Wrap Text
Finacial results and commentary
Coal of Africa Limited
Incorporated and registered in Australia)
(Registration number ABN 008 905 388)
ISIN AU000000CZA6
JSE/ASX/AIM share code: CZA
("CoAL or the "Company" or the "Group")
1 October 2012
ANNUAL FINANCIAL STATEMENTS COMMENTARY AND PROJECT UPDATE
Coal of Africa Limited, (“CoAL”, or “the Company”, or “the Group”), the coal exploration,
development and mining company operating in South Africa and listed on the ASX, AIM and JSE
(ticker: CZA), is pleased to provide a copy of its Annual Financial Statements for the year ended 30
June 2012 which are also available on the Company’s website on www.coalofafrica.com. The
financial summary and commentary on the results are provided below.
John Wallington, CEO, commented on the period under review:
“The successes achieved during the year and the various prospects in hand herald an exciting new
chapter for CoAL and confirms that the Company has the resource base, depth of management and
operational know-how to become a significant Southern African coal producer. CoAL accomplished a
number of significant milestones during the year, notwithstanding the turbulent economic, market
and labour conditions:
- lifting of the suspended Water Use License and receipt of the required regulatory authorisations
allowing for the commencement of production at the Vele Colliery;
- Makhado Project Definitive Feasibility Study and application for New Order Mining Right far
advanced; test work completed confirming the ability to produce a hard coking coal product
with a high quality thermal by-product from the project;
- finalising the acquisition of Rio Tinto and Kwezi Mining’s Chapudi coal assets;
- fourfold increase in the Company’s resource base to approximately 8.0 billion tonnes in the
Soutpansberg and Limpopo coalfields creating the platform on which to build a world class coal
business comprising hard and soft coking coal, high grade export thermal coal and a domestic
product for Eskom;
- further advancement of the technical work on the other properties in the Soutpansberg coalfield
over which the Group has prospecting rights, providing further confidence in our strategy to
develop the Makhado Project and the outstanding long term potential of the Company’s
Soutpansberg coalfield resource.
The successful resolution of the Vele Colliery regulatory hurdles after a 15 month delay was a
decisive moment for the Company. The colliery’s ground-breaking and collaborative initiatives in the
South African coal mining industry reflect the Company’s commitment to leading practices in
sustainable development. The Company is committed to ensuring the integrity of the Mapungubwe
heritage site and the long term sustainable development of mining activities in this area.
Group restructuring continued with the conversion of the Mooiplaats Colliery from a contract miner
to an owner-managed operation; assessment of options to increase the life at the Woestalleen
processing facility and the disposal of the Group’s non-core alloy producer, NiMag.
Market conditions for export quality thermal coal deteriorated significantly during the financial year,
with spot prices falling by approximately 27% year on year, with the decline particularly evident
during the last quarter when coal prices fell approximately 10% to the approximately US$85 level.
Similarly, hard coking coal prices fell from US$310 per tonne in June 2011 to approximately US$220
per tonne at the end of June 2012, falling below US$150 per tonne by September 2012.
In response to the declining prices, management implemented cost control measures to avert
further losses particularly at the Mooiplaats Colliery. As previously announced, the recent increase in
labour unrest in the South African mining industry has affected the colliery, with employees going on
a wage related strike on 25 September 2012. Various measures are being contemplated as a result
of the strike and declining prices, including the possibility of restructuring the operation.
Woestalleen continued to perform in line with expectations and the labour situation remains stable,
with annual wage negotiations settled recently. With the depletion of the coal resource at the Vuna
Colliery anticipated by March/April 2013, steps are underway to extend the life of the Woestalleen
processing plant. This includes the reprocessing of the Woestalleen discard dumps to produce an
Eskom quality coal and, utilising the existing rail-load out facility to load third party coal for transport
by rail to Eskom’s power stations.
As part of the ongoing funding requirements of the business, the Company completed an equity
fundraising of US$106 million in November 2011 and subsequent to year end, completed equity
placements totaling $53.5 million. In addition, discussions to restructure the Company's existing
debt facilities by the end of the calendar year are ongoing.
CoAL continues to work on a number of initiatives to ensure the financial security of the group going
forward and is pleased to announce the conclusion of a strategic partnership with Haohua Energy
International (Hong Kong) Company Limited, a subsidiary of Beijing Haohau Energy Resource
Company Limited, furnishing the Company with a binding offer to provide US$100.0 million of
funding to CoAL by way of a subscription for shares. The funding will be structured as an initial
US$20.0 million subscription utilising the Company’s 15% authority, which will be subject to FIRB
approval, and a further US$80 million subscription subject to shareholder approval.
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Exxaro had an option to acquire up to 30% of the Makhado Project and engaged with the Company
over the past few months to finalise the technical review and evaluation process. While the
Company was pleased the product testing confirmed that the Makhado Project will produce a hard
coking coal and that the project economics are sound, Exxaro has elected not to exercise its pre-
emptive right to acquire a 30% interest and participate in the development of the project. The
Company was advised by Exxaro that after consideration of the various alternative projects currently
in their growth pipeline, combined with the current negative sentiments regarding the global and
local macroeconomic growth outlook, that Exxaro will be focusing on existing projects.
The outcome of Exxaro’s decision coincides with the completion of various negotiations regarding
potential strategic investments with other third parties, either at group or project level, culminating
in the binding offer received from HEI. In addition, discussions are ongoing regarding the
restructuring of the Company’s debt facility with Deutsche Bank together with discussions with
other financial institutions on additional debt facilities.
The next phase of plant construction at Vele Colliery to achieve the full production target of 2.7
million run of mine tonnes per annum; improved operational performance at Mooiplaats and
downsizing of Woestalleen to create a coal processing and loading hub are key FY2013 milestones.
The remaining submissions for the granting of the Makhado Project New Order Mining Right have
been finalised and management is working closely with the various regulatory bodies to secure the
granting thereof. The development of the Greater Soutpansberg Project and advancing the technical
work required to submit New Order Mining Right applications over the various other properties in
respect of which the Group holds prospecting rights, remains key to generating significant future
value for all stakeholders.
The appointment of David Brown as Non-Executive Chairman and Bernard Pryor as Non-Executive
Director of the CoAL board occurs at a critical time in the evolution of the Company, and I look
forward to working with both as we advance the Group’s future growth plans. I take this opportunity
to thank our past Chairman Richard Linnell, Deputy Chairman Simon Farrell and Directors, Steve
Bywater and Mikki Xayiya for their contribution whilst serving on the Board and wish them well in
their future endeavors.”
