[miningmx.com] – COAL of Africa (CoAL) said that the significant
potential offered by its 8-billion-tonne Soutpansberg coal properties could lead to an
extension of its business relationship with Exxaro Resources.
Currently, Exxaro Resources has until Friday to confirm whether it will take up an
option to buy 30% of the Makhado property that is part of CoAL’s Soutpansberg coal
properties. The Soutpansberg coalfields are located in the Limpopo province.
Speaking during question time following a presentation on the Soutpansberg
resources, John Wallington, CEO of CoAL, said the optionality of the coalfields has
opened “further potential with Exxaro’.
However, Wallington stressed that at present the focus was on Exxaro’s potential
investment in five farms that comprise the Makhado property, saying, “We are very
encouraged with how that process is going, and we look forward to updating the
market soon.’
Exxaro’s option includes a 20% discount to the net present value of the Makhado
property, a clause that relates to the fact that the coalfields were once owned by
Iscor, of which Exxaro was once a part.
Wayne Koonin, CoAL CFO, indicated that the capital spend on Makhado alone would
be about $500m. “It’s in that order of magnitude, but we haven’t published the
feasibility study yet,’ he said.
CoAL announced today that the 8Bt in the Soutpansberg was a significant milestone
in taking the company to a 10Mtpa coking coal producer over the next decade. The
previous resource estimate for the Soutpansberg was 2Bt.
The increase is partly owing to additional drilling CoAL has undertaken and the fact
that it can add resources of Chapudi, a group of farms adjacent to Makhado that
CoAL bought from Rio Tinto and Kwezi Mining for $75m.
Wallington was anxious to make the point that the resources, which are an in-situ
estimate and therefore not necessarily economic or mineable, should lead to an
improvement in CoAL’s share price. “I believe there should be a significant rerating
of the share price,’ Wallington said.
Shares in CoAL have been under pressure, falling to R4,50/share from R9,60/share
at the beginning of 2011. As a result, this has limited CoAL’s financing options,
which is why tempting Exxaro Resources into further investment might make sense.
Once a decision is made by Exxaro on Makhado, the company would seek one of a
number of other financing options, of which issuing shares would be “the last
resort’, Koonin said.
