| Tue 31 Jan 2012, 8:42 | | CZA - Coal of Africa Limited - Report for the quarter ended 31 December 2011 |
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CZA
CZA
CZA - Coal of Africa Limited - Report for the quarter ended 31 December 2011
Coal of Africa Limited
(Incorporated and registered in Australia)
(Registration number ABN 008 905 388)
ISIN AU000000CZA6
JSE/ASX/AIM share code: CZA
("CoAL or the "Company" or the "Group")
REPORT FOR THE QUARTER ENDED 31 DECEMBER 2011
"Green light for Vele a significant step forward", says CoAL CEO
Coal of Africa Limited ("CoAL" or "the Company") the coal exploration,
development and mining company operating in South Africa, is pleased to provide
its operational report, together with its subsidiaries ("the Group"), for the
quarter ended 31 December 2011. A copy of this report is available on the
Company`s website, www.coalofafrica.com.
Highlights
- An encouraging safety performance was achieved during the quarter with no
lost time injuries recorded in the Group.
- Lifting of the suspension of the Vele coking coal colliery ("Vele
Colliery") Integrated Water Use Licence ("IWUL") expediting the remaining
construction and other activities requiring the use of water.
- Extraction at the Vele Colliery commenced on 20 December 2011 with
approximately 3,200 tonnes of ROM coal stockpiled to date. Wet
commissioning of the plant and related infrastructure completed in December
and hot commissioning underway.
- Memorandum of Understanding ("MOU") signed with the Save Mapungubwe
Coalition ("the Coalition") committing the parties to work together and
strengthen co-operation ensuring the sustainable development of the
Mapungubwe cultural landscape.
- Placement of 130,000,000 shares completed raising approximately US$106
million; securing a new US$40 million working capital facility with J.P.
Morgan Chase Bank N.A. ("New Bank Facility").
- 1,083,396 tonnes (FY2012 Q1: 1,199,902 tonnes) of run of mine ("ROM") and
531,506 tonnes (FY2012 Q1: 652,060 tonnes) of export quality coal produced
at the Woestalleen thermal coal complex ("Woestalleen") and the Mooiplaats
thermal coal colliery ("Mooiplaats").
- Resumption of normal sales of export coal during the period, increasing by
87.7% from 277,499 tonnes in the September quarter to 520,812 tonnes in the
December quarter.
- Further progress on disposal of the non-core assets including the Group
companies of NiMag (Pty) Ltd and Metalloy Resources Investments (Pty) Ltd
(together "the NiMag Group") and the Holfontein thermal coal project
("Holfontein Project").
- Total cash balance, available and undrawn facilities (excluding the New
Bank Facility of US$40 million) as at 31 December 2011 of US$101.2 million.
Commenting today, Mr John Wallington, Chief Executive Officer of CoAL said:
"The December 2011 quarter yielded positive outcomes for various
initiatives undertaken during the year, highlights of which included
signing a MOU with the Coalition ensuring that the Company is working with
a broad spectrum of stakeholders to preserve the Mapungubwe cultural
landscape during the lifetime of the Vele Colliery; the raising of capital
and additional debt facilities which provides CoAL with sufficient
financial resources to complete construction of the Vele Colliery, general
working capital requirements and the funding for phase one of the
acquisition and exploration of the Chapudi and Soutpansberg projects; the
disposal of the NiMag Group by way of a MBO and advancement on the disposal
of the Holfontein Project.
With the IWUL suspension lifted at Vele Colliery, the remaining
construction of the mine and plant, and establishment of infrastructure was
completed by the end of the quarter, facilitating the commencement of
mining activities with approximately 3,200 tonnes of ROM coal extracted
from the open cast pit and stockpiled at the plant. These critical
operational and corporate developments, as well as the raising of
significant additional capital and the reaching of a landmark agreement
with the Coalition previously opposed to the Vele Colliery, were all
significant milestones for the Group reached during the quarter."
QUARTERLY COMMENTARY
Woestalleen Complex - Witbank Coalfield (100%)
The outstanding safety record at the Woestalleen Complex continued without
any lost time injuries recorded during the quarter (FY2012 Q1: nil lost
time injuries).
