HomeEnergy MineralsAustralians acquire SA coal project

Australians acquire SA coal project

Coal – Lachlan
Star’s focus in
South Africa
Perth, Australia — MININGREVIEW.COM — 08 May 2008 – Lachlan Star – an emerging Australian minerals exploration and development company focused on gold, copper and bulk commodities – has reached agreement with Coal of Africa Limited to acquire 100% of the Holfontein coal project in South Africa.

A Lachlan Star release issued here says the initial consideration for the acquisition is A$15 million (R105 million), payable in a mix of cash and shares, and additional payments may be required if certain key milestones are satisfied.

It adds that several economic studies have been carried out on the project, and they indicate that it has the potential to be developed to mine both coking and thermal coal.

The company plans to advance the project as quickly as possible to enable a development decision to be taken. The release points out that there have been well-publicised shortages of thermal coal in South Africa, and the company views this as a ready market for the 4 Seam product. The 5 Seam coking coal is also in high demand both domestically and in the export market.

The Holfontein coal project contains an indicated resource of 60 Mt of coal on the Holfontein farm. It also includes an option agreement covering the adjoining Wildebeestfontein Farm, which includes significant coal mineralisation that has not been incorporated into a resource estimate.

The project is located at Secunda, 118 km east of Johannesburg, and is situated in the traditional coal mining area south and west of Witbank, where coal mining has taken place for over a hundred years.

It hosts the two main coal seams mined in the area, namely the 4 and 5 Seam. The 4 Seam is typically thicker and suitable for direct feed to nearby power stations after washing. The 5 Seam is a thin, high-quality, low-phosphorus, semi-soft coking coal suitable for either domestic use or export.

There are four power stations with 50km of the project and there is excellent road and rail access to the site. Application for a New Order Mining Right for the Holfontein Farm and further prospecting rights have been lodged with the Department of Minerals and Energy.

The company says it intends to continue its stated strategy of developing the Holfontein Coal project and growing through further acquisitions within the resource sector, with a strategic focus on coal, copper and gold.

The company release says recent coal price increases have significantly enhanced the potential economic returns from the Holfontein Coal Project, with coking coal settlements in excess of US$300/t. Thermal coal prices for domestic supply are lower than international benchmarks, it adds, however these prices are increasing rapidly to ensure adequate coal supply for power generation.

“Lachlan Star considers the underlying supply-demand fundamentals to be excellent for the foreseeable future,” the release concludes, “and intends to continue expanding in the South African coal industry.”