Wrap Text
CZA - Coal of Africa Limited - Report for the half-year ended 31 December 2011
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")
REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 2011
"Significant progress made at Vele, Makhado product testing confirms hard coking
coal"
Commenting on Coal of Africa`s performance for the six months ended December
2011, Mr John Wallington, Chief Executive Officer of Coal of Africa Limited
(CoAL), said: "The most significant development of the half-year was the lifting
of the suspension of the water licence at the Vele Colliery and the subsequent
commencement of maiden coal extraction and commissioning of the plant. We are
encouraged by progress at Vele and look forward to first sales in Q4 FY2012.
This progress at Vele, particularly the establishment of the agreements with key
stakeholders, is a strong indication on how far the Company has advanced in
forging a new approach to sustainable development.
"The Makhado Project Definitive Feasibility Study (DFS) was completed during the
reporting period, with all phases of design work and reporting complete. Further
work on identified `blue sky` potential commenced. Independent experts
progressed the baseline social and environmental studies required for the
project`s new order mining right (NOMR) application. The consultation process
with interested and affected parties continued and included the involvement of
various governmental departments. Further testing of the Makhado Project bulk
sample by Arcelor Mittal South Africa (AMSA) has been completed at both the
Vanderbijlpark and Newcastle plants. Product testing has confirmed that the
product is a hard coking coal.
"The Company`s decision to transfer the Mooiplaats Colliery to an owner-operated
mining operation during the period, together with the commissioning of a fifth
underground section, has seen improved production and product yields. These
changes are part of strategic and operational initiatives across the Company`s
thermal coal portfolio to identify further opportunities to add value to the
Mooiplaats and Woestalleen assets.
"Further progress on the Group restructuring occurred in the period, including
the disposal of the non-core assets namely, the Nimag Group and the Holfontein
thermal coal project. This restructuring, targeted for completion in June 2012,
alongside the successful capital raising in November 2011, will facilitate
development of the Makhado project and prospective Soutpansberg assets as the
Company advances the plan to move to the Main Market of the London Stock
Exchange.
Highlights
* Environmental Authorisation (EA) for the Vele Colliery granted and
suspension of the Vele Colliery Integrated Water Use Licence (IWUL)
lifted, allowing for the commencement of full operations from October
2011.
* Extraction at the Vele Colliery commenced in December 2011 with
approximately 16,800 tonnes of run-of-mine (ROM) coal stockpiled by
the end of February 2012. Wet commissioning of the plant and related
infrastructure completed in December and hot commissioning completed
by end of February 2012.
* 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 this natural
and cultural heritage site and to maintain and strengthen co-operation
between the parties.
* Memorandum of Understanding (MOU) signed with the Save Mapungubwe
Coalition, committing the parties to working together and
strengthening co-operation to ensure the sustainable development of
the Mapungubwe cultural landscape.
* Transfer to owner management of mining operations at the Mooiplaats
Colliery, together with the commissioning of a fifth underground
section, resulted in improved production and product yields.
* Total coal sales of US$143.8 million for the period (US$88.3 million
for the corresponding period 2011). Sales of export coal increased by
15.5% to 798,311 tonnes from 691,128 tonnes in the previous six
months, as a result of improved rail and port efficiencies. 2,283,298
tonnes (H2 FY2011: 2,263,417 tonnes) of ROM and 1,183,566 tonnes (H2
FY2011: 1,381,275 tonnes) of export-quality coal produced at the
Woestalleen and Mooiplaats thermal collieries.
* Signing of irrevocable undertakings by vendor shareholders and
extension of the time period to obtain regulatory approvals for the
acquisition of the Chapudi Coal Project from Rio Tinto Minerals
Development Limited/Kwezi Mining (Proprietary) Limited.
* Full Mineral Experts Report published and the placement of 130,000,000
shares raising approximately US$106 million together with the securing
a new US$40 million working capital facility with J.P. Morgan Chase
Limited.
* Further progress on disposal of the non-core assets including US$6.6
million for the Group companies of NiMag (Proprietary) Limited and
Metalloy Resources Investments (Proprietary) Limited (the NiMag
group).
* Total cash balance, available and undrawn facilities (excluding the
new bank facility of US$40 million) as at the end of December 2011 of
US$100.1 million.
Post-reporting events
* Agreement to sell the Holfontein thermal coal project (Holfontein
Project) for approximately US$12.7 million to Govhani Consulting
(Proprietary) Limited.
* BEE shareholder agreement signed for Chapudi
* UNESCO and DWA Heritage Impact Assessment presented to UNESCO in
January 2012
* Appointment of J.P. Morgan Equities Limited as JSE sponsor with effect
from 30 January 2012.
