Name and Location
Makhado coking coal project, Limpopo, South Africa.

Client
Baobab Mining & Exploration, a subsidiary of Coal of Africa Limited (CoAL).

Project Description
The Makhado project is CoAL’s anchor project in the Soutpansberg coalfield, in Limpopo, where the company has access to a significant hard coking and thermal coal resource, with the gross tonnes in situ estimated at eight-billion tonnes.

A definitive feasibility study has defined a 16-year life-of-mine, with mining expected to take place at an average rate of 12.6-million tonnes a year of run-of-mine to produce 2.3-million tonnes a year of hard coking coal and 3.2-million tonnes a year of thermal coal at a steady state.

The resource will be mined on an opencast basis, with potential underground expansion.

The project has been divided into the East, Central and West pits for technical, logistical and practical reasons.

Mining will be staggered, starting with the East pit, followed by the Central and West pits. The development of the East pit will include plant and infrastructure components, which will cater for the production volumes from the other pits.

The processing plant will comprise:
• a double-stage dense-medium separation plant for the destoning and beneficiation of the hard coking coal and the thermal product, achieved through a high-gravity wash and followed by a low-gravity wash for the coarse-size fraction of –50 +1 mm;
• a fines (–1+0.15 mm) circuit, encompassing a low-gravity reflux classifier process for the production of the coking coal, and a high-gravity reflux classifier for the production of the thermal product; and
• an ultrafines (–0.15 mm) circuit of Jameson column flotation cells for the production of the coking coal and a potential thermal product.

Net Present Value/Internal Rate of Return
Not stated.

Value
Capital expenditure is pegged at R3.96-billion, including contingency.

Duration
Not stated.

Latest Developments
CoAL has entered into subscription and loan agreements with Singapore-registered private-investment company Yishun Brightrise Investment PTE, which will result in Yishun taking a 9.5% equity stake in CoAL for £9.4-million, or about $14.7-million.

Under the subscription agreement, Yishun will acquire about 183.23-million shares in CoAL at 5.15p apiece.

The funds will be used to finance the preconstruction costs at CoAL’s Makhado coking and thermal coal project, as well as for working-capital purposes.

The agreement is subject to shareholder approval and CoAL will, within 60 days, hold an extraordinary general meeting to allow shareholders to vote on the deal.

Further, Yishun is also interested in acquiring a strategic interest in the Makhado project.

CoAL intends to, in due course, enter into discussions with the investment company in this regard.

“The package being discussed includes an equity investment in the Makhado project, the provision of a shareholder loan on commercial terms providing the debt required for the development of the colliery and the awarding of the Makhado engineering, procurement and construction (EPC) contract on commercial terms,” CoAL has stated.

In connection with these matters, the two companies have also entered into a loan agreement that will result in Yishun lending CoAL $10-million, or about £6.4-million, on condition that the coal miner’s shareholders approve the subscription agreement.

The loan will bear no interest and is only repayable if Yishun has not received the subscription shares within 95 days of the signing of the subscription agreement or if an unrelated third party makes an equity investment in the Makhado project before June 30, 2016.

Further, the loan will be repayable if CoAL or Baobab decide not to proceed with the sale of an equity interest in Baobab to Yishun before June 30, 2016; if CoAL or Baobab is put into administration before June 30, 2016; if Baobab ceases to be the holder of the new-order mining right for Makhado; or if the project is halted, as a result of a permanent regulatory prohibition.

The same will apply if the parties do not enter into a Makhado EPC contract on commercial terms or if they do not enter into an agreement for Yishun to provide a shareholder loan on commercial terms to provide the debt required for the development of the project.

Key Contracts and Suppliers
Too early to state.

On Budget and on Time?
Too early to state

Contact Details for Project Information
CoAL head of engineering Nico Pretorius, email nico.pretorius@coalofafrica.com; or investor relations and business development manager Celeste Harris, email celeste.harris@coalofafrica.com.