Coal of Africa’s BBBEE plans for Makhado

Written by on June 20, 2013 in BEE Profiles, News, On the JSE - No comments xxx
Mining

JSE listed coal mining operation Coal of Africa said yesterday it has commenced discussions with potential Black Economic Empowerment (BEE) groups, including communities and strategic partners, for its massive Makhado operation.

This pronouncement was attached to a statement announcing release of a Class II Definitive Feasibility Study (DFS) for the Makhado coking coal project. Coal of Africa will have to move with caution in rolling out a BBBEE strategy to avoid conflict with stakeholders. Events surrounding the South African platinum belt and mainly in the North West province have displayed how sensitive stakeholder relations around mining have become.

On the study Coal of Africa chairman David Brown said “We are delighted to announce the results of our Feasibility Study on our flagship, Makhado Project. This high quality hard coking coal project will not only deliver robust economic returns but also contribute meaningfully to the economic development of the Limpopo province in South Africa”.

He said Makhado further provides South Africa with a new coking coal producing asset in the region, utilising established infrastructure for domestic and international markets. “The Makhado Project represents the future of the Company and is the first step in the development of a major 8 billion tonne resource across our Soutpansberg Coalfield”.

Added Brown “We have now embarked on the financing stage of the Makhado Project and have already commenced discussions with both potential Black Economic Empowerment (BEE) groups, including our communities and strategic partners. We are working towards a funding structure which will include debt funding, whereby CoAL retains majority ownership with the incoming partner’s contribution meeting CoAL’s full equity requirement for the Project. Our regulatory approval and funding requirements are targeted to be completed by H1CY14.”

Highlights of the study included the following:

Ø  12.6 million tonnes per annum (Mtpa) Run of Mine (ROM) which is expected to produce 2.3Mtpa of hard coking coal and 3.2Mtpa of thermal coal.

Ø  Favourable Internal Rate of Return (IRR) of 30.1% (unleveraged) and a Net Present Value (NPV) of R6.79billion (US$697m) at a real discount rate of 8%.

Ø  Mineable tonnes in-situ (MTIS) 344.8 million tonnes (Mt).

Ø  16 year Life of Mine (LOM) at a mine average gate cost of R865.00 (US$88.71) per saleable hard coking coal tonne (after thermal coal by- product credit).

Ø  Capital expenditure of R3.96 billion (bn) (US$406.3m) including contingency.

Ø  Non-discounted peak funding requirement is R4.2bn (US$432.8m).

Ø  Makhado has a hard coking coal (HCC) producing a metallurgical coke with a high coke strength after reaction (CSR) value above 60.

Ø  The Makhado Project benefits from excellent existing infrastructure with respect to rail, road, power and port allocation.

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