Rail closure continues to plague CoAL quarterlies

DEPLETED resources, rail line closures and force majeures dramatically reduced production at Coal of Africa’s South African operations during the second quarter.
Rail closure continues to plague CoAL quarterlies Rail closure continues to plague CoAL quarterlies Rail closure continues to plague CoAL quarterlies Rail closure continues to plague CoAL quarterlies Rail closure continues to plague CoAL quarterlies

The bulk sample pit at the Makhado project in the foreground with coal stockpiles further behind it. Image courtesy Coal of Africa.

Staff Reporter

CoAL’s run of mine coal production fell by 79% to 188,921 tons, compared to the 911,563t mined in the previous quarter.

A train derailment on the Matola rail line to the export terminal of the same name in February resulted in the collapse of a bridge and the closure of the line from March to April.

The company declared a force majeure at its Mooiplaats, Woestalleen and Vele collieries, which it did not lift until May.

Export coal sales were also affected by the rail closure, decreasing 49% to 136,172t.

The closures affected production and earnings, with cash outflow from operations for the period at $US18.4 million due to the continued force majeure, which resulted in reduced export revenue and increased sales to the lower priced domestic middlings market.

The company reported revenue of $24.9 million and a total net loss of $39.7 million during the quarter, closing with $28.9 million cash.

In its operational report for Q4 of the 2013 financial year the tri-listed junior miner said total ROM production comprised 179,603t from the Mooiplaats colliery, down 4.2% on the previous quarter and 9318t from the Vele colliery, down 88.1%.

No ROM coal was produced during the quarter at the company’s Woestalleen complex as the Vuna colliery resource had been depleted.

“The remaining ROM coal stockpile of 28,329 tons was processed during the period producing 10,598 tons of export quality coal,” CoAL said.

“The company reprocessed discard dumps at the Woestalleen site to produce middlings quality coal and together with the discard from the export quality coal, produced 80,498 tons for sale to Eskom.”

Total coal produced for sale during the three-month period amounted to 225,655t, plunging 68% on the prior quarter, including a 97% drop in export coal produced to 10,687t and a 37% fall in middlings production to 214,968t.

CoAL said it expected to conclude the Section 189 process related to placing its Mooiplaats colliery on care and maintenance by the end of August.

The company announced in June that it had initiated many unsuccessful attempts over the past two financial years to make the operation profitable and was left with no other option but to close the mine, affecting about 290 workers and 258 contractors.

“Trading conditions remained challenging during the quarter with coal prices continuing their decline, placing further strain on the company resulting in the commencement of Section 189 processes at CoAL’s collieries and head office to rationalise costs,” executive chairman David Brown said.

During the quarter a fatality and three lost time injuries were recorded, with CoAL saying: “An increased focus on safety is underway.”

In April, a fatality was recorded at the Vuna colliery when an employee working for the rehabilitation contractor drowned in a pollution control dam.

“The incident was investigated by the company and the Department of Mineral Resources and has resulted in the implementation of additional preventative measures at the site,” CoAL said.

Definitive feasibility study results for the Makhado project were released during the quarter, confirming that the project has the ability to produce 2.3 million tons per annum of hard coking coal and 3.2Mtpa of thermal coal.

“The release of the Makhado project DFS is an important milestone for the company as it progresses its significant Soutpansberg coalfield coking coal resources,” Brown said.

“The Makhado project is the first step in the development of the Soutpansberg coalfield and, in addition to the submission of mining right applications for the Mopane, Chapudi and Generaal areas, indicates the company’s long-term development plans for the Limpopo province.

“Management will now focus on securing the required funding to develop CoAL’s flagship Makhado project.”

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