CoAL unveils Makhado plan
• Development plan for coking and thermal coal project priced at $75-$85m and will have a 12-month construction period, says CEO
Coal of Africa had devised a new, lower capital cost development plan for its Makhado coking and thermal coal project in Limpopo, which would cost about R1.15bn and have a 12-month construction period, CEO David Brown said on Friday.
Coal of Africa (CoAL) has devised a lower capital cost development plan for its Makhado coking and thermal coal project in Limpopo, which will cost $75-$85m and have a 12-month construction period, CEO David Brown says.
South African mining companies have taken a more cautious approach to new developments in the past two years amid extended regulatory uncertainty, which has also made lenders more risk averse.
CoAL originally intended to build Makhado at a cost of $406m to produce 2.3-million tonnes a year of hard coking coal and 3.2-million tonnes of thermal coal after 26 months of construction. Under the new plan, it will produce about 0.70.8Mt/year of hard coking coal and 0.9-1.0Mt/year of export quality thermal coal, with potential to expand in future years.
The Industrial Development Corporation will lend up to R240m to advance the Makhado project for a 5% stake, while black empowerment investors own 26%.
CoAL’s 69% share of the funding needed for construction will be raised 60:40 from debt and equity, once offtake agreements have been secured, Brown said on Friday. Construction is expected to begin in the 2019 financial year.
CoAL generated no revenue in the year to June, but reduced the bottom-line loss to $10.2m, from $13.1m as a result of lower depreciation, forex gains rather than losses and reduced expenses. No dividend was declared. The firm held $9.65m in cash at the end of June, down from $19.5m a year previously.
It has sold its suspended Holfontein mine to Taung Gold for $1.9m and negotiations to sell the Mooiplaats colliery are advanced, Brown said. Originally CoAL expected to raise R150-R250m from Mooiplaats, but it has been difficult to sell and Brown said he could not give details at this point.
Earlier in 2017, CoAL bought a cash-generating asset, the Uitkomst Colliery, from Pan African Coal for R275m. Uitkomst produced 508,510 saleable tonnes of coal in the year to June and is expected to produce a similar amount in the following year.
CoAL intends to increase the current BEE shareholding in Uitkomst, which is 9%, to comply with current legislation.
Brown said CoAL was look- ing at acquiring another cashgenerating asset, which could add 1-million to 3-million tonnes a year and help to cover overhead costs, although this would depend on cash available from the sale of assets.
CoAL’s Vele mine, on care and maintenance, is waiting for final approvals to divert two streams before making a decision on investing in a plant modification project, which will depend on market conditions.
Brown said short-term supply constraints had pushed up coking and thermal coal prices and trends were positive for longer-term price growth.
Brown said CoAL, which is listed in London, Johannesburg and Australia, was considering delisting from Australia, where few of its shares were held.
COAL’S 69% SHARE OF FUNDING NEEDED FOR CONSTRUCTION WILL BE RAISED 60:40 FROM DEBT AND EQUITY