CoAL in process of closing BEE deal to secure mining rights

By Time of article published Mar 11, 2014

Share this article:

Dineo Faku

Coal of Africa Limited (CoAL) was at an advanced stage of finalising agreements that would result in an empowerment consortium acquiring 26 percent of its Makhado project in the Soutpansberg in Limpopo, it said yesterday.

CoAL shares rose 4.21 percent to close at 99c on the JSE as the market digested the company’s reduced losses in the six months to December last year.

CoAL posted a loss of $46.3 million (R499m), or 4.42 US cents a share, compared with a loss of $111.7m, or 14.39c a share, for the prior corresponding period. The loss included non-cash charges of $30.3m compared with $96.1m in the 2012 period.

CoAL did not declare a dividend in the period under review. The coal explorer has been overhauled since the arrival of its new chief executive David Brown, who introduced a five-point turnaround strategy last year.

Announcing the interim results yesterday, Brown said the Makhado project’s present value was estimated at R6.9bn and would produce over 2 million tons of hard coking coal and over 3 million tons of Eskom quality thermal coal. Construction of the project, including ramp-up, would take 26 months starting next year. The life expectancy of the mine is 16 years.

“The inclusion of a black economic empowerment (BEE) shareholder ensures that the project has the requisite corporate structure for the granting of the new order mining right and in time, the Makhado project will benefit one of the least economically developed areas in South Africa,” Brown said.

The Makhado project and Greater Soutpansberg project comprised three exploration stage coking and thermal coal projects, namely the Chapudi, Mopane and Generaal projects.

The confirmation of the Vele colliery’s semi-soft coking coal qualities by ArcelorMittal South Africa could result in the commencement of the processing plant modifications.

CoAL supplied samples of semi-soft coking coal to ArcelorMittal SA for tests in its coke batteries. In the period under review, the semi-soft coking coal test results were favourable, and met all of the steel maker’s technical requirements. In January, the company received a letter of intent for the supply of coal.

ArcelorMittal SA and CoAL wish to convert this into a formal offtake agreement dependent on the agreed on pricing parameters.

“Furthermore Eskom… successfully undertook combustion tests on Vele thermal coal and the parties are to hold further discussions with regards to a potential off-take agreement,” CoAL said in a statement.

The company’s two non-core assets, the Woestalleen and Mooiplaats collieries, are classified as held for sale. The Mooiplaats colliery near Ermelo in Mpumalanga was idled in August, at which time it was producing Eskom quality coal only.

“The colliery is undergoing a formal disposal process which is expected to be completed during the current year,” Brown said.

Share this article: