Continental Coal Ltd, an emerging coal miner focused on South Africa, has signed an off-take and funding agreement with EDF Trading, a leading player in the international wholesale energy markets and a wholly-owned subsidiary of leading energy company, EDF S.A.
Under the terms of the agreement, EDF Trading has secured all export quality thermal coal produced from the Project X, Vaalbank and Vlakvarkfontein mines for a period of 20 years at the benchmark price for coal exports from Richards Bay Coal Terminal – API4.
In addition, EDF Energy has agreed to provide Continental with US$ 20 million through an advanced purchase of export coal from the three mines. The first drawing of this “coal loan” (US$ 7 million) will be used by Continental to fund mine optimisation studies, pre-development costs and site establishment, and capital construction cost.
The forecast initial production rates of export quality coal from the Vaalback and Project X mines, attributable to Continental and subject to the off-take agreement, is expected to be at an initial rate of 145,000 t/month. First coal production is expected to occur in H1 2011 from Vaalback, with production from Project X expected six to nine months later.
Vlakvarkfontein commenced coal sales in May this year, with first the commercial sales contracts signed in June.