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December 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”)
December 2015 Quarterly Activities Report
1. The Waterberg Coal Project
The Waterberg Coal Company Limited (the Company) is a
participant in the Waterberg coal project joint venture
(the Waterberg Project), situated in the Limpopo
Province, South Africa. The Waterberg Project currently
has identified coal resources of 3.4 billion tonnes of
coal contained within the granted mining and prospecting
rights1.
Accruing from the various work streams and technical
studies that have been carried out to date, the Waterberg
Project now comprises the following projects:
- The Eskom Project;
- The Export Project; and
- The IPP Project.
Predicated upon funding being forthcoming, pursuant to
the proposed arrangements with Sibanye Gold Limited
(Sibanye) [as set out below], the Company continued to
advance the progress of the Waterberg Project and
associated activities.
1.1 The Eskom Project
Since the completion of the definitive feasibility study
(DFS), the project team have been engaged in value
engineering and optimisation studies for the Eskom
Project with a view to enhancing the bankability of the
project and reducing the cost of delivery of product to
Eskom Holdings SOC Ltd (Eskom). As at the date of this
report the joint venture partners in the Waterberg
Project (the Waterberg Project Partners) are in
discussions with Eskom for producing coal on a long term
basis.
1.1.1. Project Optimisation Study
Value engineering work on the Eskom Project advanced
during the quarter, including a revised model focusing on
optimising the output to produce either an Eskom product
1
See Appendix I for the Resource Statement.
or a combined Eskom and an independent power producer
(IPP) feed product.
The optimisation study also incorporated a revision of
the Waterberg Project’s mining plan and economic model
and now is in a position to discuss with Eskom supply
price with incremental supply tonnages and a range of
qualities to meet their range of boiler fuel needs.
1.2 The Export Project
During the 2015 financial year a DFS for a proposed
development of an export project mine was completed.
This proposed development would see production of up to
4 million tonnes per annum of high quality export thermal
coal product over a 3 to 4 year period.
An optimisation study for the Export Project is underway.
The significant focus of this optimisation study is the
review of the projects capital requirements with a view
to enhancing the viability of the project. The
optimisation includes consultation with world-class plant
designers and contract vendors for the mining and
processing facilities and services. The Waterberg
Project Partners are confident that the optimisation
process will derive positive outcomes resulting in
considerable reductions in capital funding requirements
for the project.
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 production of a higher quality
power station feed product for a proposed IPP to be
located within the confines of the Waterberg Project.
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.
1.2.1. Coal Processing Plant
The Waterberg Project Partners completed their evaluation
of build-own-operate (BOO) proposals during the quarter.
The Waterberg Project 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.
1.2.2. Mining Operations
Negotiations with a number of parties for the award of
the mining contract continued to advance during the
quarter. The bidding process, guided by the Waterberg
Project mining engineer, has progressed to a point where
we have indicative pricing on a ZAR/ROM per tonne which
is within the parameters of the Waterberg Project
Partners’ financial modelling and the costing in the DFS.
We have used this quarter to investigate alternative
mining contractors to ensure we have options available,
specifically regarding price and performance. It is
envisaged that the Waterberg Project will be a large
mining operation, by any measure, and multiple mining
contractors are not being ruled out.
1.2.3. Project Water Supply
During the quarter Ceenex (Pty) Ltd (Ceenex), an
independent management, technology and engineering
advisory firm, were briefed on the Waterberg Project
water plan using the Paarl Waste Water Treatment Facility
(the Facility). Ceenex has now provided the Waterberg
Project Partners with a proposed scope of work outlining
the work required to comply with the necessary
environmental, legal and physical project related tasks
in order to complete the water supply for the mining,
process and first stage power plant.
This scope of work is expected to take twelve months and
integrates well with the Waterberg Project development
plan. The deliverables from this exercise will include,
but not limited to, a water use licence, a cost effective
plan for the operation and management of the Facility and
the delivery of process water to the Waterberg Project
site.
The Waterberg Project Partners are also in ongoing
discussions with the South African authorities in
connection with the planned Mokolo Crocodile River Water
Augmentation Project that will supply adequate long term
water for the development of the Waterberg Project’s long
term IPP plans and the entire region.
1.2.4. Power Production for Project Construction Purposes
The Waterberg Project Partners continued discussions with
multiple parties regarding the onsite production of power
generation for the proposed mining project development.
