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CoAL provides quarterly commentary

Published by , Editorial Assistant
World Coal,

Quarterly commentary:

Acquisition of the Uitkomst colliery

During the Quarter, the Company completed the acquisition of PAR Coal, 91% owner of the Uitkomst colliery, for a purchase price of R275 million (US$20.5 million). The Uitkomst colliery is a high grade thermal export quality coal deposit with metallurgical applications, which is situated in the Utrecht coalfields in KwaZulu Natal. The Uitkomst colliery consists of an existing underground coal mine and a planned life of mine extension. The operating mine is easily accessible and well-established. Existing infrastructure such as power supply, water supply, buildings, workshops, weighbridge, water storage and management facilities are all in place. The Uitkomst colliery currently employs approximately 520 employees (including contractors).

For the year ended 30 June 2017, prior to the effective date of acquisition, the Uitkomst colliery reported five LTI’s. This will be a focus point for CoAL in the year ahead. The plant produced 508 510 t which consisted of 458 350 mined t and 50 160 bought in t.

Makhado coking coal project – Soutpansberg coalfield (100% owned - 74% post BBBEE transaction)

The Makhado Project recorded no LTIs (FY2017 3Q: nil) during the Quarter.

During FY2016 2Q, the Makhado Project was granted a twenty year IWUL. This was appealed by the Vhembe Mineral Resources Forum and other parties and the IWUL was automatically suspended under Section 148(2) (b) of the South African National Water Act No. 36 of 1998. During this Quarter, pleasingly, the suspension was lifted by the South African Minister of the DWS. As a result, the Makhado Project moves closer to becoming fully permitted.

It is noted that the regulatory process is time consuming and complex but it is an appropriate process as once completed it ensures a measurable framework for both State and Company. The company remains committed to pursuing the permitting completion process as efficiently as possible.

Baobab Mining and Exploration Proprietary Limited (Baobab), a subsidiary of CoAL, is the operating entity for the Makhado Project and holds, in addition to the IWUL, the Environmental Authorisation (EA) and the mining right.

Originally Makhado’s development plan included a twenty six month construction phase followed by a four month ramp up to achieve a production rate of 5.5 million tpy with a capital requirement of US$281 million. While the company has progressed with the regulatory matters, it has started a process of reviewing Makhado’s development plan which entails, re-assessing its strategy, which may or may not result in a reduced capital expenditure, a lower production rate and a shorter construction period through to earlier than planned production, with an extended mine life. This revised strategy would also look to incorporate a manageable marketing and funding plan. Despite the proposed lower output Makhado would still look to deliver positive returns for shareholders. A detailed report on the revised strategy for Makhado is due to be reviewed by CoAL’s Board in September 2017.

CoAL remains committed to the sustainable development of the Makhado Project, recognising its potential to drive significant socio-economic transformation. The company continues to engage with all stakeholders to ensure the on-going implementation of a co-existent model, seeking co-operation between mining, agriculture and heritage land uses.

CoAL continues to monitor the process of ownership for certain surface rights on which the project will be constructed.

Mooiplaats thermal coal colliery – Ermelo coalfield (74% owned)

The Mooiplaats Colliery remained on care and maintenance throughout the Quarter. No LTIs were recorded during the period (FY2017 Q3: nil). CoAL continues to be committed to delivering a successful sale of the Mooiplaats colliery as soon as possible and a number of interested parties remain at various different stages of financial assessment and completion of the due diligence process.

Vele coking and thermal coal colliery – Limpopo (Tuli) coalfield (100% owned)

The Vele colliery remained on care and maintenance throughout the Quarter. No LTIs were recorded during the Quarter (FY2017 Q3: nil).

CoAL awaits the granting of an IWUL by the DWS, which is the final approval required to complete the regulatory approvals process for the stream diversion in respect of the Plant Modification Project. Once all regulatory approvals are in place, the company will be in a position to consider current market pricing and off- take agreements to conclude on an investment decision favourable to the company.

Greater Soutpansberg project (MbeuYashu) (74% owned)

The MbeuYashu Project recorded no LTIs (FY2017 3Q: nil) during the period. No further developments to report during the Quarter.

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