Name and Location
Waterberg coal project, Limpopo, South Africa.

Client
Waterberg Coal Joint Venture Partners (WCJVP), comprising Firestone Energy and Sekoko Resources.

In October 2013, ASX-listed Waterberg Coal Company (WCC) acquired 45.88%, or 1.63-billion shares, of dual-listed Firestone Energy, resulting in WCC acquiring 32.36% of the coal producer. WWC also acquired 480-million Firestone shares from its 25%-owned subsidiary Sekoko Resources, separately from the takeover offer, representing a further 13.52% interest in Firestone.

Project Description
The project consists of eight farms, in the Waterberg coalfield, totalling 7 979 ha. The identified area over the Smitspan farm (first-phase base case) indicates a mine layout covering 507 ha, extending for 3.5 km from east to west and for 1.8 km from north to south. The project partners have previously reported a Joint Ore Reserves Committee-compliant resource statement of 3.88-billion tonnes of coal, of which 2.07-billion tonnes are in the measured category.

The project proposes the development of an opencast mining operation to produce ten-million tonnes a year of coal for Eskom for an initial term of 30 years, pursuant to the memorandum of understanding (MoU) that the WCJVP entered into with Eskom in March 2012.

The project includes the design, manufacture, supply, delivery, assembly, installation and commissioning of a 22-million-tonne-a-year coal-handling and preparation plant in a phased approach within an engineering, procurement and construction framework.

Value
The project is estimated at R10-billion.

Duration
First coal is expected by the end of 2015.

Latest Developments
Discussions between State-owned power utility Eskom and the WCC to resolve the outstanding requirements to convert the Waterberg coal project’s offtake MoU into a coal supply agreement (CSA) are ongoing.

In terms of the MoU, ten-million tonnes a year of coal product will be delivered to Eskom’s Majuba power station, in Mpumalanga, on a take or pay basis.

The outstanding requirements to convert the MoU to a CSA include coal specification finalisation, final pricing, delivery dates and the provision to Eskom of a satisfactory due diligence report on the project’s definitive feasibility study (DFS), WCC has said, adding that the due diligence report is expected to be finalised by the end of October.

While the report is being finalised, the project partners have also been in discussions with potential funding parties.

WCC explains that the potential funding for the project is predicated on, among other factors, the completion of the CSA with Eskom and a satisfactory outcome of the due diligence review.

It is expected that it could take between 6 and 12 months after the receipt of the review report for the debt funders to provide the project funding.

WCC further notes that the delays with regard to this project has necessitated the company’s A$35-million convertible secured facility, which was drawn down on April 9, 2013, to be restructured.

WCC entered into discussions with the lenders of this facility regarding its restructuring and a potential extension of its maturity date, which is currently set for October 9.

Meanwhile, in light of the substantial technical work on the Eskom project by the project partners and owing to the expected project delay, the project partners have also identified the potential for a standalone export project.

This project will be subject to a standalone DFS, with the project partners currently also considering separate funding options for this proposed project.
Key Contracts and Suppliers
SRK Consulting (feasibility study), Coffey Mining (geotechnical investigation), Ardbel, an ELB Engineering Services and DRA Group joint venture (preliminary design and basic engineering works.

On Budget and on Time?
Not stated.

Contact Details for Project Information
Waterberg Coal Company, tel +61 8 9200 4243, fax +61 8 9200 4469 or email info@waterbergcoal.com.au.
SRK Consulting, tel +27 11 441 1111, fax +27 11 880 8086 or email johannesburg@srk.co.za.
Coffey Mining, tel +27 11 679 3331, fax +27 11 679 3272 or email Coffey.Africa@coffey.com.
Ardbel, tel +27 11 032 1150 or email info@ardbel.com.