| Mon 31 Jan 2011, 8:28 | | CZA - Coal of Africa Limited - Report for the Quarter Ended 31 December 2010 |
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CZA
CZA
CZA - Coal of Africa Limited - Report for the Quarter Ended 31 December 2010
Coal of Africa 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 2010
Coal provides its operational report for the quarter ended 31 December 2010.
A copy of this report is available on the Company`s website,
www.coalofafrica.com
Highlights
- The Company entered into an agreement with Rio Tinto to acquire the
Chapudi Coal Project and several other coal exploration properties
("Related Exploration Properties") for US$75 million.
- The Chapudi Coal Project has an estimated 1.040 million tonne ("Mt")
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")) and is contiguous with CoAL`s Makhado coking coal Project
("Makhado Project").
- Substantial progress made on the Definitive Feasibility Study ("DFS")
for the Makhado Project.
- Extraction of over 269,300 bank cubic metres ("bcm") of material for the
Makhado Project bulk sample during the quarter.
- 954,915 tonnes of run of mine ("ROM") and 686,403 tonnes of export
quality coal produced at the Woestalleen and Mooiplaats thermal
collieries.
- Cash balance at the end of the quarter of A$23 million.
Commenting on the results today, John Wallington, Chief Executive Officer of
CoAL said: "The Company continues to work closely with various government
departments to resolve the challenges at the Vele Colliery. Interactions to
date included a constructive site visit by the United Nations Educational
Scientific and Cultural Organization ("UNESCO") and senior government
officials from the Departments of Mineral Resources ("DMR") and Environmental
Affairs ("DEA"), to assess the co-existence of the Vele Colliery with the
Mapungupwe World Heritage Site. Whilst the Company awaits UNESCO`s feedback,
management remains confident that any issues identified can be satisfactorily
resolved allowing for the commencement of operations at the colliery in early
2011."
"CoAL has committed itself to complying with enacted as well as any future
legislative requirements. While seasonal rainfall reduced production at our
Woestalleen mines, production at the Mooiplaats thermal coal project
("Mooiplaats Colliery") increased slightly and further development work and
the commissioning of an additional section is expected to result in a steady
rise in production. The acquisition of Rio Tinto`s tenements in the vicinity
of CoAL`s Makhado Project will position the Company as the majority resource
owner in South Africa`s only known coking coal area, in an environment of
rising global coal prices."
QUARTERLY COMMENTARY
Woestalleen Mines and Processing Plant - Witbank Coalfield (100%)
The Zonnebloem operation continued its impeccable safety record, with the
site not recording a single lost time injury since start-up in 2008.
Production at Woestalleen`s open cast mines was adversely affected by
seasonal rainfall, resulting in the production of 761,393 tonnes (Q1: 930,840
tonnes) of ROM coal during the quarter. The Zonnebloem mine produced 639,087
tonnes (Q1: 750,130 tonnes), a further 12,516 tonnes were produced at
Klipbank (Q1: 25,968 tonnes) and 109,790 tonnes at Hartogshoop (Q1: 154,742
tonnes). The ROM coal was processed at the Woestalleen processing facility,
producing 500,940 tonnes (Q1: 447,117 tonnes) of export quality coal and
97,368 tonnes (Q1: 104,082 tonnes) for sale to the domestic market.
During the quarter, 78,886 tonnes of lower grade middlings were sold to
Eskom, the South African electricity generator, (Q1: 115,141 tonnes) and
504,731 tonnes (Q1: 560,036 tonnes) of export quality coal was sold.
Mooiplaats Colliery - Ermelo Coalfield (100%)
Safety programmes continued at the Mooiplaats Colliery during the quarter and
no lost time incidents were recorded.
Production increased to 193,522 tonnes of ROM coal compared to 182,230 tonnes
during the previous quarter. The increase is attributable to the addition of
a fourth underground section during October 2010.
The 355,698 tonnes of ROM coal processed during the three months included
162,146 tonnes (Q1: 154,957 tonnes) of purchased coal and yielded 185,463
tonnes (Q1: 197,690 tonnes) of export quality coal and 67,758 tonnes (Q1:
55,870 tonnes) of middlings product for Eskom. Extensive development was
conducted during the period to create the necessary pit room facilitating
increased production and a rise in output per section is currently being
achieved.
