AEMFC readies for second mine as losses mount

[] — SOUTH AFRICA’S state-owned miner, African
Exploration Mining and Finance Corporation (AEMFC), posted a net loss of R48.7m
during its 2012 financial year, yet stated that it has exceeded the operational targets
it had to achieve.

The company’s financials for the year to end-March were posted in the annual report
of the Central Energy Fund (CEF), under whose auspices it continues to operate for the
time being. AEMFC was earmarked by Government in 2010 as the vehicle through
which the state’s operational foray into the mining industry would take place.

It is in the process of being hived-off as a stand-alone entity that would in future
report to the Department of Mineral Resources.

The CEF’s report listed several key objectives that AEMFC had to fulfil during the year
to end-March, of which the most significant was the commissioning of the Vlakfontein
coal mine near Ogies in Mpumalanga. The mine, AEMFC’s first operational asset and
launched to much fanfare by President Jacob Zuma in February 2011, also had to
produce at least 750,000 tonnes of coal by March 31, a target it exceeded by 13%
through the delivery of 844,000 tonnes.

“Construction work of the Vlakfontein mine started at the beginning of the financial
year and included the construction of the access roads, crushing and screening plant,
pollution control dam, weighbridge and change houses,’ read the report.

“The last key item of the infrastructure programme, crushing and screening plant, was
completed and commissioned in January 2012.’

The coal was mainly supplied to the adjacent Kendal power station of Eskom.
“Coal supply negotiations for the Kusile power station is at an advanced stage and are
expected to be concluded in the course of the next financial year in time for the
commission of the new power station,’ the report added.

For now, the target is to supply Eskom with 1.5 million tonnes during the current
financial period.

Also on AEMFC’s list of priorities was the extension of a feasibility study at its next
major operation, the coal-to-oil T-Project north of Kinross, also in Mpumalanga.

“The feasibility study report has indicated that the project is viable for the thermal
coal resource of the No.4 seam,’ the report said. “The No.5 seam, which contains
both coal and torbanite resources, is being studied with a possibility of processing
torbanite into syncrude and syngas.’

It aims to start the construction of the mine’s infrastructure during the current
financial year – it has already received environmental authorisation – while
negotiations with the Industrial Development Corporation (IDC) over project funding
“are at an advanced stage’.

AEMFC also had to increase its portfolio of prospecting right. The target was five, yet
it had twelve applications granted, including applications abroad.

“AEMFC’s current portfolio includes limestone, coal and uranium, which constitute its
strategic mineral resources,’ it said. “[The group] has applied for prospecting rights
for lithium, rare earth elements, PGMs and base metals to underpin its growth
strategy. This includes growth through partnering, especially when venturing into
neighbouring countries as well as local partnerships or acquisitions.’

The financial side of the group’s reporting made for grim reading, however, stating
that apart from the R48.4m loss, its total liabilities exceeded its assets by R96.7m. It
is able to pay its bills by means of a R240.7m interest-free loan from the CEF.

Revenue amounted to R86.9m, with some R7.3m income from “other sources’, while
cost of sales (R81.7m) and operating expenses amounted to a combined R143m.