Operational highlights
- Greatly improved safety performance - 10 lost time injuries (“LTI’s”) recorded during the year
compared to 15 in FY2011.
- 4.930 million run of mine (“ROM”) tonnes (FY2011: 4.409 million ROM tonnes) of coal mined
from the Vuna, Mooiplaats and Vele collieries, up 12% year on year.
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- 4.906 million ROM tonnes (FY2011: 4.997 million ROM tonnes) processed, producing 3.128
million saleable tonnes (FY2011: 3.316 million saleable tonnes) of thermal coal at an overall
average yield of 63.8% (FY2011: 66.4%).
- The start of mining operations in October 2011 and plant operations in February 2012 at Vele
coking coal colliery (“Vele Colliery”), with the extraction of 161,107 tonnes of ROM coal during
the build-up phase, producing 46,066 tonnes of export quality thermal coal that was railed from
the Musina siding for export via the Matola Terminal in Maputo, Mozambique (“Matola
Terminal”).
- Transfer of mining operations from a contract mining to owner-managed basis at Mooiplaats
thermal coal colliery (“Mooiplaats Colliery”) and the commissioning of a fifth underground
section resulted in improved production, yielding 1.226 million tonnes of ROM coal, up 39%
from 0.883 million tonnes during the previous financial year.
- Granting of an Integrated Water Use Licence (“IWUL”) for the North Block of Vuna colliery
(“Vuna”) and the start of mining operations in the new pit resulted in 3.543 million tonnes of
ROM coal (FY 2011: 3.526 million tonnes) mined during the year.
- Total group coal sales decreased by 2% year on year from 3,448,563 tonnes in FY2011 to
3,373,780 tonnes in FY2012, due primarily to the reduction of third party ROM and saleable coal
available for purchase in the second half of the financial year, which augmented the prior year
sales volumes.
- Memorandum of Agreement (“MOA”) signed with the South African Department of
Environmental Affairs (“DEA”) and South African National Parks (“SANParks”) to ensure the
conservation and integrity of the globally significant natural and cultural Mapungubwe National
Park and World Heritage Site ("Mapungubwe"), and to maintain and strengthen co-operation
between the parties at the Vele Colliery.
- Memorandum of Understanding (“MOU”) signed with the Save Mapungubwe Coalition (“the
Coalition”), committing the parties to work together and strengthen co-operation, ensuring the
sustainable development of the Mapungubwe cultural landscape.
- Preliminary review of the Makhado coking coal project (“Makhado Project”) Definitive Feasibility
Study (“DFS”) conducted by the CoAL board of directors (“Coal Board”) resulting in submission
thereof to Exxaro Coal Proprietary Limited (“Exxaro”) allowing it to begin its evaluation process.
- Completion of the full battery of independent tests commissioned by the Company, including full
scale coking tests at ArcelorMittal South Africa’s (“AMSA”) local facilities, confirming the quality
and technical feasibility for AMSA (and potentially other customers) of the hard coking coal to be
produced at the Makhado Project.
- Gross tonnes in situ in the Greater Soutpansberg area increased by 429% from 1.5 billion tonnes
to 8.0 billion tonnes.
Regulatory highlights
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- Vele Colliery began full operations in October 2011, following the granting of the Environmental
Authorisation (“EA”) and lifting of the suspension of the IWUL.
- Effective implementation of the Environmental Management Committee (“EMC”) chaired by
SANParks to monitor environmental compliance at the Vele Colliery.
- Successful elections held for the appointment of the Makhado Colliery Community Consultative
Forum (“MCCCF”) in June 2012, enabling the finalisation of the public consultations required for
the New Order Mining Right (“NOMR”) application process.
- Section 11 consent received in terms of the Mineral & Petroleum Resources Development Act
(“MPRDA”) for the acquisition by Keynote Trading & Investment 108 Proprietary Limited
(“Keynote”) of the entire issued share capital of Chapudi Coal Proprietary Limited ("Chapudi")
and Kwezi Mining Exploration Proprietary Limited ("KME") from Rio Tinto Minerals
Development Limited (“RTMD”) and Kwezi Mining Proprietary Limited (“Kwezi”).
- Approval for the substitution of creditor (CoAL for RTMD) in relation to the shareholder claims
closing in respect of the acquisition of claims in Chapudi and KME by CoAL on 27 September
2012.
Funding activities
- US$159.5 million new equity capital raised, including US$106.0 million during the financial year
and US$53.5 million subsequent to year-end.
- Subsequent to year end and finalisation of the audited financial statements, concluding an
agreement with Beijing Haohau Energy Resource Company Limited’s (“BHE”) wholly owned
subsidiary, Haohua Energy International (Hong Kong) Company Limited (“HEI”), to subscribe for
shares in the Company for US$100.0 million at 25 pence per share, a 64% premium to the
closing share price on Friday 27 September 2012, to be completed in two tranches of US$20.0
million (subject to FIRB approval) and US$80.0 million (subject to shareholder approval).
- Discussions ongoing regarding restructuring of debt facility with Deutsche Bank and potential
discussions with other financial institutions on debt facilities.
- Extension of the payment date for the purchase consideration of US$13.6 million due to RTMD
in terms of the Chapudi acquisition to 22 October 2012, with a view to further discussions on
the revised payment plan taking place.
- Completion of the disposal of the non-core NiMag Proprietary Limited and Metalloy Resources
Investments Proprietary Limited (together “the NiMag Group”) by way of a management buy-
out (“MBO”) for ZAR54.0 million (approximately US$6.5 million).
- Ongoing review of levels of expenditures, active management of working capital requirements
and options to restructure or disposal of other interests, specifically the thermal coal assets.
Financial highlights
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- US$243.8 million (FY2011: US$261.4 million) in total revenue generated for the year. Revenue
from coal sales of US$242.5 million (FY2011: US$229.2 million) was 6% higher year on year. With
the disposal of the NiMag operation during the year, US$nil million (FY2011: US$31.2 million)
was reported as revenue in the current year and the profit on disposal of $1.1 million is reported
as part of Other Income.
- Sales of thermal coal decreased by 2% from 3,448,563 tonnes in FY2011 to 3,373,781 in FY2012
and included a change in the sales mix. The variation in sales mix resulted in revenue increasing
by 6% and was offset by a 27% decline in export coal spot prices from approximately US$119 per
tonne in June 2011, to approximately US$87 per tonne in June 2012.
