| Mon 5 Sep 2011, 17:46 | | SNU - Sentula Mining Limited - Salient features of a competent persons` report |
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SNU
SNU
SNU - Sentula Mining Limited - Salient features of a competent persons` report
Sentula Mining Limited
Incorporated in the Republic of South Africa
(Registration number 1992/001973/06)
Share code: SNU ISIN: ZAE000107223
("Sentula" or "the company" or "the group")
SALIENT FEATURES OF A COMPETENT PERSONS` REPORT
Sentula wishes to provide its shareholders with the salient features of a
recently completed Competent Persons` Report, covering the company`s Material
Assets of coal operations/projects and associated infrastructure in South
Africa, Botswana and Zambia, the effective date of which is 1 March 2011.
Purpose and Project Outline
Sentula began business as a mining contractor more than three decades ago and
over the years acquired coal mining assets, or entered into agreements with
owners of such assets, which led to the company becoming an owner and operator
of mines and processing plants, in addition to its mining services business.
The coal mining entities can be categorised under four functional definitions:
- Operating Assets: assets that are currently in production;
- Near Production Assets: assets that are expected to come into production
within 12 months;
- Exploration Projects: assets that are expected to come into production in a
period greater than 12 months but less than 24 months; and
- Long Term Projects: assets that are expected to come into production in a
period greater than 24 months.
SRK Consulting (South Africa) (Proprietary) Limited ("SRK") was mandated by
Sentula to compile an Independent Competent Persons` Report ("CPR") on the
Material Assets coal operations/projects and associated infrastructure located
in South Africa, Botswana and Zambia: Material assets are those that have a
determinable value. These are as follows:
Production Property/Asset
- Nkomati Mine.
Development Properties/Assets
- Bankfontein Project;
- Mulungwa (Indongo) Project (Zambia) (25% interest); and
- Schoongezicht Project.
Exploration Property/Asset:
- Asenjo Energy (Botswana) (25% interest).
hereinafter, collectively referred to as the "Material Assets".
The Material Assets evaluated in terms of the CPR, the salient features of which
are set out below, comprise the following Assets:
Production Property/Assets
- Nkomati Mine, in which Sentula has a 60% equity interest, is located close
to Komatipoort in Eastern Mpumalanga. The mine, currently on "care and
maintenance", operates under a Mining Licence which is valid until 29
September 2020 and covers an area of 10 000 hectares ("ha"). Opencast and
underground mining areas with a 10 year life-of-mine ("LoM") have been
identified on the basis of 4 520 kilotonnes ("kt") of Run-of-Mine ("RoM")
coal mined;
Development Property/Asset
- Bankfontein Project, in which Sentula has a 100% equity interest, is
located in the Ermelo district. Application for a New Order Mining Right
has been accepted by the Department of Minerals and Energy ("DME") on 20
November 2008 and the issue thereof is pending. The project covers an area
of 513 ha. Opencast and underground mining operations with a 11 year LoM
commencing in 2013 have been planned, on the basis of 6 825 (kt) of RoM
coal being mined;
- Mulungwa Project, in which Sentula has a 25% interest, is located in the
Sinazongwe District in the Southern Province of Zambia, some 150 km from
Livingstone. The property covers approximately 1 104 hectares. Opencast
mining operations with a 8 year LoM commencing in 2013 have been identified
on the basis of 4 500 (kt) RoM coal being mined;and
- Schoongezicht Project, in which Sentula has a 100% equity interest, is
located in close proximity to Delmas. Application for a New Order Mining
Right has been accepted by the DME and the issue thereof is pending. The
project covers an area of 94.3 ha. Opencast mining operations with a 12
year LoM, commencing in 2013 have been planned, on the basis of 8 615 (kt)
of RoM coal being mined.
Exploration Property/Asset
- Asenjo Energy, in which Sentula has a 25% stake, has three locations in
Botswana. The Mmamabula East and West Prospecting Assets that covers some
608.2 km2 in the Kweneng and Kgatleng Districts, the Dukwe Prospecting
Asset covers 212 km2 in the Central District, and the Lechana-Tshimoyapula
Prospecting Asset that covers some 247km2 and 269 km2, respectively, in the
Central district of Botswana. The three project licences expire on 31
March 2012.
Exploration Programme and Budget
Exploration will be undertaken on an ongoing basis and these costs have been
included in the operating costs, details of which are set out in Section 12 of
the CPR.
Coal Resource and Coal Reserve Statement
A brief summary of the Material Assets` Coal Resources and Coal Reserves at 28
February 2011 is set out below.
Coal resources have been reported in accordance with the classification criteria
of the South African Code for the Reporting of Mineral Resources and Mineral
Reserves (the SAMREC Code). Coal Resources are inclusive of Coal Reserves. Coal
Resources are not Coal Reserves and do not have demonstrated economic viability.
Coal Resources are reported on an air-dried, uncontaminated basis.
Nkomati Mine
Nkomati Mine Coal Resources: Gross Tonnes in situ ("GTIS") of 6.41 mt and
Mineable Tonnes In-situ ("TTIS") of 5.77 mt are located in the:
- Mangweni Block: comprising indicated resource areas of 15.11 ha, and GTIS
of 1.47mt and TTIS of 1.32 mt; and the
- Matadeni Block: comprising indicated resource area of 126.04 ha and a GTIS
of 4.94 mt and a TTIS of 4.44 mt.
