Last checked at 15 Jun 2010 07:20
ANNOUNCEMENT 15 JUNE 2010
COMPANY UPDATE
STATUS OF INTENDED MOVE OF LISTING TO THE MAIN MARKET
OF THE LONDON STOCK EXCHANGE
Coal of Africa Limited ("CoAL" or the "Company") provides the following update with regard to the Company's general operations and its intention to seek approval for admission to listing on the Official List of the UK Listing Authority ("UKLA") and to trading on the London Stock Exchange's Main Market for Listed Securities ("LSE Main Market"), as previously announced on 29 October 2009.
Trading Update
Mooiplaats Colliery - Ermelo Coalfield
A total of three sections are now opened and all are in the high quality bituminous coal which, after washing, is producing a typical export quality thermal coal, save for sulphur. Additional run of mine ("ROM") coal continues to be acquired from a mine adjacent to Mooiplaats which is being used to supplement that being mined at Mooiplaats, the result being that approximately 125,000 tonnes of export quality thermal coal had been railed to the Matola terminal at Maputo in Mozambique ("Matola Terminal") by the end of May 2010.
With three sections opened, ramp up at Mooiplaats is expected to accelerate such that 120,000 ROM tonnes per month is expected to be achieved by the end of December 2010, growing to 200,000 ROM tonnes per month thereafter.
Woestalleen - Witbank Coalfield
The assets referred to as Woestalleen were acquired in late January 2010 through the acquisition of NuCoal Mining (Pty) Limited ("NuCoal"), and comprise the Zonnebloem, Hartogshoop and Klipbank open cast mines, the Woestalleen washplant and Richards Bay Coal Terminal ("RBCT") compliant siding, together with a number of development projects ("Woestalleen").
For the period from 1 January 2010 through to 31 May 2010, the Woestalleen assets produced over 1.8 million tonnes ("Mt") of ROM coal, which translated into approximately 640 thousand tonnes ("kt") of export quality thermal coal, 190kt of lower grade coal and over 450kt of ROM coal sales. During that period, in excess of 585kt of coal was railed to a combination of RBCT, the Dry Bulk Terminal at Richards Bay and the Matola Teminal for export.
Woestalleen continues to perform in line with CoAL management expectations, notwithstanding that the newly commissioned 'build, own, operate and manage' plant is not yet operating at its full capacity of 150kt per month. Further, as a result of the Transnet Freight Rail strike action in May 2010, there was a three week period in which no railings took place.
Vele Project - Tuli Coalfield
Since the execution of the New Order Mining Right ("NOMR") and approval of the Environmental Management Plan in March 2010, CoAL has mobilised the necessary general contractors and an Engineering, Procurement, and Construction Management contractor in order to be able to commence production during August this year.
Progress to date includes completion of the Musina bypass road and rail siding improvements, modular plant construction is 60% complete, access roads are 90% complete, first blasting commenced during early June 2010, the box cut opening is 70% complete and transfer dam construction is under way.
The Company still awaits the approval of an integrated water use licence, an application for which was submitted to the Department of Water Affairs on 10 November 2009. CoAL is liaising with the relevant authorities on an ongoing basis, and remains confident that the required licence should be received prior to the intended commissioning of the plant and first production.
Makhado Project - Soutpansberg Coalfield
As announced on 11 March 2010, CoAL has received approval to remove a bulk sample from Makhado, which will be washed and trucked to ArcelorMittal South Africa's ("AMSA") Vanderbiljpark works. Processing of the bulk sample in AMSA's coking ovens is intended to facilitate the finalisation of terms and conditions, including price, volume and quality, of the proposed formal off-take agreement between AMSA and CoAL.
A definitive feasibility study in relation to the Makhado Project has also been launched, the results of which are expected to be received early in 2011.
Project Overview
An overview of CoAL's coal mines and projects is attached as Annexure A to this announcement.
Funding Options
The Company continues to consider a number of funding options which include various forms of debt (such as additional working capital facilities), equipment financing leasing, self funding environmental rehabilitation guarantees, sale of non-core assets (such as Holfontein and Madagascar) and equity. In order to fund the development of the Makhado Project and participation in any further potential expansions of capacity at the Matola Terminal, the Board believes a combination of the above would be preferable.
The Company also notes the potential sources of funding that would arise if either: (i) Firefly Investments 163 (Proprietary) Limited exercised its option (granted pursuant to the Company's black economic empowerment arrangements) to subscribe for 50 million of the Company's shares; or (ii) Exxaro Coal (Proprietary) Limited exercised its option to acquire a 30% participating right in certain properties at the Makhado Project.