- Coal sales mix was made up as follows:
o export coal sales increased by 55% to 1.662 million tonnes (FY2011: 1.069 million
tonnes) with the increase throughput capacity at the Matola terminal;
o inland sales of export quality coal decreased by 49% to 0.923 million tonnes
(FY2011: 1.803 million tonnes) as existing contracts were fulfilled; and
o sales to Eskom Limited (“Eskom”), the South African electricity utility, increased by
37% to 0.788 million tonnes (FY2011: 0.577 million tonnes) as a result of additional
discard available from mining and processing export quality coal.
- Total gross profit for the year of US$33.4 million (FY2011: US$37.9 million) and the gross margin
percentage of 14% (FY2011: 15%) was lower year on year due to:
o the gross margin from coal sales increasing by 4% to US$33.6 million (FY2011:
US$32.4 million) as a result of the change in sales prices and mix, offset by higher
logistics costs;
o the exclusion of the NiMag profit margin in the current financial year US$nil
(FY2011: US$5.7 million) following the disposal of this non-core asset.
- Once-off costs of $5.7 million (FY2011: US$nil) in the current year relating to additional legal,
technical and regulatory work associated with the equity placement undertaken in November
2011.
- Non-cash charges of US$115.9 million (FY2011: US$208.7 million) including:
o depreciation and amortisation of US$70.0 million (FY2011: US$79.5 million);
o unrealised foreign exchange losses of US$47.0 million (FY2011: US$28.8 million);
o share based payment expense of US$5.0 million (FY2011: US$3.0 million);
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o goodwill of US$1.2 million written off (FY2011: US$nil);
o other income of US$6.9 million (FY2011: US$nil) relating to the reversal of warranty and
other provisions in respect of the NuCoal acquisition; and
o reversal of impairment losses of US$0.3 million (FY2011: US$97.4 million impairment
loss) with no additional impairment charges raised in FY2012.
- Adjusted operating loss before tax (excluding non-cash items) or EBITA of US$32.8 million
(FY2011: US$10.1 million) lower by US$22.7 million largely as a result of increased labour costs
associated with the increase in mining activity at Mooiplaats, once off capital raising project
costs and the exclusion of the contribution from NiMag disposed of in the current financial year.
- Net loss after tax for the year, including non-cash items, of US$138.9 million (FY2011: US$219.0
million) was US$80.1 million lower largely due to no impairment of assets in FY2012 compared
to US$97.4 million in the prior year.
- Total unrestricted cash balances and undrawn Deutsche Bank facilities of US$37.0 million
(FY2011: US$40.3 million) at year-end.
- JSE reporting requirement: headline earnings loss for the year of US$0.2265 (FY2011: loss of
US$0.2291).
Strategic Partner - Haohua Energy International (Hong Kong) Resource Co. Limited
On 29 September 2012, HEI submitted a binding offer to provide the Company with US$100.0 million
of equity funding. The Proposed Transaction is to be executed in two stages:
- an initial placement of US$20.0 million (“Initial Placement”); and
- a conditional placement of US$80.0 million (“Conditional Placement”).
The Initial Placement allows HEI to subscribe for US$20.0 million of ordinary shares in in CoAL at a
subscription price of GBP0.25 per share, issued under the general authority provided to CoAL Board.
The subscription will be conditional upon the following conditions:
- Australian Foreign Investment Review Board (“FIRB”) approval (required for all foreign direct
investments into Australia by state owned entities), expected to be a formality as the Company
does not have any mining projects in Australia; and
- approvals from the Peoples Republic of China (“PRC”). A price adjustment mechanism will occur
if PRC approval is not obtained and Initial Placement share issue price will be increased to
GBP0.35 per share, reducing the number of shares issued to HEI in the Initial Placement.
Following the Initial Placement HEI will hold 5.82% of CoAL’s ordinary shares.
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The Conditional Placement will enable HEI to subscribe for a further US$80.0 million of shares at
GBP0.25 per share, subject to the following conditions:
- 75% of the Company’s shareholders approving the Conditional Placement;
- approvals from the PRC;
- CoAL shareholders waiving the requirement for a mandatory offer when HEI interest in the
Company exceeds 19.99%; and
- all other necessary regulatory and statutory approvals.
Following the Initial Placement and Conditional Placement, HEI will hold approximately 23.6% of
CoAL’s ordinary shares.
The Company will to undertake a road show in early October 2012 in order to inform shareholders of
the proposed transaction to obtain the necessary shareholder support. If by 31 January 2013 the
conditions have not been fulfilled or it appears that the conditions will not be fulfilled, HEI and CoAL
have agreed to cooperate and consider other arrangements pursuant to which HEI is able to provide
funding support to CoAL.
CoAL and HEI Co-operation Agreement
In the event that HEI invests US$100 million in CoAL, the parties have agreed to enter into
discussions to implement a Co-operation Agreement that creates an environment for the
cooperation on commercial, technical and operational issues. The intention is that CoAL will be able
to draw on BHE’s technical expertise in the development of the Company’s project pipeline.
To further facilitate the development of CoAL’s projects, HEI has undertaken to facilitate, on
favourable terms, future funding required by the Company. HEI will also be entitled to nominate two
directors to the CoAL Board.
OPERATIONAL REVIEW
The key operational coal statistics for the year are listed below:
Total Total Unit %
FY2012* FY2011 variance variance
ROM production 4,930,477 4,408,942 521,535 12%
ROM coal purchased 191,608 471,824 (280,216) (59%)
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Total coal feed to plant 4,905,616 4,996,800 (91,184) (2%)
Combined average yield 63.7% 66.4% (2.7%) (4%)
Saleable coal produced 3,128,064 3,316,209 (188,145) (6%)
- Export coal 2,398,025 2,760,273 (362,248) (13%)
- Middlings coal 730,039 555,936 174,103 31%
Total coal sales 3,373,781 3,448,563 (74,782) (2%)
- Export 1,662,204 1,069,163 593,041 55%
- Inland 923,160 1,802,831 (879,671) (49%)
- Eskom 788,417 576,569 211,848 37%
Numbers in the table represent tonnes
*FY2012 figures include five months production from Vele Colliery (FY2011: nil)
Woestalleen Complex
The Woestalleen Complex comprises the Vuna colliery and three beneficiation plants with the
capacity to process 4.2 million tonnes of ROM feed per annum. Vuna continued its respectable
safety record with one lost time injury recorded during the 12 months (FY2011: nil) and three lost
time injuries (FY2011: four) were recorded at the Woestalleen processing plant during the period.
Total ROM production for the 12 months from Vuna of 3,543,215 tonnes was marginally higher than
the prior year’s output of 3,525,906 tonnes.
