Wrap Text
Report For The Quarter Ended 30 June 2017
Cash Generator Acquired And Project Funding Drawdown
Coal of Africa Limited
(Incorporated and registered in Australia)
Registration number ABN 008 905 388
ISIN AU000000CZA6
JSE/ASX/AIM share code: CZA
ANNOUNCEMENT 31 July 2017
REPORT FOR THE QUARTER ENDED 30 JUNE 2017
CASH GENERATOR ACQUIRED AND PROJECT FUNDING DRAWDOWN
Coal of Africa Limited (“CoAL” or “the Company”) which operates in South Africa, together with its
subsidiaries, hereby provides its update for the quarter ended 30 June 2017 (the “Quarter”). All figures are
denominated in United States dollars unless otherwise stated. A copy of this report is available on the
Company's website, www.coalofafrica.com.
Salient operational features
- No lost-time injuries (“LTIs”) recorded during the Quarter (FY2017 Q3: nil).
- Mooiplaats Thermal Coal Colliery (“Mooiplaats Colliery”) and the Vele Coking and Thermal Coal Colliery
(“Vele Colliery”) remained on care and maintenance.
- The suspension of the Integrated Water Use Licence (“IWUL”) for the Makhado Coking Coal Project
(“Makhado Project” or “Makhado”) was lifted by the South African Minister of the Department of Water and
Sanitation (“DWS”).
Corporate and financial features
- Pan African Resources Coal Holdings (“PAR Coal”) was acquired from Pan African Resources Plc for a
purchase price of R275 million (US$20.5million) on 30 June 2017, of which R25 million (US$1.9 million) is
deferred.
- Successful placement of US$3 million by M&G Investment Management Ltd (“M&G”), US$10 million by
Summer Trees Pte Ltd and the conversion of the balance of US$0.2 million of the Yishun Brightrise
Investment PTE Limited (“YBI”) loan to equity.
- The first drawdown of R120 million (US$9.2 million) from the Industrial Development Corporation (“IDC”)
was completed.
- Repayment of the final balance owing to Rio Tinto for the acquisition of the Greater Soutpansberg Project
(“GSP”) assets of US$8.2 million.
- Available cash at period end of US$9.7 million and restricted cash of US$0.05 million.
- Positive coking and thermal coal price movements over the Quarter principally due to market supply
constraints.
QUARTERLY COMMENTARY
Acquisition of the Uitkomst Colliery
During the Quarter, the Company completed the acquisition of PAR Coal, 91% owner of the Uitkomst Colliery,
for a purchase price of R275 million (US$20.5 million).
The Uitkomst Colliery is a high grade thermal export quality coal deposit with metallurgical applications, which
is situated in the Utrecht coalfields in KwaZulu Natal. The Uitkomst Colliery consists of an existing
underground coal mine and a planned life of mine extension. The operating mine is easily accessible and
well-established. Existing infrastructure such as power supply, water supply, buildings, workshops,
weighbridge, water storage and management facilities are all in place. The Uitkomst Colliery currently
employs approximately 520 employees (including contractors).
For the year ended 30 June 2017, prior to the effective date of acquisition, the Uitkomst Colliery reported five
LTI’s. This will be a focus point for CoAL in the year ahead. The plant produced 508,510 tonnes which
consisted of 458,350 mined tonnes and 50,160 bought in tonnes.
Makhado Coking Coal Project – Soutpansberg Coalfield (100% owned - 74% post BBBEE transaction)
The Makhado Project recorded no LTIs (FY2017 Q3: nil) during the Quarter.
During FY2016 Q2, the Makhado Project was granted a twenty year IWUL. This was appealed by the Vhembe
Mineral Resources Forum and other parties and the IWUL was automatically suspended under Section 148(2)
(b) of the South African National Water Act No. 36 of 1998. During this Quarter, pleasingly, the suspension
was lifted by the South African Minister of the DWS. As a result, the Makhado Project moves closer to
becoming fully permitted.
It is noted that the regulatory process is time consuming and complex but it is an appropriate process as once
completed it ensures a measurable framework for both State and Company. The Company remains
committed to pursuing the permitting completion process as efficiently as possible.
Baobab Mining and Exploration Proprietary Limited (“Baobab”), a subsidiary of CoAL, is the operating entity
for the Makhado Project and holds, in addition to the IWUL, the Environmental Authorisation (“EA”) and the
mining right.
