Wrap Text
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
5
Date: 29/10/2015 09:02:00 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.