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THE WATERBERG COAL COMPANY LIMITED - September 2015 Quarterly Activities Report

Release Date: 29/10/2015 09:02
Code(s): WCC     PDF:  
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September 2015 Quarterly Activities Report

 The Waterberg Coal Company Limited 
(Incorporated in Australia) 
(Registration number ABN 64 065 480 453) 
ASX: WCC | JSE: WCC | ISIN: AU000000WCC9 
(“WCC” or “the Company”)
                                                                          
                                                                                                    
       September 2015 Quarterly Activities Report                                            ASX Release 
                                                                                                    
1.   The Waterberg Coal Project 
     The Waterberg Coal Company Limited (the “Company” or “WCC”)                            28 October 2015 
     is a participant in the Waterberg Coal Project (“WCP”) joint 
     venture, situated in the Limpopo Province, South Africa.  WCP                         THE WATERBERG COAL 
     currently has identified coal resources of 3.4 billion tonnes of coal                    COMPANY LIMITED 
     contained within the granted mining and prospecting rights.                            ABN 64 065 480 453 

     During the 2015 financial year a definitive feasibility study (“DFS”)                 Registered office: 
     for a proposed development of an export project mine was                    Level 2, 1 Walker Avenue West 
     completed.  This proposed development would see total                       Perth, Western Australia 6005 
     production of up to 4 million tonnes per annum of high quality                                  Australia 
     export thermal coal product over a 3 to 4 year period (the “Export 
     Project”).                                                                         Tel:+61 8 9485 0888 
     Since the completion of the DFS, the project team have been                       Fax: +61 8 9485 0077 
     engaged in value engineering and optimisation studies for the 
     Eskom Project with a view to enhancing the bankability of the                     South African office: 
     project and reducing the cost of delivery of product to Eskom                        Level 1, The Place,  
     Holdings SOC Ltd (“Eskom”).  Since the completion of the study a                        1 Sandton Dr 
     300,000 tonne bulk burn test has also been undertaken (by                                 Sandton, 2146  
     Eskom) to confirm the suitability of the coal for burning at the                           South Africa 
     designated Eskom power stations.  As at the date of this report 
     the Group are in discussions with Eskom for producing coal on a                     Tel: +27 10 594 2240 
     long term basis.                                                                   Fax: +27 10 594 2253 
                                                                                                     
     With respect to the Export Project DFS, an optimisation study is 
     current in progress.  The significant focus of this optimisation 
                                                                                              Contact: 
     study is the review of the projects capital requirements with a 
                                                                                         Mr Stephen Miller 
     view to enhancing the viability of the project.  The optimisation 
                                                                                       Managing Director & CEO 
     includes consultation with world?class plant designers and 
     contract vendors for the mining and processing facilities and 
                                                                                                   Or 
     services.  The Group is confident that the optimisation process will 
     derive positive outcomes resulting in considerable reductions in 
                                                                                               E?mail: 
     capital funding requirements for the project. 
                                                                                        info@waterbergcoal.net 
     A key focus of the optimisation study is to revise the original                   
     washing process plans to enable production of a higher quality of 
     coal suitable for the export market and to provide flexibility for                         Directors: 
     production of a higher quality power station feed product for a              Dr Mathews Phosa (Chairman) 
     proposed independent power producer (“IPP”) to be located                             Stephen Miller 
     within the confines of the WCP.  This power station product is                  (Managing Director & CEO) 
     planned to be stockpiled during the export grade coal mining                             Lee Boyd 
     phase until the potential IPP platform is completed.  Utilisation of               (Director & Company 
     this product as IPP feed will result in optimal resource utilisation.                    Secretary) 
     During the quarter the WCP Joint Venture Partners (“WCP 
     Partners”) and its consultants revised its original washing process                  ASX / JSE Symbol:  
     plans to enable production of a higher quality of coal suitable for                         WCC 
     the export market. 
     Additionally, the optimised plant design allows flexibility for 
     production of a higher quality power station feed product.  This 
 


