JOHANNESBURG (miningweekly.com) – ASX-listed Continental Coal reported on Tuesday that two seams at its Vlakvarkfontein project, in South Africa, were capable of producing export-quality coal.

The company said that a recently received washability data report on the project also indicated that it could produce coal suitable for local power generation.

Based on the report, with a run-of-mine primary and secondary was, a 40% yield of A/B grade quality export coal, and a 40% yield of power generation coal could be achieved.

Continental said in a statement that the ability to produce an export quality coal was expected to increase the profitability of the project by about 50%, based on current prices.

Continental has previously only targeted production of local power station coal across the Vlakvarkfontein product.

The coal company said in a statement that it was currently in discussions with State-owned power producer Eskom, with respect to an offtake agreement, and was seeking to complete a transaction in the near-term.

Vlakvarkfontein was scheduled to initially start production with 50 000 t/m, moving to 150 000 t/m on a contract mining basis. A valid mining right was in place, and development at the project has been started, with coal sales expected to start in the first quarter of 2010.

Meanwhile, and as a result of the better-than-expected wash results, Continental has entered into an option agreement to purchase a wash plant and associated infrastructure located nearby the project. The plant was ready to restart operations.

The purchase included the acquisition of an 85 ha operational area, and a two-million ton a year was plant, with two weighbridges, and two export grade coal stockpiles.

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