Originally Makhado’s development plan included a twenty six month construction phase followed by a four
month ramp up to achieve a production rate of 5.5 million tonnes per annum (“mtpa”) with a capital
requirement of US$281 million. While the Company has progressed with the regulatory matters, it has started
a process of reviewing Makhado’s development plan which entails, re-assessing its strategy, which may or
may not result in a reduced capital expenditure, a lower production rate and a shorter construction period
through to earlier than planned production, with an extended mine life. This revised strategy would also look to
incorporate a manageable marketing and funding plan. Despite the proposed lower output Makhado would
still look to deliver positive returns for shareholders. A detailed report on the revised strategy for Makhado is
due to be reviewed by CoAL’s Board in September 2017.
CoAL remains committed to the sustainable development of the Makhado Project, recognising its potential to
drive significant socio-economic transformation. The Company continues to engage with all stakeholders to
ensure the on-going implementation of a co-existent model, seeking co-operation between mining, agriculture
and heritage land uses.
CoAL continues to monitor the process of ownership for certain surface rights on which the project will be
constructed.
Mooiplaats Thermal Coal Colliery – Ermelo Coalfield (74% owned)
The Mooiplaats Colliery remained on care and maintenance throughout the Quarter. No LTIs were recorded
during the period (FY2017 Q3: nil).
CoAL continues to be committed to delivering a successful sale of the Mooiplaats Colliery as soon as possible
and a number of interested parties remain at various different stages of financial assessment and completion
of the due diligence process.
Vele Coking and Thermal Coal Colliery – Limpopo (Tuli) Coalfield (100% owned)
The Vele Colliery remained on care and maintenance throughout the Quarter. No LTIs were recorded during
the Quarter (FY2017 Q3: nil).
CoAL awaits the granting of an IWUL by the DWS, which is the final approval required to complete the
regulatory approvals process for the stream diversion in respect of the Plant Modification Project. Once all
regulatory approvals are in place, the Company will be in a position to consider current market pricing and off-
take agreements to conclude on an investment decision favourable to the Company.
Greater Soutpansberg Project (MbeuYashu) (74% owned)
The MbeuYashu Project recorded no LTIs (FY2017 Q3: nil) during the period.
No further developments to report during the Quarter.
IDC Loan
During the Quarter, the Company completed its first drawdown of R120 million (US$ 9.2 million) of the loan
agreement with the IDC and Baobab for the Makhado Project. The loan’s proceeds are being used to advance
the operations and implementation of the Makhado Project.
The loan funding is subject to the following conditions:
- The IDC advancing to Baobab in two equal tranches (first tranche completed) of R120 million
(US$9.2million) upon written request from Baobab;
- Each Tranche having a three-year repayment period and accruing interest at a real after-tax rate of
16% per annum;
- Subject to the provisions of the Loan Agreement, CoAL standing surety for Baobab's obligations to
ensure repayment of the loan amount in instances in which Baobab defaults on such payments;
- CoAL issuing to IDC warrants (in respect of CoAL shares) pursuant to each advance date as soon as
the relevant shareholder approval for the issue has been received. The warrants relating to the first
drawdown will be issued in due course. Approximately 48 million warrants are to be issued at South
African 0.60 cents per share;
- Baobab and CoAL providing the IDC with warranties, representations and undertakings which are
customary in a loan funding agreement of this nature;
- IDC having the right to appoint one director to the Boabab board and to be a member of the Makhado
Project steering committee during the loan repayment period; and,
- Upon each advance date, Baobab issuing new ordinary shares in Baobab to the IDC, equivalent to
5% of the entire issued share capital of Baobab at such time. CoAL's shareholding in Baobab will be
diluted accordingly. Notwithstanding such dilution, CoAL will retain a majority shareholding in Baobab
of not less than 64%.
The 5% of Baobab’s shares for the first tranche have been issued and the shareholding is now as follows:
- CoAL 69%;
- Makhado Colliery Development Trust 20%;
- Yoright Investments Proprietary Limited 6%; and,
- IDC 5%.
