LONDON (Alliance News) - Coal of Africa Ltd Thursday said it is continuing to engage with the relevant authorities about securing the necessary paperwork for the Makhado project whilst re-negotiating its deal with Rio Tinto PLC about money the company owes to the mining giant.
The company has three operating collieries, including one in build-up phase, as well as significant coking and thermal-coal resources at evaluation phase, all in South Africa.
In the first quarter of the year, the miner said it submitted a conclusion of agreements with broad-based black economic empowerment partners to the Department of Mineral Resources of South Africa, which will lead to the partners acquiring up to a 26% stake in the company's Makhado project.
Coal of Africa said the partners will have two years to raise sufficient capital to acquire their interests in the project with the final amount payable subject to due diligence and will be negotiated with the company, it said.
The deal with the partners ensures that the project is complying with mining legislation in South Africa, which states the black community must hold a certain stake in all commodity projects in the country. It is also vital in securing the mining order right for the project, which is needed prior to production.
"The structure results in communities residing in the vicinity of the project acquiring 20% of the project with a further 6% acquired by historically disadvantaged South Africans. The company expects that the Makhado project mining right will be granted during the first half of the calendar year of 2015," said Chief Executive David Brown.
The company also is engaging with the Department of Water Affairs to try to secure the integrated water use license for the Makhado project, which it expects will be awarded after it has received the mining order right.
In addition, Coal of Africa said it is continuing to talk to mining giant Rio Tinto about liabilities owed by the company to the FTSE 100 firm related to the USD74 million sale of the Chapudi coking coal project in South Africa's Limpopo province to Coal of Africa by Rio Tinto in 2010.
Coal of Africa said the liability owing to Rio Tinto in the quarter was reduced by USD1.0 million, adding that discussions continue about the remaining USD22.5 million balance owed to Rio Tinto.
Coal of Africa had cash of USD13.5 million and additional but restricted cash of USD2.1 million at the end of the year.
Coal of Africa shares were down 18% to 2.34 pence per share on Thursday morning.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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