Port expansion and upgrade related delays and a derailment affected the
railing of coal to the Matola Terminal in Maputo, Mozambique ("Matola
Terminal") and during the three months, 192,945 tonnes of export quality coal
was railed to the port (Q1: 172,022 tonnes).
58,350 tonnes (Q1: 83,167 tonnes) were sold to Eskom`s Camden Power Station
during the three months and 170,776 tonnes (Q1: 181,342 tonnes) of Mooiplaats
and Woestalleen coal exported from the Matola Terminal.
Development of the fourth section at the Mooiplaats Colliery was completed
during the quarter. Management has decided to commence the deployment of the
fifth section after production from the current four sections has been
optimised and sufficient pit room established. Further investment decisions
will be undertaken following confirmation of increased rail capacity from
Transnet Freight Rail.
At the end of October 2010, a Pre-Compliance Notice pertaining to the
Mooiplaats Project was issued. CoAL representatives met with the Mpumalanga
Department of Economic Development, Environment and Tourism shortly
thereafter and subsequently the Pre-Compliance Notice was withdrawn. No
Compliance Notice was ever issued to the Company nor was the Company ever
required to cease operations at Mooiplaats. Progress continued to be made in
this regard between the relevant officials at the mine and Provincial
Departments.
Vele Coking Coal Project - Tuli Coal Field (100%)
As announced at the end of the September quarter, the development phase of
the Vele coking coal project ("Vele Colliery") comprising the construction of
the open cast mining pit, processing plant and related mining infrastructure
is near completion. No construction or mining activity was undertaken at the
Vele Colliery during the reporting period as a result of the Compliance
Notice served on the Company by the DEA during the previous quarter.
During the quarter, representatives of UNESCO visited the Vele Colliery,
together with senior members of the DMR, DEA and CoAL management. The visit
was conducted in a positive manner and discussions are ongoing.
The Company continued to interact with DEA representatives during the quarter
and submitted the first set of rectification papers in terms of Section 24G
of the South African National Environmental Management Amendment Act, 1998
(Act No. 107 of 1998) ("NEMA"). In early January 2011, the Company submitted
the second set of NEMA rectification papers.
Pending the granting of the Integrated Water Use Licence ("IWUL") and
favourable rulings in terms of the 24G submissions, mobilisation and
construction completion is expected to take up to twelve weeks, followed soon
thereafter by production and the first sales of coking coal.
Makhado Coking Coal Project - Soutpansberg Coal Field (100%)
Significant progress was made during the quarter towards completing the New
Order Mining Right ("NOMR") application for the Makhado Project, resulting in
its lodgement with the DMR during the March 2011 quarter. This will be
followed closely by application for further regulatory approvals, as
required.
Work on the NOMR application included baseline social and environmental
studies conducted by independent experts. Consultation with interested and
affected parties continued during the quarter and included the establishment
of the Makhado Project Community Engagement Forum to formalise engagement
with the communities and land claimants affected by the Makhado Project. Once
the NOMR application has been accepted by the DMR, extensive economic, social
and environmental impact studies will be prepared as part of the process in
formulating a detailed Environmental Management Programme.
By the end of the quarter, CoAL had largely completed the DFS for the Makhado
Project and the initial results are currently undergoing a review process
which the Company expects to complete by the middle of the March quarter. The
detailed design phase of the Makhado Project will commence once the DFS has
been finalised and approved by the CoAL Board. The Company anticipates that
this will occur by the end of the June quarter and will be followed by the
purchase of long-lead time items. These activities are expected to occur
whilst CoAL awaits approval from the DMR for the Company`s Makhado Project
NOMR Application.
As announced previously, the Company has received all required regulatory
approvals to extract a bulk sample from the Makhado Project. Progress on the
bulk sample continued during the quarter and by the end of the period, over
350,000 bcm`s of material had been removed. A 19,000 tonne ROM coal sample
will be transported to Exxaro Resources Limited`s Tshikondeni Colliery, where
it is expected to be beneficiated into approximately 4,400 tonnes of coking
coal with an approximate 10% ash content. The Company is confident that
analysis and testing will confirm the expected coking qualities. It is
estimated that by the end of March 2011, the sample will have been
transported to the Tshikondeni Colliery for processing.
The product will then be tested by ArcelorMittal SA in their coking ovens at
Vanderbijlpark. The results of these tests are intended to facilitate the
finalisation of certain terms and conditions related to volumes and pricing
for the proposed off-take agreement between CoAL and ArcelorMittal SA.