Corporate
CoAL has continued to restructure its balance sheet and ensure that it is well positioned to unlock shareholder
value in the near-term from its flagship Makhado Project. As part of this restructuring, the Company has
recognised the limited cash flow to be generated during Makhado’s pre-production phase over the next two
years. The acquisition of the Uitkomst Colliery therefore represented a highly compelling and attractive value
proposition that CoAL believes will provide immediate cash flows to support the Company as it continues to
progress with the development of the Makhado Project. In addition the Company will continue to progress the
sale of the Mooiplaats Colliery which will bolster the Company’s balance sheet with the sale proceeds but
equally important, it will also reduce CoAL’s annual overheads. The Company is still reviewing prospects for
the acquisition of a second cash generator which will represent another step in the process of becoming self-
sufficient.
CoAL also received confirmation that Fifth Season Proprietary Limited is in the process of funding its full and
final settlement of the outstanding balance to the Company which is subject to completion of certain
conditions precedent, regarding the disposal of the previously announced Opgoedenhoop Mining Right. The
Company continues to interact around the outstanding balance and is hopeful that it will be received in due
course. The capital balance outstanding is approximately R15million, including VAT, but excluding accrued
interest.
Markets
The hard coking price has reflected short term supply constraints owing to disruptions caused by weather and
infrastructure problems. The current price movement underpins the tightness of world supply and, as such, is
positive for longer term pricing. Thermal coal prices have also reflected more positive fundamentals in the
short term.
David Brown, CEO commented:
“I am pleased to report on an extremely positive Quarter for CoAL as it transitioned into a coal producer
following the successful conclusion of the acquisition of the cash generating asset, the Uitkomst Colliery. This
acquisition was achieved alongside the Company completing its first drawdown of the IDC loan and
importantly, the final legacy payment to Rio Tinto.
“Going forward, CoAL will remain focused on the sale of the Mooiplaats Colliery, in conjunction with
progressing the revised development strategy for the Company’s flagship asset, the Makhado Coking Coal
Project, which will deliver positive returns for shareholders in the near-term.”
Authorised by
David Brown
Chief Executive Officer
For more information contact:
David Brown Chief Executive Officer Coal of Africa +27 10 003 8000
De Wet Schutte Chief Financial Officer Coal of Africa +27 10 003 8000
Tony Bevan Company Secretary Endeavour Corporate +61 08 9316 9100
Services
Company advisors:
Matthew Armitt/Ross Allister Nominated Adviser and Peel Hunt LLP +44 20 7418
Broker 8900
Jos Simson/Emily Fenton Financial PR (United Tavistock +44 20 7920
Kingdom) 3150
Charmane Russell/Olwen Financial PR (South Russell & Associates +27 11 880 3924
Auret Africa) or
+27 82 372 5816
Investec Bank Limited is the nominated JSE Sponsor
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 producing Uitkomst Colliery (thermal coal), the Vele Colliery (coking and
thermal coal), the Greater Soutpansberg Project /MbeuYashu, including CoAL’s flagship Makhado Project
(coking and thermal coal).