In the December quarter, the Vuna Colliery produced 821,392 tonnes of ROM
coal compared to 898,114 tonnes in the previous three months. Coal
processed during the three months decreased to 860,974 ROM tonnes from
913,896 ROM tonnes during the previous quarter. The Woestalleen wash plant
facility produced 353,395 tonnes (FY2012 Q1: 470,482 tonnes) of export
quality coal and further 225,475 tonnes (FY2012 Q1: 108,648 tonnes) of
middlings product supplied to Eskom Limited ("Eskom"), the South African
electricity utility.
A drive in selective mining has led to improved plant yields towards the
end of the quarter, with the overall yield increasing to 67.2% (FY2012 Q1:
63.4%) quarter on quarter.
Mooiplaats Colliery - Ermelo Coalfield (100%)
The safety performance at Mooiplaats reflected an improvement on the
previous quarter as no lost time injuries were reported during the period
(FY2012 Q1: three lost time injuries).
Despite a decline in ROM production to 262,004 tonnes compared to 301,788
tonnes in the previous quarter, the overall yield increased to 70.8%
(FY2012 Q1: 67.4%). Coal processed during the three months decreased to
304,107 ROM tonnes from 317,709 ROM tonnes during the previous quarter. A
total of 178,111 tonnes (FY2012 Q1: 181,578 tonnes) of export quality coal
was produced and 37,234 tonnes (FY2012 Q1: 32,420 tonnes) of the lower
grade product supplied to Eskom.
The reduction in ROM coal production was primarily a function of the short
December month coupled with challenging mining conditions and
infrastructure availability issues. Conveyor downtime is being addressed
through an operational and engineering action plan with major work
completed on the system during the year-end holiday break, resulting in
improved availability from the start of the March 2012 quarter.
A twelve month operational initiative scheduled to commence during the
March 2012 quarter, is expected to identify potential improvements in the
mining process that should lead to sustainable levels of higher production.
The process results in a change in the maintenance function for underground
machinery by introducing a support contract with equipment supplier JOY
Mining, designed to ensure a more effective approach in this critical area
of the operation.
Marketing and Logistics
International demand for South African coal, specifically from Asia and
Europe, remained subdued during the quarter. The reduced demand is
attributed to continued concerns regarding the European economy, larger
than normal stockpiles in India and increased availability of lower grade
Indonesian coal. The demand for South African coal increased towards the
end of the December quarter and this trend has continued in the March
quarter.
Index-linked international coal prices were under pressure during the
December quarter with sales recorded at discount to these indices. South
African export coal spot prices declined from just over $110 per ton at the
beginning of the quarter to approximately $100 at the end of November/early
December but were offset during the period in South African rand terms by
the decline in the value of the currency against the US dollar.
The increased sales from the Matola Terminal in Maputo, Mozambique, with
520,812 tonnes of coal sold to the export market in the quarter under
review (FY2012 Q1: 277,499 tonnes) and 212,803 (FY2012 Q1: 317,425) tonnes
of coal were sold into the inland market. A total of 254,046 tonnes (FY2011
Q1: 90,344) of lower quality coal from Woestalleen and 37,421 tonnes
(FY2012 Q1: 30,838 tonnes) from Mooiplaats, were delivered to Eskom.
Summary tables (tonnes)
Woestalleen Mooiplaats Total
December 2011 quarter
ROM production 821,392 262,004 1,083,396
ROM coal purchased - 44,862 44,862
Total coal processed 860,974 304,107 1,165,081
Overall Yield 67.2% 70.8% 68.2%
Total coal produced 578,870 215,345 794,215
Export coal 353,395 178,111 531,506
Middlings coal 225,475 37,234 262,709
Total coal sales 427,112 77,158 1,025,082
Export * * *520,812
Inland 173,066 39,737 212,803
Eskom 254,046 37,421 291,467
*export sales include both Woestalleen and Mooiplaats coal
Woestalleen Mooiplaats Total
6 months year to date to
December 2011 quarter
ROM production 1,719,506 563,792 2,283,298
ROM coal purchased - 44,862 44,862
Total coal processed 1,774,870 621,816 2,396,686
Overall Yield 64.8% 69.0% 66.2%
Total coal produced** 1,158,000 429,343 1,587,343
Export coal 823,877 359,689 1,183,566
Middlings coal 334,123 69,654 403,777
Total coal sales 793,627 149,250 1,741,188
Export * * *798,311
Inland 449,237 80,991 530,228
Eskom 344,390 68,259 412,649
* export sales include both Woestalleen and Mooiplaats coal
Vele Colliery
During the quarter, the suspension of the IWUL was lifted by the Minister
of Water and Environmental Affairs, thereby enabling the use of water and
re-commencement of construction activities required to complete the
remaining infrastructure and plant development at the mine. Based on the
authorisation received, the IWUL remains in full force and effect pending
an appeal to be heard by the Water Tribunal. As noted below, that appeal is
expected to be withdrawn following the signing of a Memorandum of Agreement
("MOA") with the Coalition.