The Company completed mining of the Vuna South Block towards the end of FY2012 and began
mining the Vuna North Block, comprising #1 and #2 thermal coal seam typical of the
Witbank/Middelburg coalfields, from March this year. A large portion of the #1 seam ROM coal,
typically sold as a low grade power station coal, is crushed on site and delivered directly to Eskom
resulting in an improved margin. All #2 seam coal mined at Vuna is transported by road to
Woestalleen for processing, to produce a high grade product for export and a thermal coal middlings
product for Eskom.
Coal processed at the Woestalleen facility decreased by 6% to 3,318,386 tonnes (FY2011:3,530,664
tonnes) and total saleable tonnes decreased by 10% to 2,095,934 tonnes (FY2011: 2,324,972
tonnes). The variation in both the yield and mix of saleable coal produced was as a result of:
- the changeover from the South to the North block at the Vuna Colliery;
- the reduction of the ROM coal processed; and
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- the use of selective mining practices coupled with the blending of stockpile material.
Overall the plant yield decreased to 63.2% (FY2011: 65.9%) for the year and the saleable tonnes
produced consisted of:
- 1,568,745 tonnes (FY2011: 2,021,770 tonnes) of export quality coal, and
- 527,189 tonnes (FY2011: 303,202 tonnes) of middlings product for Eskom.
In anticipation of the depletion of the available ROM from Vuna by March/ April 2013, the Company
continues to evaluate potential options to extend the life of the Woestalleen facility, including
evaluating potential sources of ROM coal to be mined or washed on behalf of third parties and the
reprocessing of the discard dumps at the Woestalleen plant complex to produce an Eskom quality
middlings product. Initial results for the dump-material test sample have been positive and the
reprocessing of this material will start once the Vuna resource has been depleted.
As previously indicated, the utilisation of the siding facility to load trains with third party Eskom coal
was identified as a potential commercial option for the Woestalleen facility. Eskom’s strategy to
redirect significant volumes of coal currently transported to the power stations by road to rail
transport, creates opportunities for co-operation at Woestalleen. The first trains containing Eskom
quality product were loaded at the siding in September 2012 transporting coal to the Camden power
station in Mpumalanga, confirming the viability of this business model.
FY2012 FY2011 Unit %
variance variance
ROM production 3,543,215 3,525,906 17,309 -
Total coal feed to plant 3,318,386 3,530,664 (212,278) (6%)
Average yield 63.2% 65.9% (2.7%) (4%)
Saleable coal produced 2,095,934 2,324,972 (229,038) (10%)
- Export coal 1,568,745 2,021,770 (453,025) (22%)
- Middlings coal 527,189 303,202 223,987 74%
Total coal sales 1,310,230 1,920,175 (609,945) (32%)
- Inland 718,335 1,607,014 (888,679) (55%)
- Eskom 591,895 313,161 278,734 89%
Numbers in the table represent tonnes
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Mooiplaats Colliery
Safety at Mooiplaats Colliery continues to be a focus area and the colliery recorded a 33%
improvement in LTI’s over the 12 month period reducing from nine in FY2011 to six in the current
financial year.
Mooiplaats Colliery transitioned to an owner managed mine at the end of FY2011 facilitating direct
management of the operation. The Company started an operational initiative at this time to identify
potential improvements in the mining process that would lead to sustainable levels of higher
production. This process included the introduction of a support contract with equipment supplier
JOY Mining, ensuring a more effective approach for the maintenance of underground machinery and
increased equipment availability.
The positive results of the operational improvement initiative and the addition of a fifth
underground section during the year resulted in ROM coal production increasing from 883,036
tonnes in FY2011 to 1,226,155 tonnes in FY2012.
Coal processed during the period decreased from 1,466,136 tonnes to 1,425,941 tonnes as a result
of the 59% reduction in third party ROM coal available for purchase, from 471,824 tonnes in FY2011
to 191,608 tonnes in FY2012. A total of 986,144 tonnes of saleable tonnes (FY2011: 991,237) were
produced during the year consisting of:
- 783,214 tonnes (FY2011: 738,503 tonnes) of export quality coal, and
- 202,850 tonnes (FY2011: 252,734 tonnes) of middlings product for Eskom.
However, despite these improvements the Mooiplaats Colliery has not performed in line with
managements’ expectations and continues to be exposed to challenging geological conditions
resulting in constrained production output.
In addition to the operational challenges, the combined effect of the current weak coal prices and
current labour strike, creates further pressure on the operating margins at Mooiplaats making the
mine unprofitable. The current strike if prolonged will have a negative impact on employees and the
operation and steps are underway to potentially restructure the mine.
As part of a strategic review of the Mooiplaats Colliery undertaken earlier this year, various options
were identified to unlock potential value from the installed infrastructure and processing plant
capacity. There are a number of potential options under consideration which may include
partnerships or joint ventures with interested parties. Management continues to vigorously pursue
these options.
Unit %
FY2012 FY2011 variance variance
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ROM production 1,226,155 883,036 343,119 39%
ROM coal purchased 191,608 471,824 (280,216) (59%)
Total coal feed to plant 1,425,941 1,466,136 (40,195) (3%)
Average yield 69.2% 67.6% 1.6% 2%
Saleable coal produced 986,064 991,237 (5,173) -
- Export coal 783,214 738,503 44,711 6%
- Middlings coal 202,850 252,734 (49,884) (20%)
Total coal sales 2,063,551 1,528,388 535,163 35%
- Export* 1,662,204 1,069,163 593,041 55%
- Inland 204,825 195,817 9,008 5%
- Eskom 196,522 263,408 (66,886) (25%)
Numbers in the table represent tonnes
*Export sales include coal from Woestalleen, Mooiplaats Colliery and Vele Colliery
Vele Colliery
Vele Colliery recorded no LTI’s during the year (FY2011: nil LTI’s) and the process of implementing
and monitoring the various safety, health and environmental policies and procedures continued
during the production build-up phase.
The mine has not yet reached steady state production and mining and until this occurs, mining and
processing costs are capitalised.
Environmental and regulatory compliance
After a protracted regulatory dispute over the Vele Colliery, construction of the processing plant was
completed and production started in October 2011. Three milestones in the South African mining
industry were attained as part of the effort to re-establish operations at Vele, namely:
- An MOA was signed between the Company, DEA and SANParks in respect of the Mapungubwe
Cultural Landscape World Heritage Site, to ensure the conservation and integrity of the cultural
heritage site, strengthen co-operation between the three parties and ensure the sustainable
development of mining activities in the area.
- A MoU was signed between the Company and the Coalition, a main objector to the mine,
providing an operational and administrative framework for the various parties to work through
following the start of mining activities.
