Simon Farrell.

CoAL managing director
Simon Farrel
l

Coal of Africa Limited (CoAL), which is listed on the AIM, the Australian Securities Exchange and the JSE, is scheduled to launch its first production in South Africa before the end of 2008, and to reach an overall output of close to 30 million tonnes per annum (mtpa) before the end of 2012.

Managing director Simon Farrell tells Mining Review Africa this output would include up to 13 mtpa of coking coal for export and domestic consumption, three mtpa of export thermal coal and more than 15 mtpa of middlings available for use by Eskom style mine mouth power stations. Overall capital expenditure CoAL would be investing to reach this stage would be close to US$800 million.

“CoAL is primarily focused on the acquisition, exploration and development of thermal and metallurgical coal projects,” Farrell says. “To achieve this we are pursuing the development of our three key coal projects in South Africa.” These are: Mooiplaats, situated in the Ermelo coalfield in the Mpumulanga province; Makhado, located about 60 km south of Musina in the Limpopo province; and Vele, also in the Limpopo province, but west of Musina on the Zimbabwe border.

As far as resources are concerned, CoAL plans to upgrade its coal assets to more than three billion tonnes in the proven and probable categories within two years – that will supply enough coal for the next 40 years. Current SAMREC resources stand in excess of two billion tonnes.

“The first of our three projects into production will be Mooiplaats, which will move its first coal before the end of 2008,” Farrell says. “Our wash plant will be commissioned in February, which means we will have washed coal production by the first quarter of 2009.

“This project, which involves capital expenditure of between US$100 million and US$115 million, will take some 18 months to ramp up to its full production of three mtpa of coal and 0.5 mtpa of middlings, reaching that stage in late 2010.” Life of mine has been estimated at a minimum 20 years.

CoAL’s Mooiplaats project,

CoAL’s Mooiplaats project,
showing the boxcut and trucks
removing debris to reach the
coal seam
.

“We plan to produce a washed product for export through the Richards Bay dry bulk terminal, not the coal terminal,” Farrell emphasises. “We are being allocated 900,000 of the existing four million tonne capacity, plus another two million tonnes out of the four million tonne expansion Grindrod is planning. This will take our allocation for Richards Bay to 2.9 mtpa, and this coal will not be transported on Richards Bay coal terminal rolling stock, but on the general freight system. Our 0.5 mtpa of middlings will go to the Camden power station 1.7 km away, and will be transported by conveyors.”

The latest consolidated resources statement sets Mooiplaats at 88.2 million tonnes measured and 25 million tonnes inferred resources, but mentions the potential of another 200 million tonnes-plus from as yet unexplored neighbouring properties.

The two Limpopo coking coal projects, Makhado and Vele, are awaiting conversion from prospecting rights to new order mining rights. “These are expected before mid-2009, when construction will start. Production on both projects should be underway by the back-end of the year,” Farrell says.

“After a two to three-year ramp-up we will produce five mtpa of coking coal from each mine, and generate somewhere between five and seven mtpa of middlings that are suitable for Eskom-style power stations.

“Capital expenditure on the Vele project will be close to US$400 million, while the Makhado operation will cost approximately US$275 million. These are large numbers, but we expect a significant proportion to be funded from cash flow from staged development.”

The latest resource statement shows 305.7 million tonnes measured, 250.7 milltion tonnes indicated and 548.6 million tonnes inferred for Makhado. It puts the Vele resource at 133.8 million tonnes measured, 76.6 million tonnes indicated and 131.5 million tonnes inferred.

“As far as our 10 mtpa of coking coal is concerned, 2.5 mtpa will be going to ArcelorMittal in South Africa, with the option of increasing this to five mtpa,” Farrell says. “The formal agreement is due to be signed before the end of 2008.”

The balance will be exported through the Matola bulk handling terminal outside Maputo in Mozambique. Owned by Grindrod Terminals, it has a current capacity of four million tonnes, of which CoAL will get one million tonnes.

geologist Charles Mafiri

CoAL chief geologist Charles Mafiri
showing the wide-diameter cores
stored in a low-temperature container
at the Vele project

“The deal we have with Grindrod is that we have the rights to 100% of any expansion to Matola. Currently there are plans to expand the terminal from four to six million tonnes, which will take us from one million tonnes out of four million tonnes to three million tonnes out of six million.

“Then the plan is to build a new terminal facility next to the existing one, of the order of about 10 million tonnes. That would give us an ultimate export capacity of about 13 million tonnes.

“Our coal would be transported from the mine to the railhead by truck at first until the necessary rail links have been completed.”

It will take about 18 months to complete the rail spurs and loading facilities, which involves about 40 km from Vele and 25 km from Makhado. Cost of the line, depending on ground conditions, will be between US$1 million and US$1.5 million/km. “This means the overall cost of the rail project could be as high as almost US$100 million.

Aerial shot of Mooiplaats

Aerial shot of Mooiplaats showing
the proximity of Camden power
station and the railway track
leading to Richard’s Bay.

“With our three key coal projects in South Africa well on the way to successful production, exports and local sales, we do have our eyes open for various possibilities outside this country,” Farrell says. But he emphasises that it is still very early days and the company’s full focus is on bedding down these three projects.

Looking at the future in general terms, Farrell says, “While I see a constraint on supply because of lack of infrastructural development around the world, I remain very confident that coal prices, both metallurgical and thermal, will remain robust for the long term.”