Continental collects further backing for South African venture

AUSTRALIA-listed South African junior Continental Coal has entered an offtake and funding agreement with EDF Trading which will see it develop the Vlakplaats coal mine in South Africa.
Continental collects further backing for South African venture Continental collects further backing for South African venture Continental collects further backing for South African venture Continental collects further backing for South African venture Continental collects further backing for South African venture

Image courtesy of Continental Coal

Angie Tomlinson

Today’s arrangement follows last month’s deal with the EDF which will see the trader lend Continental $US20 million through the advance purchase of thermal coal from the Vaalbank, Project X and Vlakvarkfontein coal mines.

Under this week’s deal, EDF has agreed in principal to an offtake agreement for thermal coal production from Vlakplaats for 20 years at a market AP14 benchmark price free-on-board Richards Bay.

EDF has also been granted the option to provide another loan of $20 million through the advance purchase of thermal coal from Vlakplaats.

The offtake deals cover all of Vlakplaats’ sales of export thermal coal of 2.4 million tonnes per annum with first coal expected in the second half of 2011.

Based on current prices out of Richards Bay, the offtake agreement is worth about $155 million a year in revenue for Continental and $3 billion over the 20-year life of the mine.

Continental has also entered into another funding arrangement worth $27 million with a South African resources-focused investment consortium which will be used to develop Vlakplaats.

The funding will be provided under a five-year, structured debt facility.

Continental expects to produce 300,000 tonnes a month from its Vaalbank, Project X and Vlakplaats mines next year and has already started mining at the Vlakvarkfontein mine with sales to start next month.

Continental was trading steady this morning at 4.8c.

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