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- As part of the Environmental Authorisation granted by the DEA, an EMC and its sub-committees
have been established with their main objective of monitoring and overseeing environmental
compliance at the Vele Colliery. The EMC members include SANParks, relevant government
departments, CoAL, non-governmental organisations, municipalities, farming communities and
other stakeholders. The Coalition participates as observers to these structures and the
Company provides administrative support.
In January 2012, the second UNESCO Reactive Monitoring Mission (“UNESCO RMM”) visit took place,
hosted by the DEA. The UNESCO RMM visit included a site inspection of the Vele Colliery to assess
progress made in implementing its November 2010 recommendations. As part of this process, the
Vele Colliery HIA report was revised and submitted to the DEA.
Current mining operations at the Vele Colliery are located some 32kms from the Mapungubwe
Heritage Site and 16kms away from the eastern boundary of the Mapungubwe Park (“the Park”). A
detailed HIA report was prepared for UNESCO evaluating the potential impact of the Vele Colliery on
the outstanding universal value of the Park. The HIA report and findings by the UNESCO Mission
World Heritage Committee were tabled at the 36th session of UNESCO held in June 2012 and the
meeting accepted the conclusion of the HIA report that under the approved authorisation, Vele
Colliery mining activities will have no direct impact on the outstanding universal value of the
heritage property.
Operations
During FY2012 161,107 tonnes of ROM coal were mined (FY2011: nil tonnes) and processed,
producing 46,066 tonnes of saleable export quality thermal coal. The production of the first export
quality thermal coal in April 2012 allowed the railing of this coal from the Musina siding, located
55km from the mine, to the Matola Terminal.
Thermal coal yields are expected to improve as the opencast pit advances and the proportion of
weathered coal decreases. During the coking coal testing phase, the mine will continue to produce
export quality thermal coal to offset costs and avoid the build-up of unprocessed semi-soft coking
coal producing ROM stockpiles. Testing of the coking coal and the Eskom thermal coal products are
underway with AMSA and Eskom, both potential customers, as well as with independent
laboratories. This is the final step required to finalise the off-take agreements with potential
domestic and export customers.
Unit %
FY2012* FY2011** variance variance
ROM production 161,107 - 161,107 100%
Total coal feed to plant 161,107 - 161,107 100%
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Saleable coal produced 46,066 - 46,066 100%
- Export coal 46,066 - 46,066 100%
- Middlings coal - - - -
Total coal sales - - - -
- Export*** - - - -
- Eskom - - - -
Numbers in the table represent tonnes. Vele Colliery yields will be included once production reaches steady state.
* No production at the Vele Colliery in FY2011 due to the suspension of operations pending the lifting of the IWUL suspension
**Production at the Vele Colliery commenced in February 2012
***Sales of export quality thermal coal produced by the Vele Colliery are included in total sales from the Matola Terminal
Product testing
Product evaluation and washability tests indicate that both a semi-soft coking coal with a 10% ash
and thermal coal can be produced simultaneously at the Vele Colliery. The thermal coal could either
be a higher yielding lower quality Eskom product or a lower yielding higher quality export product.
Initial testing has also confirmed that the semi-soft coking coal has a number of significant hard
coking coal characteristics however, due to higher volatiles and lower reflectance, is likely to be
classified as a semi-soft coking coal. Further detailed bulk tests on the 10% ash coking coal product
will be completed in the coming year.
Capital expenditure
Various additions to the Vele Colliery processing plant will be undertaken in order to simultaneously
produce two products, namely a semi-soft coking coal and a thermal coal product, and facilities to
enhance the recovery of the coking coal fine fraction due to the high quality of the finer size fraction
nature of the coal. These initiatives will further enhance the operational and financial performance
of the mine, creating additional value through higher yields on the coking coal products, additional
revenue from the thermal coal and lower operational costs from improved processing efficiencies,
reduced discard volumes and overall economies of scale.
The enhancements include:
- the addition of a froth flotation section to beneficiate the ultra-fines portion of the ROM;
- a permanent ROM coal handling section to replace the temporary facility planned only for
the initial phase of mining operations;
- the washing facility required for the co-generation of both coking coal and an export-grade
thermal coal product; and
14
- addition of a spiral fines upgrade section.
The technical work for the next phase has been completed with construction and commissioning of
various modules expected to be completed in phases with the total project completed in CY2013.
Makhado Project
The DFS finalised during the reporting period defined the resource base, exploitation of the
resource, processing methodology, product logistics, supporting surface infrastructure and bulk
services as well as the life-cycle financials. A preliminary review of the DFS undertaken by the CoAL
Board reflects that the resource will be most efficiently exploited by open-pit mining methods for
approximately 16 years. Further detailed product test work, including the potential for an
underground mining component, indicate that the Makhado Project will produce a hard coking coal
and a thermal product for the export and/ or the Eskom markets.
The NOMR application for the Makhado Project was submitted to the DMR in January 2011 and
during the reporting period independent experts advanced the baseline social and environmental
studies required for the application process. Interactions with interested and affected parties
continued during FY2012 and included the involvement of various government departments.
Interested and affected parties were consulted on the EIA, Environmental Management Plan
(“EMP”) and IWUL, with all final NOMR regulatory approvals for the project expected by late
CY2012/early CY2013.
As part of the consultation process for the Makhado Project, democratic election of the MCCCF
consisting of 35 member representing seven affected communities and/or villages, has facilitated
the discussions with the communities in the area. This forum provides an appropriate mechanism for
ongoing dialogue with these parties.
Studies to evaluate the various options to ensure the long-term supply and adequate availability of
water for the Makhado Project are on-going, including a further detailed assessment of the
infrastructure required to supply the water to the project. The IWUL technical and engineering
report is expected to be submitted to the DWA during the last quarter 2012 and the Company has
undertaken consultations in the region to determine both alternate and joint solutions for the
longer-term water requirements of the colliery and farming operations.
Work has progressed on the rail link for the project. In this regard the agreements to acquire
properties or servitudes are in the final stages of negotiation or implementation and the process of
transferring these properties and/or registering the servitudes is occurring in accordance with the
relevant terms of the agreements.
Furthermore, the 5MVA of bulk power required for the construction phase of the project has been
secured via an agreement with Eskom with the necessary financial guarantees in the process of
15
being established. The date for commencement of construction of the overhead lines and terraces
for the substation at the mine site has yet to be determined.
Product testing
The production scale testing of the Makhado Project bulk sample by AMSA at both the
Vanderbijlpark and Newcastle plants was completed during the period confirming that the 10% ash
product from a technical perspective could be used by AMSA in its South African coke operations.