In line with the authorisations received, the mine commenced production in
December and to date produced 118,000 m3 of overburden and 3,200 ROM tonnes
of coal. Progress continued with the plant and related infrastructure, with
wet commissioning completed in December and hot commissioning scheduled for
late January 2012.
Also during the quarter, the Company signed a MOU with the Coalition
comprising the Endangered Wildlife Trust, Birdlife South Africa, Wilderness
Foundation South Africa, World Wide Fund for Nature South Africa,
Mapungubwe Action Group and the Association for Southern African
Professional Archaeologists. The partners to the MOU share a commitment to
work together and strengthen co-operation in the interest of sustainable
development and the preservation and protection of the Mapungubwe cultural
landscape. These negotiations aim to set a benchmark for best practice in
relation to managing and mitigating the impacts of mining and related
activities at the Vele Colliery on the environment, specifically the impact
on water and heritage resources.
The MOU requires the signing of a MOA by 31 January 2012, subject to which
the Coalition has agreed to withdraw legal proceedings and administrative
appeals against the Vele Colliery`s New Order Mining Right ("NOMR"),
Environmental Management Plan ("EMP"), IWUL and Section 24G authorisation.
Progress on converting the MOU into an MOA continues and the Coalition has
agreed to extend the completion date to 29 February 2012.
The additional Heritage Impact Assessment as required by the United Nations
Educational Scientific and Cultural Organization ("UNESCO") and the
Department of Water Affairs ("DWA") was completed during the quarter and
was presented to UNESCO in January 2012.
Makhado Coking Coal Project
The review of the Definitive Feasibility Study ("DFS") was completed during
the December quarter and is expected to be presented to the CoAL Board
during Q3 FY2012.
The Makhado Project NOMR consultation process with interested and affected
parties continued during the quarter and included the involvement of
various government departments. Additional comments from various interested
and affected parties on the Environmental Impact Assessment, EMP and IWUL
submissions were received and the IWUL Technical and Engineering report is
expected to be submitted to the DWA during the March 2012 quarter.
Further product testing at ArcelorMittal South Africa ("AMSA") is nearing
completion at both the Vanderbijlpark and Newcastle plants. In addition
various independent tests have been commissioned for corroboration of the
AMSA results. Test work for establishing potential secondary products was
completed which conceptually indicates that the production of a secondary
thermal coal product may be feasible.
A product road show to potential international customers for both Makhado
Project and Vele Colliery is planned in the first half of the 2012 calendar
year.
Disposal of the NiMag Group
On 23 December 2011, CoAL entered into a definitive Sale and Purchase
Agreement for the disposal of its 100% interest in the non-core NiMag Group
by way of a MBO. The Company will dispose of its shares in the NiMag Group
companies for a total of ZAR54 million (approximately US$6.6 million) of
which 60% is being funded by a combination of equity contributions and bank
debt. The remaining 40% will be financed by an interest bearing loan
provided by CoAL that is repayable over four years. The closing of the
transaction is subject to certain conditions precedent normal with a
transaction of this nature, including finalization of bank loan financing
agreements and, to the extent necessary, exchange control approval from the
South African Reserve Bank, expected to be satisfied by 29 February 2012.
Disposal of the Holfontein Project
On 30 January 2012, the Company agreed with HDSA owned Govhani Consulting
(Pty) Ltd ("Govhani" or "the Purchaser"), to acquire from CoAL an exclusive
right to acquire by 30 June 2012, the Holfontein thermal coal project
("Holfontein Project") for a total consideration of ZAR100 million
(approximately US$12.7 million) and a continuing payment to CoAL of ZAR2.00
(approximately US$0.25) per tonne of saleable coal produced by the project.
Govhani paid an initial non-refundable deposit of ZAR4.0 million
(approximately US$0.5 million) to conduct a detailed review of the project
and a further amount upon signature of this agreement of ZAR5.0 million
(approximately US$0.6 million), to finalize the DFS in order to complete
the acquisition of the project. Upon completion of the transaction, the
total purchase consideration will be reduced by ZAR9.0 million
(approximately US$1.1 million).