AU: Coal of Africa Limited, Suite 8, 7 The Esplanade, Mount Pleasant, Perth WA 6153, Australia, Tel: +61 8 9316 9100, Fax: +61 8 9316 5475
ZA: South Block, Summercon Office Park, Cnr Rockery Lane and Sunset Avenue, Lonehill, 2191, Tel: +27 10 003 8000 Fax: +27 11 388 8333 Email: adminza@coalofafrica.com
Bernard R. Pryor – Chairman, David H. Brown – Chief Executive Officer De Wet O.Schutte - Chief Financial Officer
Non-executive directors: Peter G. Cordin, Andrew D. Mifflin, Khomotso B. Mosehla , Thabo F. Mosololi, Rudolph H. Torlage, Shangren Ding
Tenements held by CoAL and its Controlled Entities
Change
in
Project Name Tenement Number Location Interest quarter
Chapudi Albert 686 MS- Limpopo~ 74%
Project*
Bergwater 712 MS-- 74%
Remaining Extent and Portion 2 of Bergwater 697 74%
MS--
Blackstone Edge 705 MS 74%
Remaining Extent & Portion 1 of Bluebell 480 MS- 74%
Remaining Extent & Portion 1 of Bushy Rise 702 74%
MS--
Castle Koppies 652 MS-- 74%
Chapudi 752 MS -- 74%
Remaining Extent, Portions 1, 3 & 4 of Coniston 74%
699 MS--
Driehoek 631 MS-- 74%
Remaining Extent of Dorps-rivier 696 MS-- 74%
Enfield 512 MS (consolidation of Remaining 74%
Extent of Enfield 474 MS, Brosdoorn 682 MS &
Remaining Extent of Grootvlei 684 MS)--
Remaining Extent and Portion 1 of 74%
Grootboomen 476 MS- 74%
Grootvlei 684 MS-- 74%
Kalkbult 709 MS 74%
Remaining Extent, Remaining Extent of Portion 2, 74%
Remaining Extent of Portion 3, Portions 1, 4, 5, 6,
7 & 8 of Kliprivier 692 MS-
Remaining Extent of Koodoobult 664 MS- 74%
Koschade 657 MS (Was Mapani Kop 656 MS)- 74%
Malapchani 659 MS- 74%
Mapani Ridge 660 MS- 74%
Melrose 469 MS- 74%
Middelfontein 683 MS- 74%
Mountain View 706 MS- 74%
M'tamba Vlei 654 MS 74%
Remaining Extent & Portion 1 of Pienaar 635 MS- 74%
Remaining Extent & Portion 1 of Prince's Hill 704 74%
MS-
Qualipan 655 MS- 74%
Queensdale 707 MS- 74%
Remaining Extent & Portion 1 of Ridge End 662 74%
MS-
Remaining Extent & Portion 1 of Rochdale 700 74%
MS-
Sandilands 708 MS- 74%
Portions 1 & 2 of Sandpan 687 MS-- 74%
Sandstone Edge 658 MS- 74%
Change
in
Project Name Tenement Number Location Interest quarter
Remaining Extent of Portions 2 & 3 of 74%
Sterkstroom 689 MS--
Sutherland 693 MS- 74%
Remaining Extent & Portion 1 of Varkfontein 671 74%
MS--
Remaining Extent, Portion 2, Remaining Extent of 74%
Portion 1 of Vastval 477 MS-
Vleifontein 691 MS- 74%
Ptn 3, 4, 5 & 6 of Waterpoort 695 MS-- 74%
Wildebeesthoek 661 MS- 74%
Woodlands 701 MS- 74%
Kanowna M27/41 Coolgardie^ 3.81%
West and
Kalbara M27/47 3.81%
M27/59 3.81%
M27/72,27/73 3.81%
M27/114 3.81%
M27/181 7.89%
M27/414,27/415 3.81%
M27/493 3.89%
M27/494,27/495 7.89%
P27/1826-1829 3.81%
Abbotshall ML63/409,410 Norseman^ Royalty
Royalty
Kookynie ML40/061 Leonora^ Royalty
Royalty
ML40/135,136 Royalty
Makhado Fripp 645 MS Limpopo~ 100%#
Project
Lukin 643 MS 100%#
Mutamba 668 MS 100%#
Salaita 188 MT 100%#
Tanga 849 MS 100%#
Daru 848 MS 100%#
Windhoek 847 MS 100%#
Generaal Limpopo~ 74%
Beck 568 MS--
Project
Bekaf 650 MS- 74%
Remaining Extent & Portion 1 of Boas 642 MS- 74%
Chase 576 MS- 74%
Coen Britz 646 MS- 74%
Fanie 578 MS- 74%
Portions 1, 2 and Remaining Extent of Generaal 74%
587 MS-
Joffre 584 MS- 74%
Juliana 647 MS 74%
Change
in
Project Name Tenement Number Location Interest quarter
Kleinenberg 636 MS- 74%
Remaining Extent of Maseri Pan 520 MS- 74%
Remaining Extent and Portion 2 of Mount Stuart 100%
153 MT--
Nakab 184 MT-- 100%
Phantom 640 MS-- 74%
