CoAL expects Makhado construction to start in 2016

COAL of Africa (CoAL) expects the 26-month construction phase of its Makhado colliery to begin in the first half of next year with a further four-month ramp-up phase that will see it produce 5.5 million tons a year.

CoAL is an emerging South African focused coal producer, which trades shares in London, Johannesburg and Australia.

Its key assets include the Limpopo-based Vele and Makhado projects, which produce thermal and coking coal. It also operates the Greater Soutpansberg project.

The company secured a new order mining right for Makhado in May, which saw its share soar on the JSE.

At the same time, it announced that it had entered an empowerment deal, in which communities could buy a 26 percent stake in the colliery.

It also received a section 11 approval, transferring the project from CoAL to its subsidiary, Baobab Mining and Exploration.

Quarterly report

CoAL said it was talking with the Department of Water Affairs for a water-use licence, which it expects shortly.

In its quarterly report to June released yesterday, CoAL said consultations were continuing with potential customers to secure off-take agreements for Makhado’s hard coking and thermal coal products and with potential project funders.

Chief executive David Brown said yesterday that the granting of a mining right for CoAL’s Makhado project was an important milestone, given that the project had the potential to stimulate domestic industrialisation once it had reached full capacity.

“The company can now move towards developing the colliery, which has the capability to produce hard coking and thermal coal, thereby capitalising on its proximity to underutilised rail infrastructure,” Brown said.

He added that the government’s go-ahead was an indication that CoAL was getting closer to extracting value from the project.

“We expect to finalise this process and the necessary offtake agreements with prospective customers by the end of the first half of 2016,” he said.

The company said it was preparing to set aside a court interdict seeking to halt any mining or construction activity against Makhado.

CoAL did not anticipate that this process would affect the Makhado Project construction timetable, the company said yesterday.

Its share purchase agreement with Blackspear Capital for the disposal of the Mooiplaats Colliery for R250 million lapsed after Blackpear was unable to agree on terms with a financial and operational partner to fund its acquisition.

CoAL said it was continuing discussions with Blackspear, as well as other potential purchasers.

CoAL’s shares declined by 1.41 percent to close at 70c on the JSE yesterday.