Conditions precedent to closing the transaction include, Govhani completing
the DFS and obtaining the remaining funding for the project and approval of
the transaction by the Department of Mineral Resources.
Soutpansberg Coal Bed Methane Project
During the December quarter, Tshipise Energy (Pty) Ltd ("Tshipise") a joint
venture between CoAL and BEE partner Vibrant Veterans (Pty) Ltd, completed
the exercise to collate desktop studies undertaken by Australian based
Geogas (Pty) Ltd ("Geogas") on the coal bed methane potential of the
properties located in the Soutpansberg coalfields, substantially in the
same proximity as the various coking coal projects the Group is currently
involved in. Geogas compiled desktop studies of the total area granted
under Tshipise`s 1,578 km2 Exploration Right and the Company will move into
the next phase of the exploration based on recommendations detailed in the
Geogas reports. This will include the drilling of additional holes and
completing further technical studies in order to prove up a potential coal
bed methane resource in accordance with the JORC code.
Cash and Available Facilities
At 31 December 2011, total available cash on hand and call deposits was
US$89.2 million (FY2012 Q1: US$8.8 million), available loan facilities and
standby credit arrangements under existing facilities of US$12.0 million
(FY2012 Q1: US$20.1 million). The remaining conditions precedent for the
New Bank Facility of US$40.0 million, are expected to be completed in Q3
FY2012.
Corporate Activity
The Company issued 130,000,000 shares during the quarter raising gross
proceeds of approximately US$106 million (excluding expenses). The proceeds
of the capital raised will be used to finance the continuing development of
the Group`s projects, the first tranche cash payment for the acquisition of
Chapudi Coal (Pty) Ltd and Kwezi Mining & Exploration (Pty) Ltd (the
holders of the Chapudi Coal Project prospecting rights), bringing the Vele
Colliery into production, general working capital, exploration of the
Chapudi and Soutpansberg coal fields and the establishment of certain
financial guarantees. The raising of US$106 million satisfied a significant
condition precedent to secure the US$40 million New Bank Facility.
Work continues with the group restructuring and preparation for the
migration of the primary listing from the Australian Stock Exchange to the
main market of the London Stock Exchange. In preparation for this change
and achieving further alignment of corporate advisors, CoAL is pleased to
advise the appointment of J.P. Morgan Equities Limited as JSE sponsor with
effect from 30 January 2012.
Authorised by
JOHN WALLINGTON
Chief Executive Officer
31 January 2012
Johannesburg
JSE Sponsor
J.P. Morgan Equities Limited
For more information contact:
John Wallington
Chief Executive Officer
Coal of Africa
+27 11 575 4363
Wayne Koonin
Financial Director
Coal of Africa
+27 11 575 4363
Shannon Coates
Company Secretary
Coal of Africa
+61 893 226 776
Chris Sim/Romil Patel/Jeremy Ellis
Nominated Adviser
Evolution Securities
+44 20 7071 4300
Jos Simson/Emily Fenton
Financial PR (United Kingdom)
Tavistock
+44 207 920 3150
Ruben Govender
JSE Sponsor
J.P. Morgan Equities Limited
+27 11 507 0430
Charmane Russell/James Duncan
Financial PR (South Africa)
Russell & Associates
+27 11 880 3924
+27 82 372 5816
About CoAL:
CoAL is an AIM/ASX/JSE listed coal exploration, development and mining company
operating in South Africa. CoAL`s key projects include the Vele Colliery (coking
and thermal 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 Mtpa. The Woestalleen Colliery, acquired through the acquisition of
NuCoal Mining (Pty) Limited in January 2010, currently processes approximately
2.5Mtpa of saleable coal for domestic and export markets. The Woestalleen
Complex also incorporates three beneficiation plants with a total processing
capacity of 350,000 run of mine feed tonnes per month.
CoAL`s Vele Colliery started commercial production in Q1 2012. During the
initial phase, the operation is targeting 2.7 Mtpa ROM production to produce
1.0Mtpa of saleable coking coal. The Makhado Project, CoAL`s flagship project in
the Soutpansberg coalfield, is well into the feasibility stage, with a
Definitive Feasibility Study nearing completion. An application for a New Order
Mining Right for the Makhado Project was submitted in January 2011.
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. Upon completion, 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: 31/01/2012 08:42:30 Produced by the JSE SENS Department.
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