ASX- and Aim-listed coal mining company Continental Coal’s De Wittekrans coal mine could potentially turn it into a genuine midtier mining company, stated Continental Coal CEO Don Turvey, at the Sasfin Investor’s Auditorium plenary session, which took place at the 2013 Joburg Indaba in October.

At the event, held in Sandton, Turvey discussed the significant potential that the De Wittekrans project held for the company.

The R342-million Mpumalanga-based coal project was granted the mining right in September by the Department of Mineral Resources.

Turvey said the granting of the mining rights – ahead of Continental Coal taking the project into full production in the next 12 months – was a significant milestone for the project and the company.

He added that the De Wittekrans project was expected to deliver about 3.6-million tons a year of thermal coal from a major opencast and underground mine and that it would operate over an initial life-of-mine of about 34 years.

Turvey said the mine had a potential opencast production output of five-million tons run-of-mine (RoM) coal in later years.

Recently completed optimisation studies have outlined a phased development for the project, with an initial seven-year opencast mining operation, which will be followed by underground development projected to start in the third year of production.

The optimisation results indicated that the project has saleable reserves of 38.5 t, with gross on-site resources of 192.7 t.

Continental Coal submitted an application for the new-order mining right in 2010 and an application for an integrated water use licence in the fourth quarter of last year.

The approval for the integrated water use licence is expected by the first quarter of next year.

Turvey added that Continental aimed to have De Wittekrans producing coal by the second half of 2015.

The project will be the company’s fourth producing mine, with the potential to double yearly RoM production as well as export and domestic thermal coal sales.

Coal Industry Prospects

Having recently returned from the thirty-third Coaltrans Berlin World Coal Conference, held in October, Turvey said it was clear that coal, as a power-producing commodity, “is here to stay”.

He acknowledged that a lot of activity was taking place worldwide in terms of getting renewable power producers on stream, but added that some regard the impact of renewable-energy sources on the lives of many Europeans as negative, owing to these sources’ erratic power production capabilities, which was resulting in regular power outages across Europe.

Turvey added that 85% of South Africa’s electricity was produced by coal-fired power stations, which ensured long-term security for local coal producers.

He further highlighted that the expansion of existing and the establishment of new coal-fired power stations by State-owned power utility Eskom, compounded by the depletion of older coal mines’ resources, provided significant financial opportunities for emerging coal miners such as Continental.

“The local coal industry could achieve significantly more in the export arena if it increased its productivity levels,” Turvey said, adding that South Africa was exporting large tonnages of coal to Asian countries such as China, India and South Korea.

He mentioned that the recent spike in coal prices was a positive sign for coal producers, adding that coal had been trading at between $70/t and $80/t in the three months to November.

Botswana Projects

Continental Coal has three Botswana-based projects, which have a collective exploration target of more than nine-billion tons.

The Kweneng coal project, in the Mmamabula coalfield, is about 110 km north of Gaborone and comprises the PL341 property.

Continental Coal has an effective 100% interest in Kweneng and a prospecting right for the project has been granted.

As the project is in the early planning stages, investigations have yet to be carried out on the mining of the deposit.

It is envisaged that Kweneng could meet the requirements of a thermal coal product of about 20 MJ/kg after washing.

Continental states that it entered into a binding term sheet with a third party in September to earn into PL341 and, subject to the completion of confirmatory due diligence on the licence areas, the funding party will obtain the option to earn into a maximum of 80% by assuming exploration activities and costs up to November 2014.

Therefore, Continental Coal will retain a free-carry interest of 20% up to the completion of a bankable feasibility study, subject to the right of the funder to acquire Continental’s residual interest at an agreed price for its fair market value as determined by an independent valuer at that time.

Continental Coal’s Serowe coal projects, PL339 (Paje) and PL340 (Tshimoyapula), are located in the Moropule coalfield, 300 km north-east of Gaborone.

Prospecting licences have been granted for the Paje and Tshimoyapula project sites, collectively covering 34 760 ha, in which Continental has an effective 100% interest. No resources have been declared for this property.

Mining Weekly reported in November that Continental would relinquish its prospecting licence for PL339 to the Ministry of Minerals, Energy and Water Resources in Botswana to cut back on costs.

The company stated in a press release last month that an assessment of the prospecting licence revealed low exploration prospectivity for the area and it also offered little opportunity for farm-out or divestment opportunities.

Continental reports that it is in negotiations with third parties to enter into a similar type of joint exploration agreement on the Tshimoyapula project.

“Continental is reviewing opportunities to further reduce future spend, while still extracting value from its remaining prospecting licences in Botswana,” Turvey said at the plenary session.