CoAL and AMSA are currently in the process of finalising a commercial term sheet that would form
the basis of a future supply agreement once the project goes into production. Test work for
establishing potential secondary products was also completed which conceptually indicates that the
production of a secondary thermal coal product is feasible.
In accordance with the Letter of Intent signed with AMSA’s majority shareholder, ArcelorMittal
Limited on 16 April 2008, CoAL may sell between 2.5 and 5.0 million tonnes per annum (“mtpa”) of
Vele Colliery and Makhado Project coking coal on an indexed linked FOR price.
Exxaro Option
In 2009, the Company and Exxaro signed the Option to Participate Agreement (the “Option
Agreement”) to enable CoAL to acquire detailed exploration information previously compiled by
Iscor and in return for which, Exxaro retained the right to a 30% equity participation (the “Option”)
in the Makhado Project.
In the interim period, the Company and Exxaro undertook a detailed technical review and evaluation
process of the project. While the Company was pleased the product testing confirmed that the
Makhado Project will produce a hard coking coal and that the project economics are sound, on 28
September 2012, Exxaro formally notified the Company of its decision not to exercise its Option to
acquire a 30% interest and participate in the future development of the Makhado coal project.
The Company was advised by Exxaro that after consideration of the various alternative projects
currently in their growth pipeline combined with the current negative sentiments regarding the
global and local macroeconomic growth outlook, that Exxaro they will be focusing on existing
projects. The outcome of Exxaro’s decision coincides with the completion of various negotiations
regarding potential strategic investments with other third parties, either at group or project level,
culminating in the binding offer received from HEI to invest US$100.0 million in the Group, discussed
above and in today’s separate announcement.
Greater Soutpansberg Project (including the Chapudi transaction)
16
The November 2010 share purchase agreement between RTMD and Kwezi (collectively “the
Vendors”) and CoAL’s subsidiary, Keynote, in respect of the Chapudi Coal Project and related
exploration properties in the Soutpansberg coalfield for US$75.0 million, was amended to allow for
the sale of equity and shareholders’ claims to close separately.
CoAL received the consent required under Section 11 of the MPRDA, from the Minister of the DMR,
in respect of the sale of shares (equity close) by RTMD and Kwezi (collectively "the Vendors") in both
Chapudi and KME to Keynote. The consent results in the transfer of the entire share capital in
Chapudi and KME, the holders of the NOPR’s for the Chapudi Coal Project and related exploration
properties in the Soutpansberg coalfield.
The purchase consideration or the equity is to be settled in separate tranches as follows:
- the first tranche of US$29,357,545 for the sale of the equity, was paid in full in May 2012; and
- the final tranche of US$30.0 million for the sale of the equity will become payable on the earlier
of the receipt of a NOMR on any of the properties that form part of the transaction or two years
from the date upon which the conditions precedent for the equity sale were fulfilled.
The shareholder claims transaction closed on 27 September 2012 and the outstanding balance of
US$13,642,455 to settle these shareholder claims, totaling US$15,642,455 less the US$2.0 million
deposit, has been extended to 22 October 2012, with a view to further discussions on the revised
payment plan taking place.
Updated reserve and resource estimate
Keynote’s acquisition of the equity of Chapudi and KME facilitated the consolidation of various
contiguous tenements and the expansion makes CoAL a substantial holder of coking and thermal
coal NOPRs in the Soutpansberg coalfield, providing significant optionality and flexibility in the
planning of future mining projects. The Company updated its reserve and resource calculations
during the year to include the newly acquired properties.
The highlights of the updated resource estimates for Greater Soutpansberg include:
- Gross tonnes in situ increased by 429% to 7.957 billion tonnes from 1.505 billion tonnes;
- Total tonnes in situ increased by 404% to 6.443 billion tonnes from 1.279 billion tonnes;
- Mineable tonnes in situ increased by 209% to 2.004 billion tonnes from 0.648 billion tonnes;
- Total licensed area of 99,719 hectares;
- Acquisition cost of US$0.055 per MTIS tonne; and
-- Estimated valuation of US$0.74 and US$2.51 per tonne based on the Venmyn cost curves to
value the MTIS resource tonnes.
17
CoAL’s Soutpansberg coalfield NOPRs have been grouped into three consolidated regions, namely
Mopane, Makhado and Chapudi.
The Chapudi Region, situated to the west and along strike of the Makhado Project, represents the
most significant portion of the overall resource in the Greater Soutpansberg, consisting of the
Chapudi, Chapudi West and Wildebeesthoek areas.
The Makhado Region includes the Makhado Project comprising 8,190 hectares and represents the
most advanced exploration project in the Greater Soutpansberg. The Makhado Region consists of
the Telema and Gray combined area (previously referred to as the Makhado Extension), Mount
Stuart area to the east and, the Generaal area to the north.
The Mopane Region is approximately 10km north of the main Soutpansberg Coalfield and following
the acquisition, was consolidated with various additional NOPR’s already held by CoAL within the
Voorburg and Jutland areas. The region has been identified as a source of coking coal with further
potential to produce domestic and/ or export thermal coal products.
Chapudi Makhado Mopane Total
Region Region Region*
Area (hectares) 40,792 32,922 26,005 99,719
Gross tonnes in situ (billion tonnes) 6.399 1.286 0.272 7.957
Total tonnes in situ (billion tonnes) 5.119 1.090 0.234 6.443
Mineable tonnes in situ (billion tonnes) 1.318 0.467 0.219 2.004
*Figures stated for the Mopane Region resource refer only to the Voorburg area.
Soutpansberg Coal Bed Methane (“CBM”) Project
During the reporting period the CBM Project, in which the Company has a 50% interest, is in the
process of being registered with the United Nations’ (“UN”) internationally accredited carbon credit
programme. All of the necessary documentation has been completed and includes a letter of
support from the South African Department of Energy. Work on the carbon credit programme
continued during the period and CoAL compiled additional information for UN designated verifiers,
facilitating the review of technical and financial documentation regarding the gas utilisation and
greenhouse reduction required for the disposal of methane gas.
Work done on the initial project area has indicated that there is a possibility of coal bed methane in
the prospect area. The electro-seismic survey completed during the period, mapped the location of
18
the saline aquifers and further information on the coal bed methane will be identified once the
planned exploration boreholes have been drilled.
MARKETING
South African export coal prices were under pressure during the period declining 27% from US$119
per tonne in June 2011 to US$87 per tonne in June 2012. This was accompanied by softer global coal
market fundamentals, requiring producers to identify alternative markets for their coal. Weak ocean
freight rates have facilitated coal trade flows away from their traditional markets which combined
with weak global macroeconomics, led to downward pressure on global coal prices.