Commentary
Vele Colliery
The most significant development of the half-year was the lifting of the
suspension of the IWUL on 18 October 2011. This has enabled management to
complete construction of the infrastructural facilities, building of the plant,
and commence production at Vele at the end of the half-year, with the first
sales of coal expected in Q4 FY2012.
Furthermore, an MOU with the Save Mapungubwe Coalition and Coal of Africa was
signed on 24 November 2011. The Company and the Coalition share a commitment to
work together and strengthen co-operation in the interest of sustainable
development, preservation and protection of the Mapungubwe cultural landscape.
This innovative approach aims to set a benchmark for best practice in relation
to managing and mitigating the impacts of mining at Vele Colliery and related
activities, specifically the impact on water and heritage resources. The MOU
requires the signing of a MOA subject to which the Coalition has agreed to
withdraw legal proceedings and administrative appeals against the Vele
Colliery`s NOMR, EMP, IWUL and Section 24G authorisation.
Progress on converting the MOU into an MOA is progressing satisfactorily for
both parties. Significant information sharing has taken place between the two
parties to date in the spirit of the MOU. Once the review of specific technical
studies has been concluded, both parties will be in a position to conclude the
MOA.
This development follows on from the company`s commitment to work together with
the South African DEA and SANParks in respect of the Mapungubwe Cultural
Landscape World Heritage Site, enshrined in a MOA, announced on 1 September
2011. The MOA was concluded pursuant to conditions set out as part of the EA and
seeks to ensure the conservation and integrity of the cultural heritage site to
maintain and strengthen co-operation between CoAL, SANParks and the DEA.
The additional heritage impact assessment as required by the United Nations
Educational Scientific and Cultural Organization (UNESCO) and the DEA was
completed during the quarter and was presented to UNESCO in January 2012.
The mine commenced production in December and produced 118,000m3 of overburden
and 3,200 ROM tonnes of coal during the month. A further 500,000m3 waste and
13,600 ROM tonnes of coal were mined in January and February. Progress continued
with the plant and related infrastructure, with wet commissioning completed in
December. Product samples are being prepared for evaluation by ArcelorMittal
South Africa (AMSA) and other potential international customers.
Makhado Coking Coal Project
The DFS was completed during the reporting period, with all phases of design
work and reporting complete. Independent experts progressed the baseline social
and environmental studies required for the Makhado Project NOMR application. The
consultation process with interested and affected parties continued and included
the involvement of various governmental departments. Additional comments from
various interested and affected parties on the environmental impact assessment,
EMP and IWUL submissions were received and the IWUL Technical and Engineering
report is expected to be submitted to the DWA during H2 FY2012.
Further testing of the Makhado Project bulk sample by AMSA has been completed at
both the Vanderbijlpark and Newcastle plants. Coal samples have been prepared at
10%, 11% and 12% ash levels. In addition, individual and blended tests performed
by AMSA and additional independent analysis confirmed that the 10% ash product
performed well relative to other hard coking coals. Test work for establishing
potential secondary products was completed which conceptually indicates that the
production of a secondary thermal coal product may be feasible. The Makhado
Project DFS will be submitted to Exxaro Limited in terms of their option to
acquire up to 30% of the project.
An international consulting firm has been engaged for coking coal technical
assistance and support with off-take agreement negotiations. A product road show
to potential international customers for both the Makhado Project and Vele
Colliery is planned in March and April 2012.
Woestalleen Complex (Vuna Colliery & Woestalleen Wash Plant) - Witbank Coalfield
(100%).
Woestalleen
Vuna Colliery continued its outstanding safety record with not a single lost-
time injury recorded since start-up in 2008. Two lost-time injuries were
recorded at Woestalleen during the reporting period. No fatalities have been
recorded at this colliery.
Total ROM production from Vuna of 1 719 506 tonnes was 2.6% lower than the
comparative six month period of 1 764 830 tonnes primarily due to limited pit
room and a shorter month in December. Operational performance is expected to
return to normal levels over the next few months with 1.62Mt ROM projected for
the six months to 30 June and approximately 3.3Mt ROM for the full year.
Woestalleen produced 823,877 tonnes (H2 FY2011: 1,009,519 tonnes) of export-
quality coal and a further 334,123 tonnes (H2 FY2011: 161,346 tonnes) of lower-
grade product for Eskom Limited (Eskom), the South African electricity utility.
The overall plant yield marginally increased to 64.8% (H2 FY2011: 64.3%) due to
a selective mining initiative.
Strategic review of Mooiplaats Colliery - Ermelo Coalfield (100%)
Safety at Mooiplaats continues to be a focus area. Four lost-time injuries were
reported at the mine during the six months (H2 FY2011: four lost-time injuries).
