Coal of Africa closer to sales contracts

COAL of Africa has increased the initial production from its Mooiplaats colliery in South Africa, while reaching a preliminary offtake agreement with two trading companies for the mine’s ramp-up next year.
Coal of Africa closer to sales contracts Coal of Africa closer to sales contracts Coal of Africa closer to sales contracts Coal of Africa closer to sales contracts Coal of Africa closer to sales contracts

Mooiplaats shaft entry portal.

Blair Price

The triple-listed company adjusted its forecasts last week and now expects Mooiplaats to produce 1.7 million tonnes of thermal coal next year.

In its latest quarterly report, Coal of Africa said the colliery was currently mining more than 30,000 tonnes of run-of-mine coal per month and had yielded over 49,500t of coal by the end of June.

The producer also gave an update on sales negotiations.

“The company has reached, in principle, an agreement with two international coal trading companies for a minimum of 70 per cent of the export thermal coal expected to be produced at Mooiplaats,” Coal of Africa said.

“Formal agreements will be concluded early in the next quarter. The terms and conditions proposed by the traders are favourable, offering significant upside over what are considered standard terms in the industry.”

To “reaffirm” its recently modified mine layout, the company is undertaking further vertical and horizontal drilling.

By the end of the June quarter, Coal of Africa said, 44 holes for the vertical drilling program were complete and the horizontal drilling had finished four holes covering 246m.

The company said the drilling results would be used to better determine the transition from lean to export-quality thermal coal.

For infrastructure development at Mooiplaats, Coal of Africa expects the second phase of its coal handling and preparation plant module to be commissioned in the December quarter, while the remaining road, conveyor and workshop facilities are planned to be completed by mid-August.

At its 74%-owned Vele coking coal project, Coal of Africa is expecting to announce the initial results of the feasibility study within the next two months.

MCC Contracts has been appointed to undertake the open cut mining and Coal of Africa expects a contract to be signed early in the next quarter.

“Exploration to gather geotechnical data for the assessment of the decline site conditions continued and exploration confirmed that the overall dip of the coal is 1 degree and not the previously modelled 2 to 3 degrees,” Coal of Africa said.

Infrastructure planning for the project is expected to be finalised during the next quarter.

First-phase 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 coking coal mine to a second-phase 5Mt per annum operation. .

Vele has a coal resource of 721Mt.

At its wholly owned Makhado coking coal project in the Soutpansberg coal field, Coal of Africa has acquired the surface rights to a farm property in the area to be used for establishing infrastructure.

Negotiations with other surface rights holders are ongoing.

Total drilling at the project for the first half of the year has covered 2322m.

The company said drilling confirmed the presence of other coal horizons in the overburden of the deeper coal to the north of the proposed open cut.

Coal of Africa has recently said market conditions would determine whether the development of Makhado would be based on full-scale production of 5Mtpa or a similar phased approach as taken at Vele.

The company’s wholly owned Holfontein coal project remains up for sale.

Early in the year, a possible sale to Lachland Star fell through as the interested company could not get shareholder approval.

Coal of Africa had no debt and a cash balance of $A87 million at the end of June.

Listed in London, Johannesburg and Australia, shares in Coal of Africa closed at $1.60 yesterday but climbed 5% in morning trade on the Australian Securities Exchange today.

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