[miningmx.com] — COAL of Africa (CoAL) shares dropped up to 11%, hitting a 12-month low of 854c on the JSE on Friday as the company reported a loss of A$101.4m for the year to end-June.
CoAL also reported it had been forced to take a $52.8m impairment charge against its Mooiplaats colliery in Mpumalanga because of problems with the mine design.
This followed previous impairments announced at the interim stage of $8.7m against its Holfontein thermal coal project, and $6.2m against investments in Zimbabwe.
Mooiplaats was the first colliery to be developed by CoAL in South Africa.
The impairment charge against Mooiplaats raises concerns over CoAL’s technical expertise, at a time when the company is also engaged in a pitched battle with conservationists over its Vele coking coal mine in Limpopo Province.
CoAL has been forced to shut down Vele following action taken against the company by the Department of Environmental Affairs (DEA). It also faces a legal challenge from conservationists.
Production problems at Mooiplaats became apparent in the six months to end-December, when CoAL reported a $3.4m “take or pay’ penalty imposed by the Matola export terminal because the company had not been able to meet contractual export volumes.
CoAL dealt with this shortfall in the short term by taking over the adjacent Woestalleen colliery, with effect from January 1. Woestalleen produces about 2.5 million tonnes (mt) per year of saleable coal for the domestic and export markets.
According to newly-appointed CEO John Wallington, three underground sections at Mooiplaats were producing high quality thermal coal by the end of June.
The DEA shut down Vele because mining operations had started up, even though CoAL had not received the required integrated water licence.
Former MD – now deputy chairman – Simon Farrell maintained at the time that Vele was within its rights to start mining because it had received its new order mining right from the Department of Mineral Resources.
Vele is currently working through the various rectification processes demanded by the DEA.
Wallington commented that CoAL “expects to recommence production in late 2010′, but that will not happen if a coalition of conservation nongovernmental organisations (NGOs) succeeds in the legal action they have brought against the mine.
The reason for their opposition is Vele’s position in the buffer zone just east of the Mapungubwe National Park – a declared world heritage site – which is the core of a proposed trans-frontier conservation area intended to extend west and north into Botswana and Zimbabwe.
The coalition includes, among others, the Endangered Wildlife Trust (EWT), the Peace Parks Foundation (PPF) and the World Wide Fund for Nature South Africa.
The NGOs want the entire area declared a no go zone for mining. This is because of the importance of the trans-frontier conservation area, which will generate long-term sustainable development and employment through conservation, unlike the short-term exploitation that would take place through mining.
They view Vele as the thin edge of the wedge because two other mining groups – Australian junior Universal Coal and resource heavyweight Anglo American – are also looking at developing mines in close proximity to the park in even worse positions than Vele.
PPF CEO Werner Myburgh said: “The coal belt extends from Vele to the west, which implies that all future developments will only be even closer than the current 5.6km to the world heritage site.
“If Vele is allowed to proceed, what are the cumulative impacts of the mines, the coal-fired power station and other associated developments to follow?’
EWT CEO Yolan Friedmann said: “Not every form of environmental damage can be mitigated or prevented, and it is time that the no go option for some forms of development is taken seriously if we want anything to remain in this country long after the mines have shut down.’
