First coal at Penumbra by 2011

CONTINENTAL Coal has moved further in its strategy of increasing production of export-quality coal with the board approving underground development at its Penumbra thermal coal mine in South Africa, with first coal expected in the fourth quarter of 2011.
First coal at Penumbra by 2011 First coal at Penumbra by 2011 First coal at Penumbra by 2011 First coal at Penumbra by 2011 First coal at Penumbra by 2011

Production at the Vlakvarkfontein mine, image courtesy of Continental Coal.

Lou Caruana

Continental, which completed the Vlakvarkfontein mine development seven months ago, has already begun preproduction works at Penumbra. The tender processing for the 84 million South African rand ($A12.36 million), 12-month mine development contract to full production is well advanced, Continental chief executive Don Turvey said.

“This achievement is an important milestone towards increasing our production of higher value export thermal coal and meeting our production goal of 7 million tonnes per annum run-of-mine coal by 2012,” he said.

“The commencement of preproduction activities at Penumbra reinforces the strategic importance of the Mashala acquisition to the company and its shareholders.

“As a result of this transaction we have been able to immediately access the export coal market from our production at Ferreira and it is now very satisfying to see the Penumbra mine development commence so rapidly after the acquisition has settled and at a time when the export coal prices at Richards Bay are in excess of $US110 per tonne.”

The project has total JORC-compliant resources of 25Mt contained within the C-lower coal seam at an average seam height of 1.8 metres and depths between 50m and 115m.

The project is to be developed as a conventional underground bord and pillar mining operation. Access to the coal seam will be achieved by establishing a portal and sinking twin declines at 8 degrees to the coal seam.

The declines will be about 200m long, one equipped with a conveyor and the second serving as a worker and material access route. The declines will also serve as the primary ventilation intakes of the colliery, each with airflow velocities within industry norms.

Two mechanised coal production sections are planned, each with a continuous miner. One section will be equipped with three shuttle cars, better suited to mid-seam mining heights, and one section equipped with battery haulers, better suited to low-seam mining heights.

The total forecast development cost of the project is 284 million rand, which includes a contingency of 23 million rand and is to be funded by Continental from existing equity funds and secured debt and equipment leasing facilities.

The development costs cover all surface and underground infrastructure, construction, portal and decline; equipping two production sections with conveyer and services infrastructure; and the continuous miners and shuttle cars or battery haulers.

Continental has provided the surface contract tender documents to six shortlisted civil contractors in South Africa. The civil contract includes the portal development, is valued at more than 32 million rand and will be completed over a four-month period.

Contract submissions are currently being reviewed by Continental’s executive management and the final award of the contract will be made early in January 2011 with the selected contractor required to mobilise to site in February.

At full production, the Penumbra underground mine is forecast to produce 750,000tpa of ROM coal over an initial 13-year mine life.

First coal production is expected in the fourth quarter 2011, ramping up to reach full production in the third quarter of 2012. The ROM coal will be beneficiated in the existing 300 tonnes per hour coal processing plant and railed through the load-out facility located alongside the Anthra railway siding.

Penumbra is forecast to produce 500,000tpa of a primary export thermal coal product (27.5 megajoules per kilogram) and 120,000tpa of a secondary domestic-quality thermal coal product (minimum 20MJ/kg). The overall yield is 81%.

The export thermal coal will be railed from the Anthra rail siding to the Richards Bay Coal Terminal under Continental’s existing contracts with state-owned operator Transnet Freight Rail, and sold to EDF Trading under the existing coal offtake agreement.

Average total free-on-board costs for the primary export coal product over the mine life are forecast at 418 rand per tonne (about $US61/t) in real terms.

“We are delighted to be able to announce the commencement of preproduction and construction activities of the Penumbra coal mine,” Turvey said.

“The Penumbra mine will use existing processing and rail and port infrastructure and will have a significant impact on the company's future earnings and growth.”

Penumbra is located in the Ermelo coalfield, just south of the town of Ermelo in Mpumalanga Province. The project is less than 3 kilometres from Continental’s producing Ferreira open cast mine and 2km from its coal processing and Anthra railway siding on the coal line to Richards Bay, where Continental is currently exporting about 40,000t a month of thermal coal.

The Penumbra project is fully permitted with a new order mining right awarded by the Department of Minerals and Resources and an environmental management plan approved by the Department of the Environment in March 2010.

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