JOHANNESBURG (miningweekly.com) – Loss-making coal junior Coal of Africa Limited (CoAL) has received board approval for the R220-million expansion of its Vele operation, CoAL executive chairperson David Brown said on Friday.

Brown, who was speaking to Mining Weekly Online in a video interview at the company’s presentation of widened losses, to $148-million in the 12 months to end June, said the construction would take place in the 2014 calendar year and expanded production begin in 2015.

An additional R30-million will be required to service the mine in its entirety, taking the total capital expenditure to R250-million.

By year-end the company is expected to be debt free with no gearing, which it sees as presenting opportunities for the achievment of future project funding.

The board size has been reduced from 12 directors to seven, headcount by 30% and cash burn from R240-million a year to R40-million a year.

The ASX-, Aim- and JSE-listed company will not be going to the market to raise the required capital after being successful in raising an 18-month R200-million credit-approved term sheet from a South African bank.

Coupled to the sale of five noncore assets, CoAL calculates that it will have adequate financial resources to tide it over the next couple of years from a corporate perspective.

From a project funding perspective, CoAL will be raising funding at the project level for Vele on the basis of the project economics being sufficiently robust to do so.

“That process is going to start now,” Brown told Mining Weekly Online.

For the medium-term Makhado project, CoAL will be looking to a combination of debt and equity at the project level to get that project under way for production in 2017.

“The intention is not to raise additional funding at the holding company level,” the former Impala Platinum CEO said.

Vele will enter a construction phase from October and begin producing 1.3-million tons of saleable semi-soft coking coal, plus sized and unsized thermal coal, at the end of 2015, when the outlook on semi-soft pricing is expected to be elevated from its current position.

Makhado is designed to produce 5.6-million tons of saleable product, split into 2.3-million tons of coking coal and 3.2-million tons of thermal product.

In the long-term are the Chapudi, Mopane and Generaal projects in the Soutpansberg, which could represent another three “Makhados” in terms of size and importance.

From being a mine that was losing money, CoAL is now repositioning itself as a project development company with several value-enhancing projects in its grasp.

“We’re almost through the transition of repositioning the company,” Brown said.

Mooiplaats colliery and Woestalleen processing plant, which have been declared noncore, are being sold.

CoAL, which ended the financial year with $29.9-million cash, has formally agreed to sell Woestalleen to a consortium of investors, which are in the process of providing it with proof of funding.