[miningmx.com] — COAL of Africa (CoAL) CEO John Wallington does not expect operations to resume at the group’s Vele coking coal mine in Limpopo until “sometime during the first quarter of 2011′.
The company had previously hoped to resolve outstanding environmental permitting issues with the department of environmental affairs and the department of water affairs and restart mining operations by the end of the year.
Vele was shut down in August because the mine had started operations without receiving an integrated water use licence.
CoAL has also run into severe opposition to Vele from a coalition of environmental non-governmental organisations.
These view Vele as the “thin edge of the wedge’ leading to far more extensive mining development of the region.
They want the mine permanently closed, because the region has been earmarked to become a major ecotourist destination through development of the trans-frontier conservation area centred on the Mapungubwe National Park.
It is against this background of problems with Vele as well as the group’s Mooiplaats colliery in Mpumalanga that CoAL’s decision to buy Rio Tinto’s Chapudi project for $75m has to be assessed.
Wallington said: “I guess you could view that decision as a sign of confidence in South Africa, given what we have gone through.
“Buying Chapudi is a deal that was being looked at before I came on board as CEO, and it’s one that I have kept while canning others.
“I think it makes a lot of sense for CoAL because of the synergies with our adjacent Makhado project and the greater range of options that it opens up.
“We are also acquiring Chapudi at a good price. My feeling on the future development of Chapudi and Makhado is that we will be fine, provided we do everything by the book.’
But Wallington stressed a key issue in the development of Makhado/Chapudi was that CoAL intended to “derisk’ the project by bringing a suitable joint venture partner on board.
“We have learnt the lesson that developing coal mines in South Africa is not as easy as it looks,’ he said.
Asked why he thought Rio Tinto had sold out of Chapudi so cheaply – given that the group had described it as one of its key South African exploration projects at the Mining Indaba in February – Wallington replied: “I guess they decided it was non-core.’
Wallington repeated the view first expressed on October 28, when CoAL released its September quarter results, that more clarity was needed from government on regulatory processes concerning mining.
He wanted clearer demarcation of “sensitive areas’ where mining may not be allowed, given that ecotourism also features significantly in government planning.
Wallington said at the time: “Exploration expenditure should be confined to areas that can be mined. It is immoral to allow a company to invest millions on exploration with no intention of allowing it to mine in that area.’
So far, CoAL has spent nearly R600m on the development of Vele.
Investor reaction to the Chapudi acquisition has generally been favourable but cautious.
London financial institution Fairfax said: “It is encouraging to see that despite the problems (at Vele) management is not letting this slow down progress at Makhado.’
According to Numis, the coal at Chapudi is “thermal with some coking coal potential. Looks like this provides CoAL with significant additional scale potential, although it does not address the key issues of infrastructure.
“Development of the Maputo logistics corridor is required to gain access to the export market. The domestic market appears the most likely end user for this coal at this stage. Positive, but not game changing for the company.’
