The proposed deal is subject to various conditions and planned to take place in two transactions.
The first has Coal of Africa issuing 5.64 million fully paid ordinary shares to Limpopo for 20% of the project with this arrangement requiring shareholder approval by September 30.
Additional approvals are required for the second transaction for the issue of 1.99 million shares for the remaining 6% of Vele.
Coal of Africa said the acquisition will not affect the company’s black economic empowerment status at the corporate level.
The Vele project has a coal resource of 721 million tonnes.
Mining is expected to start in the last quarter of 2009 at an annualised rate of 1-1.5Mt, but the company has already signalled that additional funding is required to expand the mine to 5Mt per annum.
Shares in Coal of Africa are up 3.5c this morning to 145.5c.