17 Feb 2009 11:16
17 February 2009
Strategic Natural Resources PLC
BEE funding extension and trading update
AIM quoted - Strategic Natural Resources PLC ("SNR" or "the Company") announces an extension to its BEE funding and a trading update relating to its operating subsidiary, Elitheni Coal (PTY) Limited ("Elitheni").
Acharnian Mining Limited ("Acharnian")
In July 2008, SNR announced the disposal by its wholly owned subsidiary, Acharnian, of 26 per cent. of Elitheni to a BEE consortium comprising principally of Vuwa Investments ("Vuwa"). As part of the transaction a loan was made by Acharnian to Vuwa of £3.253m, such receivable secured under a loan note due 12 December 2008 and a pledge over 17.62 per cent. of Elitheni. The loan note remains outstanding and Acharnian has not exercised the pledge to date. Vuwa has requested an extension to the period to settle the amount due to Acharnian and accordingly a revised completion date for the payment has been set for 31 May, 2009. It is anticipated that the completion date will be met but a further extension may be required. The profit recognised by Acharnian in connection with the disposal to Vuwa in the interim results for the period ended 31 August 2008 was £3.972 million of which £640,000 was received in cash.
Elitheni
The Company's operating subsidiary, Elitheni, having established 100Mt of in-situ coal and obtained its full mining right at the end of 2008 as planned, is now moving towards initial coal sales whilst further progress is made on the power project development by IPSA Group PLC.
Elitheni has commenced supplying the local domestic market. The first 20 of a planned 100 small franchised depots, selling bags of coal for heating in winter, has been established. Testing of coal by potential offtakers with a more substantial coal requirement is underway with a view to bringing in sales in the first half of the current calendar year. Trials with varying clay brickyards are proving promising and Elitheni expects first sales in May 2009. Other markets where Elitheni's coal can be used for heating purposes have also been identified and testing is underway. Again sales are expected in the early half of 2009. Whilst these domestic sales are expected to yield a positive gross margin they are not expected to produce an overall operating profit at the Elitheni level.
In addition, Elitheni has determined that the means to export metallurgical quality coal through the port at East London, in the Eastern Cape is a real possibility and in addition to the substantial domestic market for metallurgical coal Elitheni estimates that export sales could commence as early as the second half of the year. Such sales would be both spot and under medium term contracts and for significant tonnages, and at good gross margins.
Another area of opportunity which is under development is the supply of coal for industrial steam generation under medium to long term contracts. Negotiations to supply approximately 120,000 tonnes pa to new facilities under development are underway.
In respect of long term contracts, Elitheni has already entered into a long term contract to supply IPSA with 1 million tonnes of coal per annum for 20 years for its planned power station to be built at the mine mouth at Indwe in the Eastern Cape, South Africa.
Elitheni is also working closely with South African gas and oil utilities on proposals to develop gasification plants to generate syngas to fuel power stations.
For further information contact:
The Company:
Jeremy Metcalfe Chief Executive Officer
Strategic Natural Resources PLC
Tel: +441303 872453
David Nel, Chief Operations Officer
Strategic Natural Resources PLC Tel: + 27 41 374 0842
Nominated Adviser:
Rod Venables/James Reeve
HB Corporate Tel: +44 20 7510 8600
Broker:
Nicholas Malins-Smith/James Wood Hichens, Harrison plc Tel: +44 20 7382 4450