Subsequent to the financial year-end, significant supply response was triggered by the weakening in
coal prices, specifically from the US and Australia, resulting in the closure or curtailment at a number
of coal mining operations. The current global coal and foreign exchange fundamentals are placing
significant pressure on the marginal producer.
In late 2011, throughput volumes at the Richards Bay Coal Terminal increased from an annualised
rate of 70 mtpa to in excess of 80 mtpa and resulted in a reduction of available saleable coal in the
local market that was redirected for export. As a result, ROM tonnes previously available to purchase
in the local market to supplement coal production tonnages were no longer available and
contributed to the overall decline in the sales revenue and the profit margin during the period.
During the first half of the financial year the decline in thermal coal prices was offset in part by the
weakening of the exchange rates and during this period the South African rand weakened from an
average exchange rate of US$1.00=ZAR6.78 to US$1.00=ZAR8.12 during the six month period. From
January 2012 coal prices continued to decline with a relatively stable currency averaging
US$1.00=ZAR7.92 for the second half of the financial year.
Export sales of thermal coal from the Matola Terminal increased 55% to 1,662,204 tonnes (FY2011:
1,069,163 tonnes) due to the Company’s export allocation increasing from 1 mtpa to 3 mtpa from
March 2011. As a result of the Company’s increased export allocation being available for the full
reporting period (FY2011: three months), local sales of export quality coal decreased from 1,802,831
tonnes in FY2011 to 923,160 tonnes in FY2012. Sales of lower quality coal to Eskom, increased 37%
from 576,569 tonnes in FY2011 to 788,417 tonnes in the current year.
FINANCIAL REVIEW
The consolidated statement of comprehensive income differentiated for non-cash accounting
transactions is detailed below:
19
FY2012 FY2011
US$ US$
Revenues 243,842 261,425
Cost of sales (210,429) (223,483)
Gross Profit 33,413 37,942
Employee expense (30,685) (18,358)
Other expenses (26,535) (26,134)
Special projects cost (5,532) -
Take or pay port obligation (1,570) -
Other gain and losses (1,495) (1,663)
Operating lease expenses (1,449) (1,874)
Profit on sale of NiMag and other income 1,089 -
EBITDA (32,764) (10,087)
Depreciation and amortisation (70,000) (79,521)
Unrealised forex losses (46,964) (28,758)
Share based payments (5,005) (3,004)
Goodwill written off (1,191) -
Other income 6,895 -
Impairment reversals/ (losses) 324 (97,400)
Loss before net finance costs (148,705) (218,770)
Finance income 1,128 2,486
Finance costs (2,974) (1,822)
Loss before tax (150,551) (218,106)
Income tax credit / (charge) 11,643 (897)
Net loss for the year (138,908) (219,003)
The following information is a summary of the key financial results for FY2012:
- US$243.8 million (FY2011: US$261.4 million) in revenue generated for the year. Revenue from
coal sales of US$242.5 million (FY2011: US$229.2 million) was 6% higher year on year. With the
disposal of the NiMag operation during the year, US$nil million (FY2011: US$31.2 million) was
reported in the current year and the profit on disposal of $1.1 million is reported as part of
Other Income.
- Revenue from thermal coal sales increased by 6% from US$229.2 million in FY2011 to US$242.5
million in the current year, despite export coal prices decreasing 27% from US$119 per tonne in
June 2011 to US$87 per tonne on June 2012, which was offset by the 55% increase in export
tonnes sold in the current year of 1,662,204 (FY2011: 1,069,163).
- Gross profit for the year of US$33.4 million (FY2011: US$37.9 million) and the gross margin
percentage of 14% (FY2011: 15%) was lower year on year due to the exclusion of the NiMag
20
profit margin in the current financial year US$nil (FY2011: US$5.7 million). Gross margin
from coal sales increased by 4% to US$33.6 million (FY2011: US$32.4 million) due to the
change in sales mix with higher export tonnes sold and offset in part by weaker thermal coal
prices and higher logistics costs.
- Once-off costs of $5.5 million (FY2011: US$nil) in the current year relating to additional legal,
technical and regulatory work associated with the equity placement undertaken in
November 2011.
- Non-cash charges of US$115.9 million (FY2011: US$208.7 million) including:
o depreciation and amortisation of US$70.0 million (FY2011: US$79.5 million);
o unrealised foreign exchange losses of US$47.0 million (FY2011: US$28.8 million);
o share based payment expense of US$5.0 million (FY2011: US$3.0 million);
o goodwill of US$1.2 million written off (FY2011: US$nil);
o other income of US$6.9 million (FY2011: US$nil) relating to the reversal of warranty and
other provisions in respect of the NuCoal acquisition; and
o reversal of impairment losses of US$0.3 million compared to $97.4 million in the prior
year, principally as a result of the impairment of $87.5 million for Mooiplaats Colliery,
$5.1 million for NiMag and $4.7 million for Woestalleen.
- Adjusted operating loss before tax (excluding non-cash items) or EBITA of US$32.8 million
(FY2011: US$10.1 million) lower by US$22.7 million largely as a result of increased labour
costs associated with the increase in mining activity at Mooiplaats, once off capital raising
project costs and the exclusion of the contribution from NiMag disposed of in the current
financial year.
- Net loss after tax for the year, including non-cash items, of US$138.9 million (FY2011:
US$219.0 million) was US$80.1 million lower largely due to no impairment of assets in
FY2012 compared to US$97.4 million in the prior year.
- JSE reporting requirement: headline earnings loss for the year of US$0.2265 (FY2011: loss of
US$0.2291).
Of the total foreign exchange losses of US$48.9 million (FY2011: US$29.9 million), US$47.0 million
are unrealised (FY2011: US$28.8 million) and the remaining amount of US$1.9 million (US$1.2
million) are realised. The unrealized foreign exchange losses are as a result of the South African rand
weakening against the United States dollar. The rand weakened by 22% from ZAR6.78 at the
21
beginning of the financial year to ZAR8.27 at 30 June 2012 and, by 11% from an average rate of
ZAR6.99 in FY2011 to ZAR7.74 in FY2012.
Total impairment losses of $97.4m recorded in the previous financial year relate to the re-
assessment of the carrying value of the investments in Mooiplaats and Woestalleen as well as assets
held for sale. The auditors considered these assets fairly valued at the end of FY2012.
Depreciation and amortisation relating to the mining assets, plant and equipment decreased from
$79.5 million in FY2011 to $70.0 million in FY2012. The 12% decrease in this charge year on year was
due to a reduction in the estimated Vuna Colliery resource at is nears the end of its remaining life of
mine.
