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 to destone and beneficiate 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
A condition compelling CoAL to conduct a strategic regional impact assessment as part of its environmental authorisation for its eight-billion-ton Makhado coking coal project was set aside by the North Gauteng High Court in December last year.

Following the launch of an interim court interdict in December 2014 and a subsequent counter application in March 2015, the court found that CoAL still had to review the environmental authorisation. The interim interdict against the environmental authorisation remained in place pending the review; however, the company believes that the nature of the interdict will not delay its timeline with regard to the start of construction in the second half of 2016. “CoAL will study the judgment in detail and will review its various options available,” the miner has stated.

Meanwhile, CoAL signed a nonbinding memorandum of understanding (MoU) with China’s Qingdao Hengshun Zongsheng Group last month for a possible equity investment into Baobab Mining & Exploration, which holds the Makhado project.

Under the terms of the MoU, Hengshun could invest $113.94-million to acquire a 34% stake in Baobab, with the transaction valuing the Makhado project at $335-million.

The 34% equity investment enable Hengshun to nominate its own members to the Baobab board and the Chinese firm to match any alternative proposals for the provision of a mining contract at the Makhado operation.

The final transaction valuation will be subject to negotiations, and the proposed equity investment will also be subject to an engineering, procurement and construction contract being awarded to Hengshun, the value of which is expected to be about $400-million.

The transaction is expected to be completed by the first half of 2016.

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.