The transition to an owner-managed mine at the end of June 2011 facilitated the
direct management of the operation, resulting in an improvement in overall
performance. The commissioning of a fifth underground section in September 2011
assisted in increasing production from 498,587 ROM tonnes in the previous six
months to 563,792 ROM tonnes despite challenging mining conditions and
infrastructure availability issues.
The challenging geological conditions are anticipated to continue for the
remainder of the financial year, resulting in a reduction in the full year
forecast to 30 June 2012 from 1.67Mt to approximately 1.3Mt.
Coal processed during the six months decreased to 621,816 ROM tonnes from
731,766 ROM tonnes during the previous six-month period. The reduction was due
to lower ROM coal purchases from 152,699 tonnes to 44,862 tonnes. The coal
processed yielded a total of 359,689 tonnes (H2 FY2011: 371,756 tonnes) of
export-quality coal and a further 69,654 tonnes (H2 FY2011: 110,948 tonnes) of
the lower-grade product.
A strategic review is in progress to identify and evaluate options available to
management with the primary objective to increase the underlying value of the
asset. In addition, an operational initiative, expected to identify potential
improvements in the mining process leading to sustainable levels of higher
production, is scheduled to commence during H2 FY2012. This process includes the
introduction of a support contract with equipment supplier Joy Mining to improve
the maintenance of underground machinery.
Marketing and logistics
Total sales tonnes achieved for the period were 1,741,188 (H2 FY2011:
1,665,209), of which 798,311 (H2 FY 2011: 691,128) were to the export markets.
Export sales increased by 15.5% compared to the previous six month period which
is attributable to improved rail performance, a slight recovery of market
conditions and increased capacity at the Matola Terminal in Maputo, Mozambique.
However, the international demand for South African coal, specifically from Asia
and Europe, remained subdued during the period due to continued concerns
regarding the European economy, larger than normal stockpiles in India, and
increased availability of lower-grade Indonesian coal. The demand for South
African coal increased towards the end of the six months and this trend has
continued in H2 FY2012.
Index-linked international coal prices were under pressure during the six months
with sales recorded at discounts to these indices. South African export coal
spot prices declined from just over $118 per tonne at the beginning of July to
approximately $102 in December, but these movements were offset by cost
reductions caused by a weakening of the South African rand against the US
dollar.
During the six months, Woestalleen sold 449,237 tonnes (H2 FY2011: 621,799
tonnes) and Mooiplaats sold 80,991 tonnes of export-quality coal (H2 FY2011:
124,388 tonnes) to domestic customers. Eskom purchased 344,390 tonnes (H2
FY2011: 106,003) of middlings coal from Woestalleen and 68,259 tonnes (H2
FY2011: 121,891 tonnes) from Mooiplaats.
Acquisition of Rio Tinto`s South African assets
The Company secured irrevocable undertakings from the vendor shareholders in
terms of the Sale and Purchase Agreement (SPA) for the acquisition of Rio
Tinto`s Chapudi Coal Project and related exploration properties (collectively,
the coal assets) in the Soutpansberg coal basin in the Limpopo Province. The
date for the fulfilment of the suspensive conditions in the SPA was extended
from 12 August 2011 to 30 April 2012, to allow for obtaining the remaining
regulatory approvals required. The transaction consolidates various tenements
and will make CoAL a substantial holder of coking coal new order prospecting
rights in the Soutpansberg coalfield when completed.
The Company is in the process of mobilising the exploration teams and finalising
the exploration programme for the various properties, which is expected to
further increase the resource base and unlock the potential value from these
assets.
Disposal of the NiMag Group
CoAL entered into a SPA for the disposal of its 100% interest in the non-core
NiMag Group by way of a management buyout. The Company will dispose of its
shares in the NiMag Group companies for a total of ZAR54 million (approximately
US$6.6 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 closing of the transaction is subject to certain conditions precedent normal
with a transaction of this nature, expected to be satisfied by the end of April
2012.
Disposal of the Holfontein Project
On 30 January 2012, the Company agreed to sell the Holfontein Project to South
African-owned Govhani Consulting for ZAR100 million (approximately US$12.7
million) and a continuing payment to CoAL of ZAR2.00 (approximately US$0.25) per
tonne of saleable coal produced by the project. Govhani paid an initial non-
refundable deposit of ZAR4.0 million (approximately US$0.5 million) to conduct a
detailed review of the project and a further ZAR5.0 million (approximately
US$0.6 million) upon signature of the agreement, enabling it to finalise the DFS
in order to complete the acquisition of the project. Upon completion of the
transaction, the total purchase consideration will be reduced by ZAR9.0 million
(approximately US$1.1 million).
Conditions precedent to closing the transaction include: Govhani completing the
DFS and obtaining the remaining funding for the project and approval of the
transaction by the Department of Mineral Resources (DMR), all of which are
required to be fulfilled by 30 June 2012.