Total unrestricted cash balances and undrawn Deutsche Bank facilities of US$37.0 million (FY2011:
US$40.3 million) at year-end.
Disposal of the NiMag Group
During the reporting period, CoAL disposed of its 100% interest in the non-core NiMag Group by way
of a MBO. The Company disposed of its shares in the NiMag Group companies for a total of ZAR54
million (approximately US$6.5 million) of which 60% is being funded by a combination of equity
contributions and bank debt. The remaining 40% will be financed by an interest-bearing loan
provided by CoAL that is repayable over four years. The effective date of the transaction was 2 April
2012.
Disposal of the Holfontein Project
In early CY2012, the Company agreed to sell the Holfontein Project to South African-owned Govhani
Consulting for ZAR100 million (approximately US$12.1 million) and a continuing payment to CoAL of
ZAR2.00 (approximately US$0.24) per tonne of saleable coal produced by the project.
Govhani paid a CoAL deposit of ZAR9.0 million (approximately US$1.1 million) for exclusivity and to
conduct a detailed review of the project. If the transaction is successful, the total purchase
consideration will be reduced by this balance. Govhani was unable to satisfy all the transaction’s
conditions precedent by 30 June 2012 and the Company and Govhani are negotiating a potential
extension to this disposal process on a non-exclusive basis. The Company is also potentially inviting
offers from other potential bidders for this property.
Corporate review
The 2012 financial year has been a turning point for the Company, with a number of key
developments taking place on several fronts. Significant progress has been made in our relationships
with key stakeholders, including government and the various regulatory authorities in South Africa.
22
Overall, we have managed to overcome significant hurdles which will prove to be the foundation for
the delivery of CoAL’s objectives.
The newly formed strategic partnership with BHE through HEI’s binding offer, provides a strong
financial and technical partner for the business to realise the full potential for CoAL over the next
few years. The additional funding secured through the capital raising and the proposed additional
funding to be raised through the subscription for shares, will place the Company on a sound footing
going forward. The decision to migrate the primary listing from the ASX to the LSE is currently under
review, pending market conditions.
The consolidation of the Company’s footprint in the Soutpansberg coalfield, is the catalyst for the
future growth of the Company. The initiatives on the existing thermal operations are ongoing and
will in time, create the necessary outcomes. The progress made at the Vele Colliery and advancing
the Makhado Project bodes well for further positive developments in 2013 and beyond.
In conclusion, I take this opportunity to welcome CoAL’s new directors, thank the directors that
served on the board until recently and re-iterate the commitment of the Company to developing its
valuable assets in a responsible manner. Furthermore I am fortunate to have a competent,
dedicated and loyal team in place that have the desire and ambition to see CoAL succeed.
JOHN WALLINGTON
Chief Executive Officer
For more information contact:
John Wallington Chief Executive Officer Coal of Africa +27 11 575 4363
Wayne Koonin Financial Director Coal of Africa +27 11 575 4363
Shannon Coates Company Secretary Coal of Africa +61 89 322 6776
Sakhile Ndlovu Investor Relations Coal of Africa +27 11 575 6858
Jos Simson/Emily Fenton Financial PR (United Tavistock +44 20 7920 3150
Kingdom)
Chris Sim/Neil Elliot Nominated Adviser Investec Bank plc +44 20 7597 5970
Robert Smith JSE Sponsor Investec Bank Limited +27 11 286 7000
Charmane Russell/Jane Financial PR (South Africa) Russell & Associates +27 11 880 3924
Kamau or
+27 82 372 5816
About CoAL:
23
CoAL is an AIM/ASX/JSE listed coal exploration, development and mining company operating in South Africa. CoAL’s key
projects include the Vele Colliery (coking and thermal coal), the Greater Soutpansberg Project, including CoAL’s Makhado
Project (coking coal) and the Mooiplaats and Woestalleen Collieries (both thermal coal).
The Mooiplaats Colliery commenced production in 2008 and is currently ramping up to produce 1.6 Mtpa. The Woestalleen
Colliery, acquired through the acquisition of NuCoal Mining (Pty) Limited in January 2010, currently processes
approximately 2.5Mtpa of saleable coal for domestic and export markets. The Woestalleen Complex also incorporates
three beneficiation plants with a total processing capacity of 350,000 run-of-mine (ROM) feed tonnes per month.
CoAL’s Vele Colliery commenced production in Q1 2012. During the initial phase, the operation is targeting 2.7 Mtpa ROM
production to produce 1.0Mtpa of saleable coking coal. The Makhado Project, CoAL's flagship project in the Soutpansberg
coalfield, is well into the feasibility stage, with a draft Definitive Feasibility Study having been reviewed by the CoAL Board
in March 2012. An application for a New Order Mining Right for the Makhado Project was submitted in January 2011.
In May 2012, CoAL acquired the Chapudi coal project and several other coal exploration properties in the Soutpansberg
coal basin in South Africa, subsequently renamed the Greater Soutpansberg Project, from the previous owners, including
Rio Tinto. The Greater Soutpansberg Project is a consolidation of nine potential coking and thermal coal assets grouped
into three proximate regions, namely Mopane, Makhado and Chapudi. The acquisition of these assets strengthens Coal of
Africa’s position as one of the most substantial holders of prospecting and mining rights for coking coal in South Africa’s
*Soutpansberg coalfield.
The updated resource estimates are presented in detail in the "Independent Technical Statement for Greater Soutpansberg
Projects for Coal of Africa Limited, 31st May 2012" ("Technical Statement") prepared by Venmyn Rand (Pty) Ltd
("Venmyn"), which is available on the Coal of Africa website, www.coalofafrica.com.
Competent Person Statement
The information in this announcement that relates to mineral resources or ore reserves has been compiled by Ms C Telfer
(B.Sc. Hons. (Geol.), (DMS) Dip Bus Man Pr. Sci. Nat., FGSSA, MAusIMM, M.Inst.D) and Mr G Njowa (M.Sc. (Min. Eng), MRM,
B.Sc.Hons. (Min. Eng), Grad CIS, MSAIMM, Pr Eng, MIAS), both full time employees of Venmyn Rand (Pty) Ltd, who both
have relevant and appropriate experience and independence to appraise the coal assets. Both Ms C Telfer and Mr G Njowa
are considered “Competent Persons”, and each have more than five years relevant experience in the assessment
and evaluation of the types of coal exploration and mining properties presented in this announcement. Both Ms C Telfer
and Mr G Njowa consent to the inclusion of the resource information in these Presentation Materials in the form and
context in which it appears.
24
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