Admission to Official List of the London Stock Exchange
CoAL is currently listed on three securities exchanges: the Australian Securities Exchange ("ASX"), the AIM Market of the London Stock Exchange ("AIM") and the Main Board of JSE Limited ("JSE"). As previously announced, the Company intends to de-list from AIM and seek simultaneous approval for admission to the Official List and to trading on the LSE Main Market ("LSE Admission"). In connection with this move and in order to address the requirements for inclusion in the FTSE Index UK series, the Company is also considering de-listing from the ASX following the LSE Admission.
The Company previously indicated that the LSE Admission was expected to take place in the first half of 2010. The LSE Admission requires the publication of a full Prospectus Rules-compliant prospectus including, inter alia, audited financial statements and mineral expert reports on the Company's mining assets.
As a result of timing requirements under the Prospectus Rules in relation to the financial statements to be included in the prospectus, the Company has decided to wait until its next audited full year financial statements, for the year ended 30 June 2010, are available to be published before proceeding with the LSE Admission. It is expected the financial statements will be available in September or October 2010, and accordingly it is currently anticipated that the LSE Admission will, subject to approval from the UKLA being obtained, take place no later than November 2010.
In connection with the LSE Admission and the preparation of the related prospectus, CoAL engaged mineral experts to prepare reports in relation to its assets, including the assets acquired through the acquisition of NuCoal which was completed earlier this year. The Company engaged:
1. Mineral Corporation Consultancy (Pty) Limited ("The Mineral Corporation") to prepare a report (the "MinCorp Report") in relation to its Mooiplaats mine and its Vele and Makhado coal projects; and
2. Caracle Creek International Consulting (Pty) Limited ("CCIC") to prepare a report ("CCIC Report") in relation to the former NuCoal thermal coal assets now owned by CoAL, namely the Zonnebloem, Hartogshoop and Klipbank mines, the Opgoedenhoop project and the Woestalleen colliery.
The CCIC Report has been received in its final form, and an Executive Summary is provided as Annexure B to this announcement. Further, a copy of the full CCIC Report is available on the Company's website at www.coalofafrica.com/-Reports-.html.
The MinCorp Report is close to completion. However, the Company and its advisors are still awaiting receipt of the completed Makhado project coking coal analysis resulting from the 25 large diameter drill program completed later last year, the cores of which were submitted to ACT Laboratories for testing. The initial analysis has been completed and the results are attached as Annexure D to this announcement. The commentary on the results of the analysis are included in the MinCorp Summary Report (refer below). The results of the complete analysis will be included in the MinCorp Report in commentary on the quality of the coking coal at the Makhado project. On receipt of the final MinCorp Report, the Company will make an announcement to the market providing a summary of the report and will publish the report in full on the Company's website.
As an interim measure until the final MinCorp Report is available, the Company asked The Mineral Corporation to issue a summary report ("MinCorp Summary Report") containing details of the resources at the Mooiplaats mine and the Vele and Makhado coal projects. This MinCorp Summary Report has now been finalised and is attached as Annexure C to this announcement. A copy of the MinCorp Summary Report is also available on the Company's website.
A summary of the key resource information for CoAL's projects is shown below. This has been extracted without amendment from the CCIC Report and the MinCorp Summary Report. These resource statements were compiled in accordance with (and comply with) the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves ("JORC Code"), as published by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, the Australian Institute of Geoscientists and The Minerals Council of Australia. The revised resource statements from the CCIC Report and the MinCorp Summary Report are all in line with previously reported gross tonnes in situ ("GTIS") resource estimates.
CoAL Resource Summary(1)
| Project | GTIS |
| Vele | 813.5 |
| Mooiplaats | 84.5 |
| Makhado | 947.0 |
| Zonnebloem | 11.8 |
| Hartogshoop | 1.2 |
| Klipbank | 7.60 |
| Opgoedenhoop | 27.4 |
(1) All figures shown are in millions of tonnes, rounded to one decimal place
Highlights of MinCorp Summary Report
Vele Project
·; The Mineral Corporation has estimated that the Vele Project contains total GTIS and mineable tonnes in situ ("MTIS") resources of 813 Mt and 690 Mt respectively. The current estimate of 813.5 Mt GTIS generated by The Mineral Corporation shows an increase in the GTIS tonnage of approximately 93Mt from the previous CoAL estimate of 720.8 Mt.
·; The deposit is considered to be amenable to exploitation by opencast and underground mining methods. The potential opencast GTIS resources in all four targeted seams total 333 Mt. Only the Bottom Lower seam, with a GTIS resource of 212 Mt, is targeted for underground extraction.
·; Free Swelling Indices ("FSI") determined on a 12% ash product derived from large diameter ("LD") bulk samples are relatively high, ranging from 7.5 to 8.5, while Gray King and Roga Indices are similarly high, ranging from G8 to G11 and 84 to 90 respectively.
·; On the basis of the bulk sampling test work, Vele coals could be categorised as high volatile soft (blend) coking.