Soutpansberg Coal Bed Methane Project
During the six months, Tshipise Energy (Pty) Ltd (Tshipise) a joint venture
between CoAL and BEE partner Vibrant Veterans (Pty) Ltd, completed the exercise
to collate desktop studies undertaken by Australian-based Geogas (Pty) Ltd
(Geogas) on the coal bed methane potential of the properties located in the
Soutpansberg coalfields, substantially in the same proximity as the various
coking coal projects the Group is currently involved in.
Geogas compiled desktop studies of the total area granted under Tshipise`s
1,578km2 exploration right and Tshipise will move into the next phase of the
exploration, including the drilling of additional holes and completing further
technical studies to prove up a potential coal bed methane resource in
accordance with the JORC code.
Financial Results
Revenue from the sale of coal for the six months totalled US$143.8 million
compared to US$88.3 million for the comparative period.
The loss for the six months under review amounted to US$74.7 million, including
various non-cash charges of US$68.8 million, or 13.36 cents per share compared
to a loss of US$66.5 million, including various non-cash charges of US$30.6m, or
12.30 cents per share for the prior corresponding period.
Foreign exchange losses total US$42.6 million of which US$37.7 million represent
unrealised losses arising from the translation of inter-group loan balances,
borrowings and cash. Depreciation of US$8.5 million and amortisation of US$19.5
million contributed further to the non-cash charges. The Company recorded a
further impairment to the carrying value of the assets classified as held for
sale, as the result of the exchange rate related adjustment in the carrying
value of the NiMag Group due to the depreciation of the South African Rand
against the United States dollar.
As at 31 December 2011, the Company had cash and available facilities of
US$100.1 million, excluding the US$40 million facility arranged with JP Morgan
Limited, compared to cash and available facilities of US$40.3 million at 30 June
2011.
Corporate activity
Work continues with the group restructuring and preparation for the migration of
the primary listing from the Australian Stock Exchange to the Main Market of the
London Stock Exchange by the end of 2012. In preparation for this change and
achieving further alignment of corporate advisors, CoAL appointed J.P. Morgan
Equities Limited as JSE sponsor with effect from 30 January 2012.
The Company issued 130,000,000 shares in November 2011, raising approximately
US$106 million (excluding expenses) and simultaneously published a Registration
Document, prepared in accordance with the Prospectus Rules of the Financial
Services Act (United Kingdom) made under section 73A of the Financial Services
Management Act, which satisfied a significant condition precedent to secure the
US$40 million new bank facility.
John Wallington
Chief Executive Officer
A presentation will be hosted at 1030hs CAT on 12 March 2012 with a simultaneous
webcast and conference call. Further information is available on
www.coalofafrica.com
12 March 2012
For more information contact:
John Wallington
Chief Executive Officer
Coal of Africa
+27 11 575 7423
Wayne Koonin
Financial Director
Coal of Africa
+27 11 575 6797
Shannon Coates
Company Secretary
Coal of Africa
+61 893 226 776
Sakhile Ndlovu
IR & PR Manager
Coal of Africa
+27 11 575 6858 or 27 83 306 7058
Chris Sim/Jeremy Ellis/Neil Elliot
Nominated Adviser
Investec Bank plc
+44 20 7071 4300
Jos Simson/Emily Fenton
Financial PR
Tavistock
+44 207 920 3150
Charmane Russell/Jane Kamau
Financial PR S.Africa
Russell & Associates
+27 11 880 3924
+27 82 372 5816
www.coalofafrica.com
Ruben Govender
Sponsor
J.P. Morgan Equities Limited
+27 11 507 0430
About CoAL:
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 Makhado Project (coking coal) and the Mooiplaats and
Woestalleen Collieries (both thermal coal).
The Mooiplaats Colliery commenced production in 2008. 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 ROM feed tonnes per month.
CoAL`s Vele Colliery commenced production in Q3FY2012. During the initial phase,
the operation is targeting 2.7Mtpa ROM production to produce 1Mtpa of saleable
coking coal. The Makhado Project, CoAL`s flagship project in the Soutpansberg
coalfield, is well into the feasibility stage, with a DFS completed. Application
for a new order mining right for the Makhado Project was submitted in January
2011.
In November 2010, CoAL agreed to acquire the Chapudi coal project and several
other coal exploration properties in the Soutpansberg coal basin in South Africa
from the previous owners, including Rio Tinto. Upon completion, the acquisition
of these projects will significantly extend the scale and scope of certain of
CoAL`s existing projects in the region and will more than double the resource of
the existing Makhado Project.
Date: 12/03/2012 08:41:01 Supplied by www.sharenet.co.za
Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.