     power station product is planned to be stockpiled during the export grade coal mining phase until the 
     potential IPP platform is completed.   Utilisation of this product as IPP feed will result in optimal 
     resource utilisation and a barren waste dump.   
2.   Coal Processing Plant 
     During the quarter WCP Partners commenced negotiations with experienced processing and services 
     providers for a build?own?operate (“BOO”) dual module plant, each with 550 tonnes per hour 
     capacity. 
     The proposed plant design configures a two?stage wash process providing greater flexibility in product 
     quality output.  The advantage of such a design is clearly an ability to optimise a given product output 
     mix to meet a range of commercial coal requirements including export quality, IPP platform feed stock 
     and Eskom specification product from the one plant.   
     The WCP Partners are confident that adopting a BOO strategy in conjunction with well experienced 
     operators will significantly reduce up front capital requirements and provide for a swift progression to 
     mining and production. 
     The WCP Partners expect to complete its evaluation of BOO providers during the September quarter. 
3.   Mining Operations 
     Negotiations with a number of parties for the award of the mining contract were advanced during the 
     quarter.  The bidding process, guided by our mining engineer, has progressed to a point where we 
     have indicative pricing on a ZAR/ROM per ton which is within the parameters of the WCP Partners’ 
     financial modelling and with the WCP Partners’ costing in the DFS. 
4.   Project Water Supply 
     In October 2014 WCP Partners advised they had entered into a memorandum of understanding with 
     the Lephalale Municipal Council (“LMC”) with respect to the Paarl Waste Water Treatment Facility (the 
     “Facility”) whereby the WCP Partners will take over the management and operation of the Facility for 
     the purpose of supplying water to the WCP. 
     During the quarter (August 2015) the Company WCP Partners advised that it had entered into an 
     formal agreement with LMC to take over the management and operation of the Facility for the 
     purposes of supplying water to WCP (the “Agreement”). 
     The Facility has a treatment capacity of 10 million litres per day or 3.64 million cubic metres per 
     annum.  This will provide WCP with sufficient water not only for its proposed Export Project 
     development but also stage 1 of its proposed IPP development which is currently under technical and 
     economic assessment. 
     The Agreement is a significant step towards the development of WCP which WCP Partners are 
     targeting a project start up for the Export Project towards the end of Q1 2016.   
5.   Project Optimisation Study – The Eskom Project 
     With the current focus on the Export Project and the IPP platform, value engineering work on the 
     Eskom Project remains a lower priority and will continue so until further direction is received from 
     Eskom in terms of advancing the status of negotiations with respect to the coal supply agreement.   
6.   Power Production for Project Construction Purposes 
     WCP Partners are in discussions with multiple parties regarding the onsite production of power 
     generation.  Guided by consultants, SMEC Holdings Limited (“SMEC”); who has extensive experience 
     with this sector, will provide guidance and advice to the WCP Partners in respect of electricity 
     generation plant specifications to ensure achievement of optimal technological configuration and 
     operational efficiency for the plant.  SMEC will also be assisting the WCP Partners to identify the most 
     pre?eminent project and funding partners. 


