| Fri 29 Jul 2011, 7:26 | | CZA - Coal of Africa Limited - Report for the quarter ended 30 June 2011 |
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CZA
CZA
CZA - Coal of Africa Limited - Report for the quarter ended 30 June 2011
Coal of Africa Limited
(previously "GVM Metals Limited")
(Incorporated and registered in Australia)
(Registration number ABN 008 905 388)
ISIN AU000000CZA6
JSE/ASX/AIM share code: CZA
("CoAL or the "Company")
REPORT FOR THE QUARTER ENDED 30 JUNE 2011
Coal of Africa Limited provides its operational report for the quarter ended
30 June 2011. A copy of this report is available on the Company`s website,
www.coalofafrica.com.
Highlights
- Washing of the Makhado coking coal project ("Makhado Project") bulk
sample completed at Exxaro Resources Limited`s ("Exxaro") Tshikondeni
Colliery.
- 1,256,825 tonnes (Q3: 1,229,584 tonnes) of run of mine ("ROM") and
664,865 tonnes (Q3: 717,367 tonnes) of export quality coal produced at
the Woestalleen and Mooiplaats thermal collieries.
- Sales of Export coal increased to 492,781 tonnes in the June 2011 quarter
from 198,347 tonnes in the March 2011 quarter, due to increased
operational performance on the Maputo Rail Corridor and additional
throughput capacity at the Matola Terminal in Maputo, Mozambique.
- Transitioning the Group`s Mooiplaats thermal coal colliery ("Mooiplaats
Colliery") from a contract mining operation to an owner-managed
operation.
- Appointment of Mr Wayne Koonin as Financial Director.
- Total cash balance and available facilities at the end of the quarter of
A$34.88 million.
Post quarter highlights
In early July 2011, the South African Department of Environmental Affairs
("DEA") granted authorisation for rectification at the Vele Colliery in terms
of Section 24G of the National Environmental Management Act (Act No. 107 of
1998) as amended ("NEMA"). The authorisation contains specific conditions
which the Company will be required to fulfil due to the uniqueness of the
area. Completion of the construction and commissioning phase of the plant and
mine is expected to take place within six to nine months from the restart in
August 2011 and is ultimately intended to ramp up to an initial production
profile of 1 million tonnes per annum.
Commenting today, Mr John Wallington, Chief Executive Officer of CoAL said:
"The increased throughput at the Matola Terminal combined with mining and rail
improvements, resulted in a significant increase in export coal sales during
the quarter."
"At the Mooiplaats Colliery, we have taken an important step in the
development cycle of the mine by transitioning from an outsource contractor to
an owner operated mine. As a result of this change, approximately 300
employees previously employed by the contractor are now employed directly by
Mooiplaats. The handover process has gone extremely well and we are confident
that the expected operational and cost efficiencies will be realized."
"During the quarter, significant progress was made on issues relating to the
Vele Colliery. Importantly, following several months of intensive interaction
and work with the various government departments, the Integrated Water Use
Licence ("IWUL") was granted on 4 April 2011 and the Environmental
Authorisation on 5 July 2011. However, as anticipated and with reference to
the announcement released earlier today, on 28 July 2011, the NGO coalition
has filed an appeal with the Minister of Environmental and Water Affairs
against the granting of the IWUL. The Company has the right to file an appeal
with the Minister to apply discretion in the matter to allow mining to
continue and for the appeal to be heard in the normal course of events. We are
in the process of assessing the appeal by the action groups and preparing the
necessary submission to the Minister on an urgent basis."
"CoAL is committed to continue working closely with the various government
departments, ensuring compliance with legislation as well as specific
requirements stipulated by government in granting authorisation to recommence
operations. Further announcements in this regard will be made in due course."
QUARTERLY COMMENTARY
Woestalleen Colliery - Witbank Coalfield (100%)
The outstanding safety record at the Zonnebloem colliery was sustained during
the quarter with the site not recording a single lost time injury since its
start-up in 2008. One lost time injury was recorded at the Woestalleen mines
and processing plant ("Woestalleen Colliery") during the quarter and
Management`s focus on safety remains a priority.
Production of ROM coal at Woestalleen`s open cast mines increased by 7%
compared to the previous quarter, yielding 970,220 tonnes (Q3: 909,994 tonnes)
of coal. Quarter on quarter production at the Zonnebloem colliery was up 30%
with 955,872 ROM tonnes mined (Q3: 735,674 ROM tonnes). The Hartogshoop North
colliery was mined out in the quarter yielding 14,348 ROM tonnes (Q3: 161,027
ROM tonnes) and the Klipbank colliery, mined out in the previous quarter
yielded zero ROM tonnes (Q3: 13,293 ROM tonnes).