Nkomati Mine Coal Reserves:
The probable reserves of the Nkomati Mine comprise 5.77 mt on a TTIS basis and
4.52 mt on a TTIS to RoM basis.
Mulungwa Project
Mulungwa Project Coal Resources: Total GTIS of 12.28 mt and of TTIS 9.8 mt. Of
the resource, measured resource represents GTIS of 11.68 and TTIS of 9.34 with
the balance being indicated resource.
Mulungwa Project Mines Coal Reserves:
The probable reserves of the Mulungwa Project comprise 9.8 mt of GTIS and 4.5 mt
on a TTIS to RoM basis.
Bankfontein Projects
Bankfontein Projects Coal Resources:
- The total inferred resources comprise total GTIS of 14.8 mt and TTIS of
11.1 mt.
Bankfontein Projects Coal Reserves:
The probable reserves of the Bankfontein Project comprise of 11.1 mt of TTIS and
6.9 mt on a TTIS to RoM basis.
Schoongezicht Project
Schoongezicht Project Coal Resources:
The total measured resources indicate GTIS of 9.8mt and TTIS of 8.8 mt.
Schoongezicht Project Coal Reserves:
- The probable reserves comprise 8.8mt of TTIS and 8.6 mt on a TTIS to RoM
basis.
Competent Person Validation
The Competent Person, Hilton Ashton, hereby declares that the salient features
are a true reflection of the full CPR.
Equity Value
The summary valuation for Sentula`s Coal assets is based on an aggregation of
the following:
- the Net Asset Value ("NAV") for the Material Assets as represented by the
Net Present Values ("NPVs") determined in Section 14 of the CPR;
- the Mulungwa Project NPV value has been converted at an exchange rate of
7.4 ZAR/USD;
- the Present Value of unallocated corporate expenses valued on the basis of
a Discounted Cash Flow ("DCF") approach for the duration of the LoM; and
- balance sheet adjustments to account for debt and cash position at 28
February 2011.
The summary equity valuation for Sentula is equated by averaging the valuation
found in the tables below.
Table ES14: material Assets - Primary (Cashflow) Valuation Range as at 1 March
2011
Asset / Applied Min: Min: Max:
adjustment Discount WACC+ Max: Equity WACC+ WACC
Rate 2% WACC Stake 2% Preferred -2%
(%) Preferred -2% (%)
Nkomati Mine 10.70 613 648 686 60 368 389 412
(including
inferred
resources)
Mulungwa 13.70 115 130 148 25 29 33 37
Bankfontein 13.70 207 230 256 100 207 230 256
Project
Schoongezicht 13.70 302 341 386 100 302 341 386
Project
At Cost
Asenjo Energy 222 222 222 25% 56 56 56
Value of 1 460 1 571 1 962 1 048 1 146
Material 698
Assets
Adjustments
Unallocated (10) (10) (10)
Corporate
Expenses1
Exploration - - -
Expenditure
Mark-to- - - -
Market Value
of Financial
Instruments
Net debt/cash (472) (472) (472)
position (31
March 2011)2
Equity Value 1 460 1 571 1 480 566 664
698
1 Unallocated Corporate Expenses (general and administrative, head office and
other costs that cannot be allocated by activity of ZAR1.5 million per
annum) for LoM, discounted at the base case real WACC.
2 Net debt/cash position supplied by Sentula as at 31 March 2011.
Using the primary valuation methodology produces a preferred value of ZAR566
million with a range of ZAR480 to ZAR664 million.
Table ES15: Secondary Valuation (Market Approach) for Material Coal Assets
Coal Resources Reserve Equity
Stake
(%)
Inferred Indicated Measured Rom
Nkomati Mt 6.61 4.52 60%
Mulungwa Mt 0.46 9.34 25%
Bankfontein Mt 11.9 2.9 100%
Schoongezicht Mt 8.8 100%
Asenjo Mt 25%
Min Preferred Max Sentula Attributable
Value Value Value Min Preferred Max
ZARm ZARm ZARm ZARm ZARm ZARm
Nkomati 146 279 405 88 167 243
Mulungwa 77 97 145 19 24 36
Bankfontein 83 124 163 83 124 163
Schoongezicht 70 88 132 70 88 132
Asenjo (at cost) 222 222 222 56 56 56
Gross Value 598 810 1 066 315 458 629
(ZARm)
Using this methodology a range between ZAR315 and ZAR629 million is obtained
with a preferred value of ZAR458 million.
Low ZARM Preferred ZARM High ZARM
Asset/adjustment
Market Approach 315 458 629
Cashflow Approach 480 566 664
450 512 660
In SRK`s opinion an equal weighting to each of the Primary and Secondary (Market
Approach) Valuation Methods gives a fair valuation of the assets. The average
of the methods amounts to ZAR512 million with a range of ZAR450 to ZAR660
million.
SRK`s considers that the resulting in the Equity Value range of ZAR450 to ZAR660
million is based on sound reasoning, engineering and technically achievable
plans, within the context of the specific risks associated in the South African
Mining Industry.
The CPR, which includes inter alia, location maps indicating areas of interest,
legal aspects & tenure, geological settings & description, key modifying factors
& environmental issues and project risks, is available for inspection at the
office of Sentula, Ground Floor, Building 14, Woodlands Office Park, Woodmead,
Johannesburg, 2080.
Johannesburg
5 September 2011
Sponsor - Merchantec Capital
Date: 05/09/2011 17:46:01 Produced by the JSE SENS Department.
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