CoAL still waiting for answer on Vele

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[miningmx.com] — COAL of Africa (CoAL) has still not had an answer from government on when it can reopen the Vele coking coal mine in Limpopo Province.

The company also faces a looming deadline in arranging new funding to repay a $20m loan from JP Morgan, due on March 24 this year.

The Vele mine was shut down in August last year by the department of environmental affairs (DEA), which issued a compliance notice requiring cessation of all activities on site.

The mine has run into fierce opposition from environmentalists because of its proximity to the existing Mapungubwe National Park and the proposed international Mapungubwe Transfrontier Conservation Area, which will extend the area under conservation into Botswana and Zimbabwe.

CoAL CEO John Wallington had previously hoped to have an answer on Vele by the end of December, but subsequently revised this to the end of March.

In his review of the results for the six months to end-December published on Wednesday, Wallington commented on Vele that “the company expects clarity soon on the appropriate approvals, enabling it to commence activities’.

Wallington said: “The company has subsequently submitted rectification papers…. requesting permission to continue with the activities relevant to the compliance notice.

“CoAL has fully adhered to the instructions contained in the compliance notice and is complying with all relevant legislation.

“With reference to the integrated water use licence, the company has cooperated fully with the department and complied with the legal requirements.

“The company is expectant therefore that that a decision in this regard should be imminent.’

Wallington pointed out that representatives of the United Nations Educational, Scientific and Cultural Organisation along with senior officials from the DME and department of mineral resources visited Vele in November last year.

He said: “The company is confident that it has addressed the concerns and designed sufficient mitigation into the mining layout and processes to ensure coexistence with ecotourism and agriculture.’

But the Vele situation has adversely affected CoAL’s plans to shift its primary listing from the Australian Stock Exchange (ASX) to the London Stock Exchange Main Market.

Wallington said: “As a result of the delay in the commencement of the Vele Colliery, the CoAL board considered it prudent that the transfer to the LSE be delayed. “

CoAL lost $57.4m during the six months to end-December (previous comparable six months – $41.4m loss). As of end-December the company had cash of $23.3m and working capital of $11.9m, compared with cash of $101m and working capital of $73.3m at June 30 last year.

Wallington said: “CoAL continues to work on a number of new debt facilities and remains confident of securing one or more currently under negotiation which, if finalised, will ensure that the company has the ability to repay the $20m facility to JP Morgan.’

The notes in the financial statements contain a subtle change in the wording regarding the status of one of the three commercial legal fights CoAL is currently involved in that have been listed as contingent liabilities.

That is the dispute between Envicoal and CoAL subsidiary NuCoal, in which Envicoal is claiming between R139m and R189m in terms of a coal supply contract.

The matter has now gone to arbitration. CoAL’s 2010 annual report noted: “The directors are of the opinion that the action currently holds insufficient merit for provision to be made in the financial statements.’

That assessment has now been changed to: “The directors are of the opinion that the action currently holds insufficient certainty of the outcome of the proceedings for provision to be made in the financial statements.’

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