Media coverage

3 February 2014

CoAL plan to restart Vele mine on track

Source: www.bdlive.co.za

COAL of Africa Ltd (CoAL) is confident it will have sufficient cash and debt resources to see through its plans to resume production from its Vele coal mine within the next 12-24 months, CEO David Brown said on Friday.

By the end of December the company had drawn down about half of the R210m, 18-month working capital facility secured from Investec.

It held about R44m in cash and expected to realise about R100m from the sale of its Woestalleen mining complex and Opgoedenhoop mining right once regulatory approvals were received.

CoAL has also granted an option to a third party to acquire its Holfontein project within the next year for R55m. Further, it has converted its stake in Lemur Minerals, which is listed on the Australian Stock Exchange, to a stake in Bushveld Minerals, which has a listing on London's Alternative Investment Market.

Mr Brown said CoAL planned to sell these shares in the second half of its current financial year. The miner holds 19.5-million of Bushveld's shares, which are trading at about 5p in London.

Excluding the Bushveld shares, that means CoAL has about R300m in current and due cash and debt. These consume about $4.5m to $5m a quarter.

Further, the miner will have to spend about R210m over the next year on plant modifications at the Vele mine.

Mr Brown said it was expected this cost of the plant modifications would be funded through debt and equity. All operations have been suspended at Vele while the plant is modified so that it can produce a number of different coking and thermal coal products.

This work is scheduled to be completed by the end of the calendar year and it will be followed by a production ramp-up period.

CoAL is negotiating a letter of intent with ArcelorMittal SA for an offtake agreement to supply Mittal with semi-soft coking coal for its steel-manufacturing business in South Africa.

Mr Brown said the fact that Mittal approved of the quality of the coal was a positive step.

In the longer term, CoAL also needs to find about $450m to develop its Makhado hard coking coal mine.

Mr Brown said this was still work in progress.

In the December quarter, CoAL produced only 7,068 run of mine tonnes of coal compared with 202,910 in the September quarter as it scaled down its loss-making collieries. Woestalleen and Mooiplaats are on care and maintenance, and while a buyer has been found for Woestalleen, the process of selling Mooiplaats is still under way.

Mr Brown said it was likely that the sale of Mooiplaats would be completed by June and the price has not been agreed yet.

CoAL's shares weakened about 1% to 112c on the JSE after the announcement.