Coal of Africa (CoAL, CZA) and Exxaro Coal have agreed to continue negotiations and the assessment process to finalise the valuation of the Makhado Project.
They have set a deadline for a formal decision regarding the exercise of Exxaro's right to a 30% equity participation in the project of 30 September 2012.
During this period, further detailed analysis of several key aspects of the Makhado Project will be conducted, in order to finalise the project valuation.
Coal of Africa chief executive John Wallington said there had been significant progress in the discussions and negotiations with Exxaro.
“The decision for Exxaro to continue with this process is encouraging and will enable both parties jointly to complete the remaining work required to finalise the review of the Definitive Feasibility Study and valuation of the Makhado Project. Against the background of the detailed testing results that confirmed the ability to produce a hard coking coal product and the recently announced consolidation of the New Order Prospecting Rights (NOPRs) over the adjacent tenements acquired in the Soutpansberg coalfield, this bodes well for the future development of the Makhado Project,” he added.
The development of high quality metallurgical coal assets is fully in line with Exxaro's strategic growth objectives, noted Exxaro chief executive Sipho Nkosi.
“During the past number of months we have established an excellent working relationship with Coal of Africa and look forward to the joint effort to finalise the review of the Makhado Project and the negotiations for Exxaro's possible participation in the Project,” said Nkosi.
The two companies have agreed on the deliverables for the next phase of the evaluation process, which includes further detailed analysis of several key aspects of the project.
The mandate for the joint technical teams and the scope of work has been agreed in broad terms. The work has commenced and both parties remain committed to completing the process in the shortest possible time period, to enable Exxaro to make a final decision under the option by the end of September.
The agreed scope of work to be completed by that date includes further technical work to be conducted on the upside potential of thermal coal production, additional large diameter drilling and related additional test work to confirm the coking and thermal coal yield assumptions over the total mining area, a review of the optionality of coal assets in respect of adjacent farms to the proposed Makhado Project mining area, following the update on the reserve and resources for the Greater Soutpansberg area announced on 13 June 2012 and progressing commercial discussions with ArcelorMittal South Africa regarding future off-take arrangements for the Makhado Project.
It also includes finalisation of the project valuation as calculated in accordance with the DFS, after taking into account the additional work to be completed and finalisation of a definitive shareholders agreement between CoAL and Exxaro to be implemented, should Exxaro decide to exercise the option.
The Makhado Project is CoAL's most advanced exploration stage development project in the Greater Soutpansberg area with NOPRs over five farms - Lukin, Salaita, Fripp, Tanga and Windhoek - covering an area of 8,190 hectares.
Based on the reserve and resource update announcement published last week, the JORC compliant resource for the project, drilled over a 16.5km strike length, was 795.6 million tonnes gross tonnes in situ, 691.7 million total tonnes in situ and 344.4 million mineable tonnes in situ.
The application for a New Order Mining Right was submitted in January 2011 and the process is at an advanced stage. - I-Net Bridge