·; The results of testwork conducted on LD core samples indicate that product yields in the practical mining situation are likely to be significantly higher than the slim core indications, in some cases by more than 90%. In some seams, yields over 40% were shown.
Mooiplaats Colliery
·; The Mineral Corporation calculated a MTIS for Mooiplaats of 79.4 Mt which compares to CoAL's previously stated resource of 74.5 Mt. This resource estimate is based on a seam thickness cut-off of one metre.
·; GTIS resources for the B Upper Seam, which is currently being mined, total 56.3 Mt of which more than 95% is classed as measured. A seam thickness cut-off of 1.4 metres was used to define potentially mineable GTIS resources, as this is considered the minimum underground mining height from practical and economic aspects.
·; Resources in all categories in the North Block are measured, while approximately 95% of resources in the South Block fall into the measured category.
Makhado Project
·; The Mineral Corporation has estimated a total GTIS resource of 947 Mt for the coal deposits contained on the contiguous farms Windhoek, Tanga, Fripp and Lukin (held by CoAL) and Salaita and Telema (held by Rio Tinto), of which 387 Mt is measured resource and 542 Mt is indicated resource. This is within 10% of CoAL's previous resource statement which estimated 1,035 Mt GTIS.
·; The opencast GTIS resources total 311.5 Mt and comprise 284.4 Mt measured resource and 27.1 Mt indicated resource. No resource statement was calculated for underground resources.
·; Results of analyses for slim core samples from the CoAL boreholes indicate an overall average yield of 19.5% for a coking coal product with an ash content of 12%. Average product yields from LD bulk samples are higher and in some seams, yields of over 30% were shown.
·; The product has a low inherent moisture content and the arithmetic average sulphur content of 1.1% is moderate. Based on the initial results received from LD bulk sample testwork, the product exhibits high Free Swelling and Roga Indices of 9 and 89 respectively while the vitrinite content ranges from 79% to 88% with an average vitrinite reflectance of RoVmax1.0. Maximum fluidities of over 14,000 dial divisions per minute have been recorded.
·; The vitrinite reflectance, FSI and volatile matter contents suggest that the Makhado product has the potential to be classed as a medium volatile, semi-hard coking coal. This is expected to be confirmed when further results of specialised testwork are received.
Highlights of CCIC Report
·; CCIC have estimated a total GTIS resource across the various projects under review of approximately 48 Mt, of which 23 Mt are measured resources and 25 Mt are indicated resources. MTIS are estimated at 43 Mt.
·; The resource projects in question are called the Zonnebloem (Vuna), Hartogshoop, Klipbank and Opgoedenhoop projects. The first three are active surface (open pit) collieries mined by truck and shovel methods, and Opgoedenhoop is a drilled out exploration project with potentially exploitable resources.
·; Zonnebloem is presently producing an average of 260kt per month of ROM coal, which is transported some 40 kilometres to Woestalleen, where it is beneficiated for export and domestic thermal coal markets. Presently, the estimated GTIS resource at Zonnebloem stands at approximately 11.77 Mt. To the immediate east and north of Zonnebloem, there is considerable upside potential to jointly develop other resources not currently held by CoAL.
·; The Hartogshoop Colliery began production in December 2009 and currently has a steady rate of production with a maximum capacity of 60kt per month of ROM coal. The mining method is via open pit truck and shovel roll-over. The mining layout is a single box cut 600 metres in length. Some coal has been sold raw as mined but presently the majority of the coal is beneficiated at Woestalleen.
·; The Opgoedenhoop Project has an estimated GTIS resource of 27.41 Mt. A NOMR has been granted in respect of the project, however mining has not yet begun.
·; Woestalleen is a coal preparation facility in close proximity to the coal resources from which it currently receives coal to be beneficiated for the export and domestic markets. The plant is established, well run and flexible, being well suited to its present task. Woestalleen has its own RBCT and general freight rail siding, and has produced beneficiated coal product since 1986. The present plant capacity is some 350kt (±1O%) ROM feed tonnes per month. A two stage wash is undertaken to produce a 26.5 megajoules per kilogram ("MJ/kg") primary product for the export thermal coal market and a secondary 21 MJ/kg product for the domestic thermal coal market.
·; As Zonnebloem, Hartogshoop and Klipbank are all producing mines; the main development opportunities at these sites lie in enhancing the coal recoveries, decreasing mining dilution and costs, and enhancing processing on site, such that less non-coal material needs to be hauled to Woestalleen and beneficiated. Opgoedenhoop is a greenfield project that contains a significant coal resource.
ASX Listing
If the Board concludes that de-listing from the ASX is in the best interests of the Company and all of its shareholders, certain prescribed conditions must be met by the Company before de-listing, namely:
1. A minimum of three months' formal notice to the market regarding the Company's intention to delist;
2. Provision of a facility through which shareholders may sell their securities on AIM, the LSE Main Market or the JSE through an ASX participating organisation for a period of not less than three months after the Company's removal from the Official List of ASX; and
3. Provision of a letter to shareholders informing them of the Company's intention to be removed from the Official List of ASX and notifying them of the facility through which they can sell their shares on AIM, the LSE Main Market or the JSE.
