| Thu 14 Apr 2011, 13:13 | | OPT - Optimum Coal Holdings Limited - Optimum Coal operational update for the |
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OPT - Optimum Coal Holdings Limited - Optimum Coal operational update for the
period ended 31 March 2011
Optimum Coal Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 2006/007799/06)
JSE code: OPT
ISIN: ZAE000144663
("Optimum Coal" or the "Company")
OPTIMUM COAL OPERATIONAL UPDATE FOR THE PERIOD ENDED 31 MARCH 2011
Optimum Coal, a leading South African coal mining and exploration group, listed
on the JSE Limited, wishes to inform shareholders and update the market on its
operational performance, the status of its arbitration with Eskom and the sale
of its platinum interests.
Operational Update
Table 1 - Salient Production Features at Optimum Collieries and Koornfontein
Mines for the 3 month period 1 January 2011 to 31 March 2011
Units Optimum Koornfontein Group
Collieries Mines Total
ROM production t`000 3,299 832 4,131
Eskom Saleable t`000 1,300 334 1,634
Export Saleable t`000 1,150 486 1,636
Optimum Collieries produced 3,299kt (YTD FY2011: 10,538kt) of run-of-mine coal
during the 3 months ended 31 March 2011, 4% higher than 3,162kt during the same
period in 2010. Total saleable coal production was 2,450kt (YTD FY2011:
7,844kt), 11 % higher than 2,198kt during the corresponding period in 2010.
Export saleable production was 1,150kt (YTD FY2011: 3,793kt), unchanged from the
corresponding period in 2010, with Eskom saleable production of 1,300kt (YTD
FY2011: 4,052kt), 13% higher than 1,148kt during the 2010 corresponding period.
Optimum Collieries production was affected by three operational challenges
during the quarter under review. Firstly, the planned outage for a major re-
build of a dragline at Pullenshope Mine took longer than anticipated as a result
of unexpected technical issues. This dragline is now fully operational and is
currently operating on target. Secondly, the production rate at Kwagga North
Mine was affected by localised thin coal areas encountered, with mineable coal
seams being thinner than expected. The mining operation has advanced past the
localised thin coal area and coal seam thickness has increased to what is
expected in our geological model. The mine is now producing on target at this
section. Thirdly, production at Boschmanspoort Underground Mine was affected by
excessive downtime on both mining equipment and infrastructure affecting the
production availability, as well as a slower than anticipated increase in mining
productivities after the protracted contractor wage negotiations. A sixth stone
section was successfully commissioned in the previous quarter and this section
has progressed pit-room development into the bulk of the reserve which will
allow the main producing sections more flexibility in order to achieve targets
in the future. All mining equipment and contractor issues are now resolved. The
main underground infrastructure issue will be resolved during April in order to
ensure higher overall availability and utilisation of the infrastructure.
Overall, our water management initiatives continue to benefit our operations, as
flooding has not been a material issue at any of our opencast sections during
the quarter. Furthermore, we have signed a water supply agreement with the Steve
Tshwete Local Municipality ("STLM") and have commenced supplying up to 4.5ML per
day of potable water to the STLM for a 5 year contractual period.
Koornfontein Mines produced 832kt (YTD FY2011: 2,383kt) of run-of-mine coal
during the 3 months ended 31 March 2011, 24% higher than 670kt during the same
period in 2010. Total saleable coal production was 819kt (YTD FY2011: 2,459kt),
21% higher than 675kt during the same period in 2010. Export saleable production
was 486kt (YTD FY2011: 1,454kt), 28% higher than 379kt during the same period in
2010, with lower quality domestic saleable production of 334kt (YTD FY2011:
1,005Mt), 13% higher than 296kt during the same period in 2010.
Koornfontein Mines have performed well during the quarter under review and
continue to produce above targets.
CEO Mike Teke said "We have had a challenging production quarter at Optimum
Collieries and continue to work hard to improve our run-of-mine volumes from our
key operating sections. Encouraging progress has been made at our critical
Kwagga North opencast extension project and we remain on track to deliver this
project on time and within budget. Koornfontein Mines again produced ahead of
target for the quarter. We recognise that the rand price of export coal has been
favourable, but we remain cautious of industry logistics challenges and will
continue to maintain our focus on safety and delivering on production targets to
ensure that unit production costs remain competitive. Of concern is that our
export stocks at operations and available for railing to RBCT have increased by
22% to 388kt as at 31 March 2010, from 318kt as at 31 December 2010. Whilst the
leadership appointments at Transnet Freight Rail ("TFR") have recently been
resolved, their performance has been adversely affected by various derailments
and other operating issues which have adversely affected the rail tempo to
Richards Bay Coal Terminal Company Limited ("RBCT"). Furthermore, TFR has
announced the imposition of an average 26% rail rate increase on the export coal
line to RBCT with effect from April 2011. Although long-term contractual
arrangements are yet to be concluded, the increase will nonetheless be effective
from April 2011. TFR has further indicated that it is planning a 20-day
maintenance shutdown on the RBCT line between 23 May 2011 and 11 June 2011. We
are in the process of finalising operating initiatives to optimally manage cost
and associated working capital impacts during this shutdown period."
Eskom arbitration
The Company has amicably resolved the issue in respect of which it had been
engaged in arbitration with Eskom Holdings Limited ("Eskom"). Consequently the
arbitration has been withdrawn, and the Company has withdrawn its cancellation
of the Hendrina Coal Supply Agreement ("CSA"), in terms whereof it sells and
delivers 5.5 million tons per annum of coal to Eskom. The Company has also
agreed with Eskom to amend the terms of the CSA, on the basis that an increased
penalty becomes payable by the Company in respect of any coal delivered to Eskom
which does not comply with the agreed parameters in respect of Abrasiveness
Index of such coal; resulting in a higher purchase price for the coal sold and
delivered to Eskom.
Mike Teke further said "We are satisfied that our dispute with Eskom has now
been resolved and we remain committed to supplying coal to Eskom in accordance
with the amended CSA. As a key stakeholder in our business, it is important that
we enjoy a good working relationship with Eskom, and this settlement illustrates
our combined commitment to working effectively together going forward, to our
mutual benefit."
Sale of platinum interests
The conditions precedent to the disposal of the Company`s 26% interest in and
loan account claims against Afarak Platinum Holdings (Proprietary) Limited for a
total purchase consideration of R121 million, have now been fulfilled and the
transaction has closed.
Mike Teke commented "We are furthermore delighted to report that we have
successfully disposed of our platinum exploration assets during the quarter for
a purchase consideration of R121m. This disposal enables us to re-focus our
strategy as a pure coal company and we remain well positioned to take advantage
of buoyant coal markets which remain well supported by international and local
energy demand fundamentals."
Johannesburg
14 April 2011
For further enquiries please contact:
Optimum Coal Tel: +27 (0)11 325 0403
College Hill
Jacques de Bie Tel: +27 (0)11 447 3030
Sharon Steyn
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 14/04/2011 13:13:08 Produced by the JSE SENS Department.
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