 
7.    Export Product Off?take Arrangements 
      Negotiations are ongoing with a number of international parties who have expressed considerable 
      interest in entering into a long term off?take arrangements for the export product that is expected to 
      be produced from the Export Project development. 
      The product specifications for the export product that are anticipated to be sold into long?term offtake 
      agreements are as follows: 
                                      Combined Total          Upper Zone            Lower Zone 
                                          Average               (03?15)               (17?20) 
               Ash (%)                     17.39                 24.73                 16.38 
               CV (MJ/kg) (ad)             25.99                 23.21                 26.37 
               Moisture (%)                 3.25                 2.51                  3.35 
               Volatiles (%)               24.86                 26.88                 24.59 
               Sulphur (%)                  0.71                 0.72                  0.71 
               Yield (%)                   71.52                 37.39                 76.19 
8.    Project Funding – The Export Project 
      Accruing from the preliminary results of the DFS and the optimisation studies for the Export Project, 
      the WCP Partners are in discussions with certain banks with respect to funding arrangements for the 
      proposed development.  Pursuant to the financing discussions, Snowden Mining Industry Consultants 
      Pty Ltd (“Snowden Group”) has been commissioned as independent technical experts to produce a 
      due diligence report for the purposes of project funding. 
      Accruing from the term sheet and the suite of transactions now proposed with Sibanye, it is 
      considered that a successful transaction will not only greatly enhance the export project development, 
      but also the economics and fundability. 
9.    IPP Strategy 
      As previously advised, the WCP Partners have been preparing preliminary technical and economic 
      models to determine the most appropriate, capital efficient and economical fashion in which to 
      facilitate the development of an IPP Project from feed stock generated from its proposed coal mining 
      projects.  
      WCP Partners are currently engaging with a number of parties, including mining and civil engineering 
      contractors on the mining project(s); and potential technology partners, IPP developers and financial 
      groups to partner with it in creating a new independent integrated energy company to be located 
      within the confines of the WCP mining project area. 
10.   South Australian Tenements 
      WCC holds 2 exploration tenements in the Gawler Craton of South Australia which are highly 
      prospective for gold and copper?gold mineralisation.  The Gawler Craton is host to large copper?gold 
      deposits such as Olympic Dam and Prominent Hill to the east, and gold deposits such as Challenger, 
      Tarcoola and Tunkillia in the west.   
      During the quarter, WCC continued to compile and validate exploration data relating to the 2 
      tenements and is assessing the prospectively of targets within the license holdings.  WCC has designed 
      work programmes to test these targets however these work programmes have not been carried out to 
      date due to the Company’s focus on the Waterberg coal projects in South Africa.  Consequently, The 
      Company does not consider these tenements to be core to its future business prospects and has 
      undertaken to seek expressions of interest from potential buyers. 
      On 29 September 2015 the Company accepted a deposit of $25,000 to effect an agreement with 
      Stockworks Exploration and Mining Pty Ltd (Stockworks) whereby Stockworks will acquire exploration 
      licence 5397 (EL5397) for a cash consideration of $100,000 comprising the deposit paid and a further 
      $75,000 on registration of the transfer of title to Stockworks. Additionally, a 1.0% net smelter royalty 
      for the benefit of WCC applies for any type of ore mined on the tenement  


11.    Corporate 
11.1   Refinancing the SBSA Facility 
       The Company entered into a voluntary suspension of its shares on 19 March 2015 whilst it progressed 
       negotiations with Standard Bank of South Africa Limited (“SBSA”) (and other participants) with respect 
       to “refinancing” the SBSA convertible note facility (the “Facility”).   
       On 15 September 2015 the Company and Firestone Energy Limited (“FSE”) (collectively the Waterberg 
       Coal Group (“WCG”)) entered into a term sheet with Sibanye Gold Limited (“Sibanye”) whereby, inter 
       alia, Sibanye, have agreed terms with SBSA (as Facility agent) to acquire the Facility held by SBSA.   
       It is proposed, subject to completion of due diligence and formal transaction documentation, the 
       Facility acquired by Sibanye will, upon the completion of a corporate restructure; and subject to the 
       various regulatory requirements and court, regulatory & shareholder approvals; be converted to 
       equity in the enlarged company.   
       The proposed restructuring will see WCC and FSE merge through a proposed scheme of arrangement 
       in accordance with the provisions of the Corporations Act (Cth) 2001.  The scheme of arrangement will 
       be subject to formal documentation, shareholder, regulatory and court approvals.   
       In addition to the acquisition of the Facility and the conversion of same into equity in the enlarged 
       group, Sibanye will: 
       a.        Contemporaneous with the acquisition by Sibanye of the Facility and the execution by the 
                 Parties of the transaction agreements and the provision by WCG Parties of the security, 
                 provide AU$8.5 million as additional working capital to WCG.   
       b.        Subject to shareholder approval and other Corporations Act (Cth) 2001 and ASX Listing Rules 
                 requirements, subscribe for shares based on a conversion price of AU$0.0154 per ordinary 
                 share in the capital of the consolidated WCG following the Corporate Consolidation (the 
                 “Loan”).  The consolidated WCG will issue the shares which are to be offset against the loan 
                 principal repayable by the consolidated WCG.   
       c.        Enter into a coal off?take agreement with WCG.  This agreement will specify the term, 
                 quantity, quality, target price and delivery of coal which will be produced and sold to Sibanye 
                 (or a nominated representative) for the purpose of Sibanye’s power requirements as part of 
                 the IPP Platform (to support Sibanye’s IPP/s). The Parties undertake that the terms of the off?
                 take agreement will be such that it conforms to international standard IPP debt financing 
                 requirements.  These coal sales will be in addition to the proposed 4 million tonnes of high 
                 quality export thermal coal product that WCG anticipate producing for the export market. 
       The proposed suite of transactions (with Sibanye) will be subject to due diligence and the completion 
       of the formal transaction documentation. 
       It is anticipated that the current voluntary suspension of the Company’s securities will remain until 
       completion of the due diligence and transaction documentation referred to above by Sibanye.   
       The Company will update the market as and when the various conditions precedents are satisfied. 
       It should be noted that the matters referred to in this announcement are subject to documentation 
       and a number of regulatory, court and shareholder approvals.   