Riet 182 MT-- 100%
Rissik 637 MS- 100%
Schuitdrift 179 MT- 100%
Septimus 156 MT-- 100%
Solitude 111 MT- 74%
Stayt 183 MT-- 100%
Remaining Extent & Portion 1 of Terblanche 155 100%
MT--
Van Deventer 641 MS- 74%
Wildgoose 577 MS- 74%
Mopane Limpopo~ 100%
Ancaster 501 MS--
Project*
Banff 502 MS- 74%
Bierman 599 MS- 74%
Cavan 508 MS 100%
Cohen 591 MS-- 100%
Remaining Extent, Portions 1 & 2 of Delft 499 MS- 74%
Dreyer 526 MS-- 74%
Remaining Extent of Du Toit 563 MS- 74%
Faure 562 MS 74%
Remaining Extent and Portion 1 of Goosen 530 74%
MS --
Hermanus 533 MS- 74%
Jutland 536 MS-- 100%
Krige 495 MS- 74%
Mons 557 MS- 100%
Remaining Extent of Otto 560 MS (Now 74%
Honeymoon)-
Remaining Extent & Portion 1 of Pretorius 531 74%
MS-
Schalk 542 MS- 74%
Stubbs 558 MS- 100%
Ursa Minor 551 MS-- 74%
Van Heerden 519 MS-- 74%
Portions 1, 3, 4, 5, 6, 7, 8, 9, Remaining Extent of 74%
Portion 10, Portions 13, 14, 15, 16, 17, 18, 19, 20,
21, 22, 23, 24, 26, 27, 29, 30, 35, 36, 37, 38, 39,
40, 41, 44, 45, 46, 48, 49, 50, 51, 52 & 54 of Vera
815 MS
Remaining Extent of Verdun 535 MS- 74%
Voorburg 503 MS-- 100%
Mooiplaats Portions 1, 9,14,17,18,19,20 & Remaining Extent Mpumalanga~ 74%
Change
in
Project Name Tenement Number Location Interest quarter
Colliery and of Mooiplaats 290 IT
prospects
Portion 2, 3 and Remaining Extent of Klipbank 74%
295 IT
Portions 1, 2 and Remaining Extent of 74%
Adrianople296 IT
Portions 2 & 3 of Willemsdal 330 IT 74%
Portions 2, 3, 4 & Remaining Extent) of De 74%
Emigratie 327 IT
Remaining Extent and Portions 2, 5, 8,10 & 13 of 74%
Buhrmansvallei 297 IT
Klipfontein 442 IT 74%
Vele Colliery Portions of Overvlakte 125 MS (Remaining Limpopo~ 100%
and prospect Extent, 3, 4, 5, 6, 13, 14)
Bergen Op Zoom 124 MS 100%
Semple 155 MS 100%
Voorspoed 836 MS 100%
Alyth 837 MS 100%
Tshikunda Certain portions of Unsurveyed State Land known Limpopo~ 60%
as Mutale
Coal bed Limpopo~ 50%
Adelaide 91 MT
methane
Adieu 118 MT 50%
Alicedale 138 MT 50%
Armstice 120 MT 50%
Bergwater 697 MS 50%
Bergwater 712 MS 50%
Blackstone Edge 705 MS 50%
Bushy Rise 702 MS 50%
Chapudi 752 MS 50%
Charlotte 90 MT 50%
Chase 576 MS 50%
Cross 117 MT 50%
Doppie 95 MT 50%
Ettie 33 MT 50%
Fanie 578 MS 50%
Feskraal 85 MT 50%
Folorodwe 79 MT 50%
Fripp 645 MS 50%
Gray 189 MT 50%
Hettey 93 MT 50%
Jeannette 77 MT 50%
Joffre 584 MS 50%
Kalkbult 709 MS 50%
Laura 115 MT 50%
Lukin 643 MS 50%
Magazasand 123 MT 50%
Malapchani 659 MS 50%
Mountainview 706 MS 50%
Change
in
Project Name Tenement Number Location Interest quarter
Mount Stuart 153 MT 50%
Nakab 184 MT 50%
Naus 178 MT 50%
Neltox 92 MT 50%
Phantom 640 MS 50%
Prince’s Hill 704 MS 50%
Queensdale 707 MS 50%
Riet 182 MT 50%
Rochdale 700 MS 50%
Rynie 158 MT 50%
Salaita 188 MT 50%
Schuitdrift 179 MT 50%
Septimus 156 MT 50%
Stayt 183 MT 50%
Suzette 32 MT 50%
Tanga 648 MS 50%
Telema 190 MT 50%
Terblanche 155 MT 50%
Trevenna 119 MT 50%
The Duel 186 MT 50%
Truida 76 MT 50%
Van Deventer 641 MS 50%
Wendy 86 MT 50%
Wildgoose 577 MS 50%
Windhoek 649 MS 50%
Zisaan 31 MT 50%
Ziska 122 MT 50%
Portion of Unsurveyed state land 50%
* Form part of the Greater Soutpansberg Project
- Lapsed – Mining Right Application Lodged
-- Valid – Mining Right Application Lodged
~ Tenement located in the Republic of South Africa
^ Tenement located in Western Australia
# CoAL’s interest will reduce to 74% owned on completion of the Broad Based Economic
Empowerment transaction
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