The Woestalleen wash plant produced 503,625 saleable tonnes (Q3: 505,894
saleable tonnes) of export quality coal. The plant produced a further 73,265
saleable tonnes (Q3: 88,081 saleable tonnes) of lower grade product for Eskom,
the South African electricity utility.
An overall yield of 64.5% (Q3: 64.2%) was marginally lower than the previous
quarter.
Mooiplaats Colliery - Ermelo Coalfield (100%)
Safety continues to be a focus at the Mooiplaats Colliery, where four lost
time injuries were reported at the mine during the June 2011 quarter.
Coal production for the three months decreased by 10.3%, from 319,590 ROM
tonnes in the previous quarter, to 286,605 ROM tonnes in the June quarter. The
decrease was primarily due to the transfer of mining operations from a
contractor miner to CoAL as the operator. The transition to an owner managed
mine will enable direct management of the operation and improve the overall
performance of the mine. As part of this process, employees previously
employed by the contractor, were transferred to the direct employ of the mine.
All mining equipment was previously purchased and remains the property of the
mine, thereby minimising disruptions during the transitional phase. Steps are
underway to open the fifth underground section during the last quarter of this
year, with all the necessary capital expenditure having already been incurred.
Coal processed during the three months declined from 413,111 ROM tonnes in the
March quarter, including 121,426 purchased ROM tonnes, to 321,105 ROM tonnes
in the June quarter, including 31,274 purchased ROM tonnes. A total of
161,240 tonnes (Q3: 211,473 tonnes) of export quality coal was produced and
44,348 tonnes (Q3: 66,907 tonnes) of the lower grade product for Eskom.
The overall yield of 64.0% (Q3: 67.4%) was lower quarter on quarter due to the
high level of contamination mined by the contractor.
Subsequent to quarter end, following the switch from contract mining, the
decline in production has been reversed along with an improvement in the
contamination levels. Management continue to monitor the situation closely to
ensure that the improvement in operational performance continues.
Marketing and Logistics
Additional rail capacity created by Transnet Freight Rail earlier in the year
supported the significant increase of export sales through the Matola
Terminal. The purchase of 42,774 tonnes of third party coal and the completion
of the port expansion contributed in the increase of export sales by 148% from
198,347 tonnes in the March 2011 quarter to 492,781 tonnes in the June 2011
quarter.
In the June 2011 quarter, Woestalleen sold 264,813 tonnes (Q3: 356,986 tonnes)
and Mooiplaats Colliery sold 63,233 tonnes (Q3: 61,155 tonnes) to domestic
customers and Woestalleen Colliery sold 39,460 tonnes (Q3: 66,543) and
Mooiplaats Colliery sold 69,242 tonnes (Q3: 52,649 tonnes) of lower grade coal
to Eskom.
Summary tables (tonnes)
Woestalleen Mooiplaats Total
June 2011 quarter
ROM production 970,220 286,605 1,256,825
ROM coal purchased - 31,274 31,274
Total coal processed 894,605 321,105 1,215,710
Overall Yield 64.5% 64.0% 64.4%
Total coal produced 576,890 205,588 782,478
Export coal 503,625 161,240 664,865
Middlings coal 73,265 44,348 117,613
Saleable coal purchased - 40,298 40,298
Total coal sales 304,273 625,256 929,529
Export - 492,781 492,781
Inland 264,813 63,233 328,046
Eskom 39,460 69,242 108,702
Vele Coking Coal Project
As announced previously, the development phase of the Vele Colliery is near
completion. No activity was undertaken at the colliery during the quarter as a
result of the Compliance Notice served on the Company by the DEA in August
2010.
CoAL applied for an Integrated Water Use Licence ("IWUL") in November 2009 and
had been liaising with the Department of Water Affairs ("DWA") to progress the
application. During the quarter the DWA granted the IWUL, completing a
significant outstanding requirement for commencement of operations at the
colliery.
The rectification papers previously submitted in terms of Section 24G of NEMA
resulted in the Company being required to pay a ZAR9.25 million (A$1.26
million) administrative fine to the DEA. The payment of the fine was a pre-
condition to enable the DEA to adjudicate the application for rectification
relating to the environmental authorisation for the Vele Colliery.
This authorisation was granted on 5 July 2011, and contractors are being
mobilised to recommence with the completion of the construction of mining and
coal processing infrastructure at the mine site. As previously announced, the
Company expects to bring Vele into production within six to nine months of the
restart date. The construction activities, commissioning of the plant and
recommencing production are being planned and implemented. At the time
operations were halted in August 2010, work was 95% complete.
Due to the temperate climate and that no wet commissioning of the plant had
taken place, there has been limited degradation to the plant and
infrastructure whilst the mine was dormant. Upon recommencing activities, a
full assessment will take place and the necessary steps implemented to address
any issues that require remediation. The natural ingress of water into the pit
over the past year requires dewatering prior to the recommencement of mining
activities.