The Company will provide further details of progress and the timetable regarding the move to the LSE Main Market and de-listing from ASX in due course.
Yours sincerely,
SIMON J FARRELL
Managing Director
Contacts
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About CoAL
CoAL is an AIM/ASX/JSE listed coal mining and development company operating in South Africa. CoAL's key projects include the Woestalleen Colliery, the Mooiplaats thermal coal mine, the Vele coking coal project and the Makhado coking coal project.
The Mooiplaats coal mine commenced production in 2008 and is currently ramping up to produce 2 million tonnes per annum ("Mtpa"). CoAL's Vele and Makhado coking coal projects are expected to start production in Q3 2010 and Q1 2012 respectively, collectively producing an initial 2 Mtpa rising to a combined annual output of 10 Mtpa of coking coal.
In 2010, CoAL completed the ZAR650m acquisition of NuCoal Mining (Pty) Limited ("NuCoal"), a thermal coal producer with assets in South Africa in close proximity to CoAL's Mooiplaats mine. NuCoal owns the Woestalleen Colliery, which has a number of off-take contracts in place and processes approximately 2.5Mtpa of saleable coal for domestic and export markets. NuCoal also owns two beneficiation plants, one fully operational mine producing approximately 300kt per month of ROM coal and has recently commenced production at a second mine.
CoAL currently has 1 Mtpa export capacity at the Matola Terminal in Maputo, Mozambique, increasing to 3 Mtpa on completion of the next phase of expansion at the terminal. CoAL also has the option to participate in further expansion at the Matola Terminal, which is expected to increase the capacity at the terminal by an additional 10 Mtpa.
Competent Persons Statement
The information in this announcement that relates to exploration results, mineral resources or ore reserves is based on information compiled by the following persons:
1. In respect of the MinCorp Summary Report, Mr Mark Craig Stewardson, who is registered as a Professional Natural Scientist (Pr Sci Nat, Reg. No. 400119/93) with the South African Council for Natural Scientific Professions (SACNASP), which is a Recognised Overseas Professional Organisation (ROPO) in terms of the JORC Code. Mr Mark Craig Stewardson is employed by The Mineral Corporation.
2. In respect of the CCIC Report, Dr. Philip John Hancox , who is a member of the South African Council for Natural Scientific Professions (SACNASP No. 400224/04), which is a Recognised Overseas Professional Organisation (ROPO) in terms of the JORC Code. Dr. Philip John Hancox is employed by CCIC.
Mr Mark Craig Stewardson and Dr. Philip John Hancox have sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as Competent Persons as defined in the 2004 Edition of the JORC Code. Mr Mark Craig Stewardson and Dr. Philip John Hancox consent to the inclusion in this announcement of the matters based on their information in the form and context in which it appears.
Glossary
| bituminous coal | A medium quality coal mostly used in for raising steam for the generation of electricity. |
| coal | A readily combustible sedimentary rock containing more than 50% by mass and 70% by volume of carbonaceous material. |
| coke | The solid product of heating coal in an oven to very high temperature in the absence of air. |
| coking coal | Coal that can be converted into useful coke. |
| Free Swelling Index | A measure of the tendency of coal to swell when heated under controlled conditions. |
| Gray King index | A measure of the coking properties of a coal sample. |
| indicated coal resource | That part of a coal resource for which tonnage, densities, shape, physical characteristics and coal quality can be estimated with a low level of confidence. |
| measured coal resource | That part of a coal resource for which tonnage, densities, shape, physical characteristics and coal quality can be estimated with a high level of confidence. |
| mineable in situ coal resource | Tonnage and coal quality, at specified moisture content, contained in the coal seams or sections of the seams, which are proposed to be mined at the theoretical mining height, excluding dilution and contamination material, with a specific mining method and after the relevant minimum and maximum mining thickness cut-off and relevant coal quality cut-off parameters have been applied. |
| MJ/kg | Megajoules per kilogram, a measure of the heat generating capacity of coal |
| Roga Index | An indicator of the potential caking properties of coke produced from coal. |
| thermal coal | Coal used to generate heat. |
| vitrinite | An organic component of coal. |
| vitrinite reflectance | A measure (used in the determination of coal quality) of the light reflected back from the vitrinite when viewed under a microscope. |
ANNEXURE A
PROJECT OVERVIEW
ANNEXURE B
EXECUTIVE SUMMARY OF CCIC REPORT
ANNEXURE C
MINCORP SUMMARY REPORT
ANNEXURE D
MINCORP INITIAL COKING COAL ANALYSIS OF MAKHADO PROJECT