Acquisition of Rio Tinto`s South African Coal Assets
During November 2010, the Company announced that it entered an agreement to
acquire Rio Tinto Minerals Development Limited`s Chapudi Coal Project and
Related Exploration Properties (collectively, "the Coal Assets"). The Coal
Assets are situated in the Soutpansberg Basin and comprise both thermal and
coking coal and establish the Company as the dominant coal prospect holder in
the Soutpansberg Basin.
The acquisition more than doubles the Company`s current Makhado Project
resource and provides CoAL with an estimated additional 1.040 million tonne
JORC resource. The Chapudi Coal Project is contiguous with the Company`s
Makhado Project and CoAL will retain properties that were to be exchanged in
accordance with the previously announced Rio Farm Swap Agreement.
Separately from the 1.040 million tonne 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. CoAL`s working knowledge of this area, which has been
established during its period of ownership, exploration and resource
delineation of the Makhado Project, will aid in further exploring the
contiguous areas which it has now acquired.
CoAL intends to develop the coking coal properties and expects to seek either
a domestic or export market for the thermal coal. Grindrod, as port sub-
concession holder, is currently expanding the export capacity at the Matola
Terminal to 6 million tonnes per annum ("Mtpa"), completion of which is
expected in the March 2011 quarter and will result in CoAL`s allocation
increasing from 1Mtpa to 3Mtpa. The Company also has the option to
participate in further expansion at the Matola Terminal which is expected to
significantly increase the capacity at the terminal. CoAL`s Matola Terminal
capacity and scale presence in the Soutpansberg Basin will allow the Company
to develop the Maputo logistics corridor and leverage its future production
into the export market.
CoAL intends to use the acquisition of the Coal Assets to continue and
further build upon its extensive Broad Based Black Economic Empowerment
("BBBEE") initiatives. Specifically, CoAL intends to develop the Chapudi Coal
Project and a potential Independent Power Producer project in collaboration
with its proposed BBBEE partners, including the local communities and other
broad based groupings.
The acquisition consideration payable by CoAL comprises:
- US$45 million up front 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. 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 NOMR for any farm or combination of farms that form
part of the Coal Assets, or (ii) 24 months from fulfilment of the
conditions precedent to the sale.
Polokwane Analytical Laboratory (100%)
During the quarter, the Polokwane laboratory continued with the analysis of
CoAL`s Makhado Project exploration samples. The facility received its South
African National Accreditation System approval for the majority of the
procedures undertaken at the laboratory. The accreditation results in the
facility being more marketable and ensures that laboratory results are
reliable and accurate.
NiMag Group of Companies (100%)
The NiMag Group returned a profit for the quarter as a result of increased
orders during the three months, stable nickel prices and the consolidation of
the Joerg Foundry acquired in the previous quarter. Profitability was however
adversely affected by the strengthening of the South African Rand against the
United States Dollar.
The investment in the NiMag Group was assessed during the quarter and as a
result of it being considered non-core to the CoAL Group, it has been
classified as available for sale. The Company has commenced with a formal
disposal process.
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, as previously announced, has commenced with a formal disposal
process.
Madagascar Coal Project (50%)
CoAL holds a 50% interest in the Imoloto Project located in south west
Madagascar which covers approximately 90% of the Imoloto basin. The project
comprises 43 blocks, totalling 270 km2, as well as a further 90km2 in 14
blocks in adjacent coal basins. It is intended that the Madagascan asset be
listed on the Australian Securities Exchange in the near term.
Corporate Activity
Funding options
The Company held A$23m of cash at the end of the December 2010 quarter.
Operating cash flows were impacted by rail and port performance.
Commissioning of the Matola Terminal upgrade is scheduled for completion by
the middle of the March 2011 quarter and is expected to result in increased
export volumes. Operational cost and cash flow controls have been
substantially reviewed and are being significantly strengthened as CoAL
transitions to a fully fledged operational and project delivery company. The
Company is well advanced in assessing the various financing alternatives
available.
Appointment of Non-Executive Directors
As announced in November 2010, Messrs Khomotso Mosehla, Mikki Xayiya and
Rudolph Torlage were appointed as Non-Executive Directors to the Board of
CoAL.
Authorised by
JOHN WALLINGTON
Chief Executive Officer
Bryanston
31 January 2011
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 Tavistock +44 207 920 3150
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: 31/01/2011 08:28:02 Produced by the JSE SENS Department.
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