Universal’s open cast mine is in operation

SOUTH Africa-focused coal miner, Universal Coal, has started operations at its New Clydesdale Colliery’s (NCC’s) open cast mine after it concluded a five-year, 650 000 tons per year export contract with a global commodities trader, the company said.

The open cast operation is the second phase of the planned 3.3 million tons per annum run of mine NCC development, following the commencement of underground operations in September last year.

High quality

Located in Kriel in Mpumalanga, the NCC was initially meant to be “a large Eskom-linked operation” supplying the power utility with high quality coal in two phases – an open-cut mine delivering up to 2 million tons per annum run of mine thermal coal and an underground mine delivering up to 900 000 tons per annum run of mine high quality thermal coal.

But delays in securing a supply contract with Eskom prompted Universal Coal to pursue the low capital intensive underground development first.

The high quality coal from the development could be sold to the local and exports markets. A recovery in the global thermal coal markets encouraged Universal to consider exports.

“With both the Eskom and the long-term export offtake agreements now secured for NCC, the debt funding is now near complete, thereby having allowed for the commencement of the Roodekop opencast operation,” explained Universal’s chief executive, Tony Weber yesterday.

“Additionally, the long-term export coal contract provides us with significant exposure to the improved thermal coal export market and further advances our revenue diversification strategy.”

Weber said Universal expected NCC to generate robust cash flow, complementing contributions from Universal’s first mine at Kangala, Mpumalanga, thus positioning Universal well to fund future growth.

The high quality coal from the development could be sold to the local and exports markets.

Universal said during the December 2016 quarter, NCC delivered first export quality coal sales totalling 107 570 tons from the Diepspruit underground operation at NCC, ramping up from 27 710 tons in October to 42 860 tons in December.

The long-term export offtake contract for 650 000 tons per year with a major global commodities trader was for thermal coal which would be delivered on a free-on-rail basis over a five-year period.

“The export offtake contract is in addition to the long-term coal sales agreement that Universal entered into with Eskom in November 2016.

“The coal supply agreement is for a seven year period, with first coal delivery to commence at the end of the first quarter of (financial year) 2017,” said Universal.