Resource Base and Significant Exploration Potential
The Chapudi Coal Project`s estimated 1,040Mt resource more than doubles the
Makhado Project`s current 947Mt resource (of which 387 Mt is Measured and 542 Mt
is Indicated). Further potential is available from the Related Exploration
Properties for which there is no current resource, notwithstanding that the
Voorburg and Jutland blocks have been the subject of extensive historical
exploration. These properties comprise approximately two thirds of the Coal
Assets acquired by area.
Establishment of a dominant rights holder in the Soutpansberg Basin
The Soutpansberg Basin is one of South Africa`s most prospective coal basins,
particularly for coking coal, with significant undeveloped resources. CoAL`s
early presence through the Makhado Project and subsequent expansion through both
the Rio Tinto Farm Swap and acquisition of the Coal Assets has cemented its
position as the dominant rights holder in the region.
Dual thermal and coking coal development potential
The Coal Asset`s resources are suitable for development of thermal and coking
coal operations. The Chapudi Coal Project`s estimated 1,040Mt resource is more
suitable as a thermal coal project, whilst the Related Exploration Properties
which are contiguous with CoAL`s Makhado, Mt Stuart, Voorburg and Jutland
Projects exhibit coking coal properties and are more likely to be developed as
such. CoAL intends to develop the coking coal properties and will seek either a
domestic or export market for the thermal coal. Strong potential exists for
development of an Independent Power Producer ("IPP") project in the region,
bolstering the domestic market together with international markets being
developed given the ready access to the export market through the Maputo
logistics corridor.
Ability to leverage logistics capacity and expertise
Grindrod, as port sub-concession holder, is currently expanding the export
capacity at the Matola Terminal in Maputo, Mozambique, to 6Mtpa by Q1 2011, of
which CoAL`s allocation will increase from 1Mpta to 3Mpta upon completion.
Further, 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 10-17Mtpa. CoAL`s Matola Terminal capacity and scale presence in
the Soutpansberg Basin will allow it to develop the Maputo logistics corridor
and leverage its future production into the export market.
Acceleration of Makhado New Order Mining Right
The Directors believe that the increase in scale of CoAL`s presence in the
Soutpansberg Basin following the acquisition of the Coal Assets will likely
enhance the prospects of its Makhado New Order Mining Right application with the
Department of Mineral Resources. It is anticipated that the New Order Mining
Right application will be lodged before the end of the calendar year, followed
closely by an application for an Integrated Water Use Licence and further
relevant approvals, as required.
Significant Development Optionality
CoAL`s dominant presence in the region, together with its leading logistics
capability coupled with the dual thermal and coking application of the Coal
Assets being acquired are likely to present significant opportunities in the
region as it develops, allowing CoAL to capitalise on a "first mover advantage"
through consolidating, joint venturing or otherwise restructuring its presence
in the Soutpansberg Basin.
Broad Based Black Economic Empowerment ("BBBEE")
CoAL intends to use the acquisition to continue and further build upon its
extensive BBBEE initiatives. Specifically, CoAL intends to develop the Chapudi
Coal Project and potential IPP in collaboration with its proposed BBBEE
partners, the local constituents of the Mudimeli, Musekwa, Makushu_]Musholombi
and Tshivhula communities, together with Terracotta Resources and Vibrant
Veterans Mineral Resources.
Acquisition Consideration
- The consideration payable by CoAL comprises:
US$45 million upfront consideration in cash, payable on completion of the
sale, which remains subject to a number of conditions precedent, including
approval in accordance with Section 11 of the Mineral and Petroleum
Resources Development Act. Completion of the sale is expected to occur
within six months. CoAL has already provided the Vendors with a US$2
million cash deposit; and
- US$30 million deferred cash consideration, payable on the earlier of (i)
the granting of a New Order Mining Right for any farm or combination of
farms that form part of the Coal Assets, or (ii) 24 months from fulfillment
of the conditions precedent to the sale.
Azure Capital acted as Corporate Adviser to CoAL in relation to the transaction.
Acquisition Funding
As detailed in the 15 June 2010 Company Update, CoAL continues to consider a
number of funding options which include various forms of debt (such as
additional working capital facilities), equipment finance leasing, self funding
environmental rehabilitation guarantees, sale of non-core assets (such as
Holfontein, NiMag and Madagascar) and equity. The Company also notes the
potential sources of funding that would arise if either (i) the options issued
to its BBBEE partners were exercised, raising some GBP30m, or (ii) Exxaro Coal
(Proprietary) Limited exercised its option to acquire a 30% participating right
in the Makhado Project.
Authorised by:
JOHN WALLINGTON
Chief Executive Officer
Johannesburg
29 November 2010
JSE Sponsor
Macquarie First South Advisers (Pty) Ltd
For more information contact
Simon Farrell Executive Deputy Coal of Africa +61 417 985 383
Chairman
John Wallington Chief Executive Coal of Africa +27 11 575 7423
Officer
Blair Sergeant Finance Director Coal of Africa +27 11 575 6797
Ryan Rockwood Associate Azure Capital +61 447 760 058
Director
Simon Nominated Evolution +44 20 7071 4300
Edwards/Chris Adviser Securities
Sim
Melanie de JSE Sponsor Macquarie First +27 11 583 2000
Nysschen/Annerie South Advisers
Britz/Yvette
Labuschagne
Jos Simson/Emily Financial PR Conduit PR +44 207 429 6603
Fenton
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 2013 and timing for Vele to reach
production is still to be confirmed. These operations are targeted to
collectively produce an initial 2Mtpa ramping up to a combined annual output of
10Mtpa 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.
Resource Estimation:
The information in this report that relates to the Chapudi Coal Project`s
estimated 1,040Mt JORC Resource is based on information compiled by Steen
Kristensen, who is a member of the Australian Institute of Mining and Metallurgy
and who qualifies as a Competent Person as defined in the 2004 Edition of the
`Australasian Code for Reporting of Exploration Results, Minerals Resources and
Ore Reserves` ("JORC Code"). Steen is a full-time employee of Rio Tinto Energy
and has experience which is relevant to the style of mineralisation and type of
deposits under consideration. . Steen Kristensen consents to the inclusion in
the report of the matters based on his information in the form and context in
which it appears.
The information in this report that relates to exploration results, mineral
resources or ore reserves in respect of the Makhado coking coal project is based
on information compiled by Mark Craig Stewardson, who is registered as a
Professional Natural Scientist (Pr Sci Nat, Reg. No. 400119/93) with the South
African Council for Natural Scientific Professions ("SACNASP"), which is a
Recognised Overseas Professional Organisation ("ROPO") in terms of the JORC
Code. Mark Craig Stewardson is employed by Mineral Corporation Consultancy and
has sufficient experience that is relevant to the style of mineralisation and
type of deposit under consideration and to the activity which he is undertaking
to qualify as a Competent Person as defined in the JORC Code. Mark Craig
Stewardson consents to the inclusion in this announcement of the matters based
on his information in the form and context in which it appears.
Date: 29/11/2010 07:26:01 Produced by the JSE SENS Department.
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