JOHANNESBURG (miningweekly.com) – The coal that is to be produced at South Africa-focused Coal of Africa’s (CoAL’s) Makhado project in South Africa’s Limpopo province has the potential to be a world-class hard coking coal product, independent coal consultant Wood Mackenzie has confirmed.

Makhado, CoAL said in a media release, had the potential to produce 2-million tons of hard coking coal a year and 3-million tons of thermal coal a year.

A definitive feasibility study would likely be published in the second quarter of this calendar year.

Wood Mackenzie, which CoAL described as the most comprehensive source of knowledge about the world’s energy and metals industries, were engaged to verify the expected quality and marketability of coal from Makhado, which is CoAL's initial project on the greater Soutpansberg coalfield area acquired from diversified major Rio Tinto.

“The confirmation augurs extremely well for the future development of the project,” said CoAL CEO John Wallington, who added that the key development in the six months to December 31 was the $100-million worth of CoAL shares that Beijing Haohua Energy (BHE) of China bought as part of a strategic partnership agreement that had bolstered the financial structure of the company.

Wallington said that the money would go into the development of CoAL’s projects and the exchange of operational expertise would facilitate CoAL’s growth and development in South Africa’s coking coal industry.

CoAL's losses widened in the interim period from $74.7-million in the previous corresponding period, to $111.7-million. The increased loss of the ASX- and JSE-listed company was owing to a $50-million impairment on its troubled Mooiplaats colliery.

Revenue for the six months under review also declined from $125.8-million in the previously comparative period to $87.3-million, owing to lower coal prices and lower sales volumes, following a six-week strike at the Mooiplaats colliery.

CoAL produced some 2.6-million tons of run-of-mine coal during the period under review, and just over one-million tons of export-quality coal. This was compared to the 2.6-million tons and the 1.2-million tons produced in the six months ended December 2011 respectively.

Export coal sales reduced to 636 264 t during the interim period, compared with the 863 893 t sold in the second half of the 2011 calendar year, owing to the reduction in production volumes after the strike action at Mooiplaats.
Sales of export-quality coal to the domestic market also decreased by 13%, to 341 685 t, compared with the 392 932 t sold in the previous six months.

Middling coal sales decreased by 25.9%, from 375 768 t in the six months ended June 2012, to 473 154 t for the December half.

However, the company noted that certain elements of its turnaround strategy remained as work in progress, including the possible restructuring or sale of its Mooiplaats colliery, the Woestalleen colliery, as well as related assets.

CoAL said it was also continuing discussions with various financial institutions to secure new short- and long-term debt facilities.