Mining Weekly

Company Announcement - Coal of Africa Limited is pleased to announce the granting by the South African Department of Mineral Resources of a New Order Mining Right in terms of the Mineral and Petroleum Resources Development Act (Act 28 of 2002) for its flagship Makhado hard coking and thermal coal project in Limpopo Province. The DMR also granted the Section 11 approval transferring the right from CoAL to its wholly owned subsidiary Baobab Mining & Exploration (Pty) Ltd , which will be the project development company.

CoAL completed a Class II Definitive Feasibility Study on the Makhado Project (“Makhado” or the “Project”) during 2013 and anticipates developing the colliery to produce 2.3 million tonnes per annum of hard coking coal and a further 3.2 Mtpa of thermal coal over a 16 year life of mine. The project can produce hard coking coal that has been benchmarked by independent consultants. Tests confirmed that the coal can be successfully beneficiated to produce high strength coke for the steel manufacturing industry.

Following the granting of the Section 11 approval, the Makhado Colliery Community Development Trust (the “Trust”) representing seven local communities living in the vicinity of the project will acquire a 20% interest in Baobab. A further 6% interest in Baobab has been acquired by Yoright Investments (Pty) Ltd (“Yoright”) formed by black entrepreneur Mike Nkuna whose shareholder grouping will include other Historically Disadvantaged South Africans. The Trust and Yoright have two years to raise sufficient funding to acquire their interests in Baobab with the final amount payable subject to due diligence which will be negotiated with the Company. The completion of the acquisition transactions will result in the Trust owning 20%, Yoright 6% and CoAL 74% of Baobab.

The Company has initiated discussions with potential customers following the granting of the NOMR, which is a critical step in the process to secure off take agreements for the coal products. The granting of the NOMR is also an important step towards sourcing the funding required to develop the Makhado Project, where construction is expected to begin in H1 CY2016. CoAL anticipates that construction will take 26 months with a further four month ramp-up phase by which time the project will produce 5.5 Mtpa of saleable product.

David Brown, Chief Executive Officer of CoAL, commented:
"The granting of the mining right is a significant milestone for CoAL as it allows the Company to proceed towards developing Makhado, its flagship project. It is an important vote of confidence in the economic potential of the Project, not only for the region, but also for the Limpopo province. As soon as development starts at Makhado a meaningful contribution will be made to the growth and development goals of the province, improving the socio-economic environment of the communities in the area of operation. CoAL looks forward to a successful working relationship with its partners in the area. “Makhado’s capacity to produce hard coking and thermal coal alongside its close proximity to underutilised rail infrastructure ensures its role as a potential domestic and/or export supplier. The level of production from the Project has the potential to stimulate domestic industrialisation once it reaches full capacity. CoAL awaits the approval of the Integrated Water Use Licence from the Department of Water and Sanitation, and will continue to engage with the Department in this regard.”