On 28 July 2011, the Integrated Water Use Licence ("IWUL") for the Vele
Colliery has been suspended in terms of Section 148(2) (b) of the South Africa
National Water Act, No, 36 of 1998, due to an appeal to the Water Tribunal
submitted by an NGO coalition. The appeal automatically suspends the licence
unless the Minister of Water Affairs directs otherwise. In the interim, the
Company is therefore unable to continue with activities at the Vele Colliery
that require water use, however in anticipation of recommencing operations,
the planning in relation to other construction and mining activities that do
not require the use of water are ongoing.
CoAL has the right to and is in the process of preparing an urgent appeal to
the Minister requesting that the IWUL remains in full force and effect in this
interim period and until the final conclusion of the appeal. If the Company is
successful in its representation to the Minister the Company will be able to
continue all activities, including the water uses per the IWUL.
Makhado Coking Coal Project
During the quarter, independent experts continued with the baseline social and
environmental studies required for the Makhado Project New Order Mining Right
("NOMR") application that was lodged with the DMR in January 2011.
Consultation processes with interested and affected parties continued during
the period. These will form part of the extensive economic, social and
environmental impact studies required for the NOMR. The studies will result in
the formulation of a detailed Environmental Management Programme for the
Makhado Project.
The processing of the Makhado Project bulk sample at Exxaro`s Tshikondeni
Colliery was completed during the quarter. Samples of the washed product have
been sent to ArcelorMittal South Africa`s ("AMSA") Vanderbijlpark facility for
testing.
The results of the tests are expected to facilitate the finalisation of the
terms and conditions related to volumes and pricing for the proposed off-take
agreement between CoAL and AMSA, as well as the finalisation of the Makhado
Project Definitive Feasibility Study. Additional coking coal samples are being
analysed at the Company`s Polokwane laboratory and further trial samples are
being sent to potential export customers.
The Definitive Feasibility Study is at an advanced stage and is expected to be
tabled for consideration by the Board before calendar year end. Construction
is anticipated to commence in mid 2012.
Corporate Activity
Financial Director Appointment
During the quarter, CoAL announced the appointment of Mr Wayne Koonin as
Financial Director. Mr Koonin has extensive international experience working
in the financial role at Board level in exploration, development and operating
mining companies, including coal. Mr Koonin has most recently been the Chief
Financial Officer of Platmin Limited, a platinum mining company listed on the
Toronto Stock Exchange, AIM and the JSE.
Cash and Available Facilities
At 30 June 2011, total cash on hand and call deposits was A$34.88 million (31
March 2011 : A$25.113 million) and undrawn loan facilities and standby credit
arrangements was A$26.41 million (31 March 2011 : A$36.913 million). Quarter
on quarter, total cash and available facilities remained in line with
management expectations.
Authorised by
John Wallington
Chief Executive Officer
29 July 2011
Johannesburg
JSE Sponsor
Macquarie First South Advisers (Pty) Ltd
For more information contact:
John Wallington
Chief Executive Officer
Coal of Africa
+27 11 575 7423
Wayne Koonin
Finance Director
Coal of Africa
+27 11 575 4363
Shannon Coates
Company Secretary
Coal of Africa
+61 893 226 776
Chris Sim/Romil Patel
Nominated Adviser
Evolution Securities
+44 20 7071 4300
Jos Simson/Emily Fenton
Financial PR
Tavistock
+44 207 920 3150
Melanie de Nysschen/ Annerie Britz/ Yvette Labuschagne
JSE Sponsor
Macquarie
+27 11 583 2000
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 Vele Colliery (coking coal), the
Makhado Project (coking coal) and the Mooiplaats and Woestalleen Collieries
(both thermal coal).
The Mooiplaats Colliery commenced production in 2008 and is currently ramping
up to produce 2 million tonnes per annum ("Mtpa"). CoAL`s Vele Colliery and
Makhado Project are expected to start production in the first half of 2012 and
the first half of 2013 respectively. These operations are targeted to
collectively produce an initial 1Mtpa 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 Colliery. 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. The Woestalleen
Colliery also incorporates two beneficiation plants with a total processing
capacity of 350,000 run of mine feed tonnes per month.
In November 2010, CoAL agreed to acquire the Chapudi coal project and several
other coal exploration properties in the Soutpansberg coal basin in South
Africa from the previous owners, including Rio Tinto. When completed, the
acquisition of these projects will significantly extend the scale and scope of
certain of CoAL`s existing projects in the region and will more than double
the resource of the existing Makhado Project.
Date: 29/07/2011 07:26:01 Produced by the JSE SENS Department.
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