Name of the Project
Makhado coking coal project.

Location
The Makhado project is located in the Makhado municipality, in South Africa’s Limpopo province, on five adjacent farms covering the properties Lukin 643 MS, Fripp 645 MS, Tanga 849 MS, Daru 848 MS, Mutamba 668 MS, Windhoek 847 MS and Salaita 188 MT. 

These farms are all situated parallel to the Soutpansberg mountain range.

Client
Baobab Mining and Exploration, a subsidiary of Coal of Africa Limited (CoAL), will be the operating entity of the project.  Baobab is the operating entity for the Makhado project and holds, in addition to the integrated water use licence, the environmental authorisation and the mining right.

Project Description
The project will produce hard coking and thermal coal through opencast mining.

There are currently 172.73-million tonnes run-of-mine (RoM) reserves in situ, which will be mined over the life-of-mine of 16 years. Makhado is expected to be mined at an average rate of 12.6-million tonnes a year RoM, with potential for underground expansion.

At steady-state production, 2.3-million tonnes a year of hard coking coal and 3.2-million tonnes a year of thermal coal will be produced for domestic and export markets.

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 process plant will comprise: 
• a single-stage dense-medium separation (DMS) plant to beneficiate the -50 +6 mm for the production of a thermal product using high-gravity wash, 
• a double-stage DMS plant to beneficiate the -6 +1 mm for the production of hard coking coal and thermal products (high-gravity followed by low-gravity wash), 
• a double-stage up-current classifier to beneficiate the -1 +0.15 mm fines for the production of hard coking coal and thermal products (high-gravity followed by low-gravity wash), and 
• a flotation circuit to beneficiate the ultrafines (-0.15 mm) to produce hard coking coal and a potential thermal product. 

Jobs to be Created
About 2 000 jobs are expected to be created during construction and 1 100 permanent positions thereafter. 

About 60% of jobs will be sourced from communities, based on results from a skills audit. 

Net Present Value/Internal Rate of Return
The project has a net present value, at an 8.5% discount rate of $544-million and an internal rate of return of 37.4%.

Value
A front-end engineering design (FEED) completed by DRA in May 2016 resulted in a revision of the total project capital estimate from $406-million quoted in the definitive feasibility study to $280-million, a 38% reduction of $126-million.

Duration
Makhado’s 26-month construction phase is expected to start in the first half of 2017, followed by a further four-month ramp-up phase.

Latest Developments
During the second quarter of CoAL’s financial year, the Makhado project was granted a 20-year IWUL. This was appealed by the Vhembe Mineral Resources Forum and other parties and the IWUL was automatically suspended in April 2016 under Section 148(2) (b) of the South African National Water Act No 36 of 1998. Water and Sanitation Minister Nomvula Mokonyane has since lifted the suspension.

Following representation by CoAL in May 2016, and February this year, the Minister exercised her discretion and lifted the suspension.

Originally Makhado’s development plan included a 26-month construction phase followed by a four-month ramp-up to achieve a production rate of 5.5 million tonnes a year, with a capital requirement of $281-million. CoAL has started reviewing Makhado’s development plan, which entails re-assessing its strategy, which could result in reduced capital expenditure, a lower production rate and a shorter construction period through to earlier than planned production, with an extended mine life.

This revised strategy would also consider incorporating a manageable marketing and funding plan.

Despite the proposed lower output Makhado will still aim to deliver positive returns for shareholders. A detailed report on the revised strategy for Makhado is due to be reviewed by CoAL’s board in September 2017.

CoAL continues to engage with all stakeholders to ensure the ongoing implementation of a co-existent model, seeking cooperation between mining, agriculture and heritage land uses.

CoAL also continues to monitor the process of ownership for certain surface rights on which the project will be built.

Key Contracts and Suppliers
DRA Project South Africa (optimisation study and FEED).

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 van Tonder, email Celeste.vanTonder@coalofafrica.com