 

Stephen Miller 
Managing Director and CEO 
The Waterberg Coal Company Limited 
                               



Updated Resource Statement1 2 

An Independent Competent Persons Resource Statement was prepared in October 2013 to reflect the 
increased borehole database following the completion of the 2013 drilling programme on the four farms 
covered by the Mining Right (Smitspan, Massenberg, Hooikraal and Minnasvlakte), and the two farms held 
under Prospecting Rights (Vetleegte and Swanepoelpan) and associated sample analysis on the WCP 
properties.  
The resource statement for the WCP stands at 3.4 billion tonnes.  This represents a substantial increase in the 
coal resource of the WCP properties. Previously SRK Consulting (Pty) Limited (December 2012) declared a Coal 
Resource of 1.183 billion tonnes on the two farms Smitspan and Massenberg. 
The resource statement was prepared on behalf of the Company by Gemecs (Pty) Limited in their capacity as 
Independent Competent Persons. 


Coal Resource on all six Waterberg Coal Project Properties under both Prospecting Permit and Mining Right 
Resource Classification Coal Resource* Ash %              IM %         Vol %      CV (Mj/kg)    TS %
                          (Mt)             (ad)          (ad)        (ad)      (ad)          (ad) 
Measured                 1314.51          57.6           2.2          17.9       10.7          1.00
Indicated                1247.2           57.4           2.3          17.8       10.7          1.13
Inferred                 838              58.5           2.2          17.6       10.4          1.19
Total Resources          3400             57.7           2.2          17.8       10.6          1.09
*Coal Resource based on minimum thickness cut?off of 0.5m

 

                                                      
1
  Please note that this information was prepared and first disclosed under the JORC Code 2004.  It has not been updated 
since to comply with the JORC Code 2013 on the basis that the information has not materially changed since it was last 
reported. 
2
  Competent Person Statement ? Gemecs (Pty) Limited was commissioned by the Company to undertake an Updated 
Independent Persons Geological Report for the Waterberg Coal Project.  The Coal Resources were estimated in accordance 
with the South African code for the Reporting of Exploration Results, Mineral Resources and Mineral Reserves (“SAMREC 
Code”), Australasian Code for Reporting of Exploration Results. Mineral Resources and Ore Reserves (“the JORC Code”) and 
South African National Standard (SANS 10320:2004) guidelines.  The information in this report that relates to Exploration 
Results, Mineral Resources or Ore Reserves is based on information compiled by Mr Coenraad D van Niekerk, Pr.Sci.Nat 
(Reg. No 400066/98), M.Sc Hons (Geology), MDP, an employee of Gemecs (Pty) Limited, who is a Fellow of the Geological 
Society of South Africa.  Mr Niekerk is a mining geologist with 38 years’ experience in the mining industry, sufficient 
experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is 
undertaking to qualify as a Competent Person as defined in the 2004 Edition of the Joint Ore Reserves Committee (JORC) 
“Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr Niekerk consents to the 
inclusion in the report of the matters based on his information in the form and context in which it appears.  Any 
discrepancy is due to rounding. 

29 October 2015

JSE Sponsor:  The Standard Bank of South Africa Limited



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