Coal of Africa and BEE group Exxaro may link up

Coal of Africa (CoAL), the Australian Stock Exchange and JSE listed miner which has raised eyebrows for its activities around the world heritage site Mapungubwe, looked set to beef up its black economic empowerment (BEE) credentials through a partnership with local coal mining giant Exxaro.

In its report for the quarter ended March CoAL suggested that its potential partnership with Exxaro has come closer to realization after its board concluded the preliminary review of the a Definitive Feasibility Study (DFS) around the Makhado Coking Coal Project.  Exxaro has an option to acquire up to 30% of the Makhado Project following an intriguing 2009 agreement.

CoAL announced that it has Makhado Project DFS draft has been provided to Exxaro to undertake an initial evaluation of the project in order to facilitate further discussion, with a view to agreeing the valuation for Exxaro’s equity participation.

This is after CoAL acquired various properties previously owned by Iscor. It seems Exxaro which came out of the unbundling of Iscor earned a right to participate through equity partnership in these properties which include the Makhado Project. In its announcement CoAL said “In order for CoAL to acquire detailed exploration information previously compiled by Iscor, Exxaro retained the right to a 30% equity participation in any future project”.

The announcement added that “Exxaro’s majority 51% ownership by Historically Disadvantaged South Africans (“HDSA”) will enable CoAL to utilize their BEE credentials to achieve the minimum required level of 26% BEE ownership in the project by May 2014. Ownership will be at the project level and on this basis and assuming that Exxaro exercise their option in full, CoAL will achieve 30% BEE ownership in the project”.

Commenting on this and other developments CoAL CEO John Wallington said “The Company achieved significant milestones during the March quarter with progress on a number of fronts”. These include the completion of the commissioning of the plant at Vele Colliery, the controversial project around the Mapungubwe world heritage site.  Wallington said construction of the Vele Colliery’s first phase was completed, allowing for the final commissioning of the processing plant and delivery of an initial batch of thermal coal product to the Musina siding with the first sales expected in the June quarter. “Moving forward, we remain fully focused on improving operational performance at the two thermal mines, ramping up Vele to full production and continuing with our development activities on the Makhado, Greater Soutpansberg and Coal Bed Methane Projects. Collectively, these events beckon an exciting new chapter for CoAL, as the Company proceeds towards its goal of becoming a significant Southern African coal producer.”

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