SMEC Holdings Limited (SMEC), as consultants, will
provide guidance and advice to the Waterberg Project
Partners in respect of electricity generation plant
specifications to ensure achievement of optimal
technological configuration and operational efficiency
for the plant.
1.2.5. Export Product Offtake Arrangements
The Waterberg Project Partners are in discussions with
parties with respect to memorandums of understanding for
the initial export production offtake. 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
1.3 IPP - Power Transmission
As previously reported, the Waterberg Project Partners
have been carrying out preliminary work on the
incorporation of an IPP platform on the Waterberg Project
site.
During the quarter the study team continued its scope of
works. As part of this scope, the study consultants,
SMEC, concluded an investigation and study of the current
transmission capacity of the existing transmission
infrastructure available for the transmission of the
first stage planned IPP production. This verified that
the evacuation of the planned power production for the
first phase IPP is viable with the existing
infrastructure. Further power generation units will have
additional transmission capacity challenges, which will
be addressed when appropriate.
Additionally, during the quarter a number of critical
aspects of the IPP development study were completed,
including a technology survey which determined that
circulating fluidised bed technology was the most
appropriate for the Waterberg Project resource. There
were a number of positive reasons for this including,
inter alia, lower emissions and the ability to utilise
lower grade carbon fuel, thus maximising the yield or
carbon utilisation from the deposit. It also allows the
utilisation of the fines discard for fuel, minimising or
negating the need for tailings disposal.
2. South Australian Tenements
The Company holds exploration tenements EL5221 and EL5397
in the Gawler Craton, South Australia; these are
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.
On 29 September 2015 the Company entered into an
agreement with Stockworks Exploration and Mining Pty Ltd
(Stockworks) for Stockworks to acquire EL5397 in
consideration of an initial cash payment of $25,000, a
further cash payment of $75,000 on registration of the
transfer of the tenement and an ongoing 1% net smelter
royalty for the benefit of the Company for any type of
ore mined on the tenement. The transfer application
documentation is currently under consideration by the
South Australian Mineral Resources Division and is
expected to be effected by the end of January 2016. In
the interim the Company, in conjunction with Stockworks,
has effected renewal of the tenement and continued to
compile and validate exploration data relating to it.
Compilation and validation of exploration data continued
for EL5221. Further work has not been undertaken on this
tenement due to the Company’s focus on the Waterberg
Project. Consequently, the Company does not consider
this tenement to be core to its future business prospects
and has undertaken to seek expressions of interest from
potential buyers.
3. Corporate
3.1 The SBSA Facility and the Proposed Transaction with
Sibanye
The Company entered into a voluntary suspension of its
shares on 19 March 2015 whilst it conducted negotiations
with Standard Bank of South Africa Limited (SBSA) (and
other participants) (the SBSA Noteholders) with respect
to “refinancing” the SBSA convertible note facility (the
Facility).
On 15 September 2015 the Company and Firestone Energy
Limited entered into a term sheet with Sibanye whereby,
inter alia, Sibanye agreed provisional terms with SBSA
(as the Facility agent) to acquire the Facility.
As advised to the market on 17 September 2015, the
transaction contemplated with Sibanye was subject to due
diligence (legal, technical and financial); the due
diligence was expected to be completed by end of November
2015.
Sibanye has advised that due diligence has been completed
and, whilst they are desirous of pursing the transaction,
they wish to vary, inter alia, the terms of the proposed
transaction with the SBSA Noteholders. At the date of
this report, this variation has not been completed or
documented.
It is contemplated that once the variation with the SBSA
Noteholders has been documented a revised term sheet will
be entered into with all of the parties.
3.2 Annual General Meeting
The Company held its Annual General Meeting on 30
November 2015. All resolutions were passed on a show of
hands at the meeting. Dr Mathews Phosa was re-elected as
a Director.
Stephen Miller
Managing Director and CEO
The Waterberg Coal Company Limited
Appendix I: Resource Statement1 2
Coal Resource on all six Waterberg Coal Project Properties
under both Prospecting Permit and Mining Right
Resource Coal Ash % IM % Vol % CV TS %
Classification Resource* (ad) (ad) (ad) (Mj/kg) (ad)
(Mt) (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 3400 57.7 2.2 17.8 10.6 1.09
Resources
*Coal resource is based on a minimum thickness cut-off of 0.5m
Stephen Miller
Director & MD
The Waterberg Coal Company Limited
02 February 2016
JSE Sponsor:
The Standard Bank of South Africa Limited
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 Coenraad D van 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 Coenraad D van 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.
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