The mine — which is located in the Witbank coalfield, in the Mpumalanga province of South Africa — will be developed through a majority black-owned and controlled joint venture, the Goedgevonden JV, in which ARM Coal owns a 51% share. Xstrata Coal owns the remaining 49%.

ARM Coal is a black-owned and controlled coal mining company created in February 2006, and is 51% owned by African Rainbow Minerals Limited. The creation in February of ARM Coal signalled the birth of a new major South African coal mining company in a transaction valued at some US$335 million (R2.4 billion). ARM Coal holds the following assets:

  • A 20 percent equity-based participation in Xstrata’s South African coal assets, comprising 13 operating coal mines (11 of which are managed by Xstrata) located near the towns of Witbank, Middelburg and Ermelo in Mpumalanga;
  • A 51 percent ownership of the Goedgevonden project, near Ogies, also in Mpumalanga
  • Access to Xstrata’s 20.9 percent interest and allocation in the Richard’s Bay Coal Terminal (RBCT)
  • And, subsequent to the financial year end, the ARM board approved the exercise of an option held by ARM to acquire a further 10 percent direct participating share in Xstrata’s South African coal operations, for R400 million.

ARM will appoint the majority of representatives on the Goedgevonden JV management committee, in line with its majority interest. Xstrata Coal will manage the Goedgevonden project on behalf of the Goedgevonden JV, and Xstrata Coal Marketing AG will market all export coal produced by the mine.

Goedgevonden1

Hamilton Mkatshana (left) is the designing
engineer and general manager of
ARM Coal’s Goedgevonden open-cut
mine. A similar open pit can be seen in
the background

MINE LIFE WILL EXCEED 30 YEARS
At full production, the new mine will produce 3.1 Mtpa of export thermal coal and 3.6Mtpa suitable for the domestic thermal markets, and will have a mine life in excess of 30 years. ARM Coal has been successful in obtaining an additional 3.2 Mtpa in export capacity for the Goedgevonden project in the revised Phase V expansion of Richards Bay Coal Terminal (RBCT).

RBCT — in which Xstrata has a 20.9 percent stake — announced an expansion from its existing 72 Mtpa quota to 91 million tonnes a year. This includes the Phase 5 expansion at a total cost of approximately US$140 million (R1 billion), which is expected to be completed during July 2008.

The precise phasing of the incremental export tonnage is subject to colliery and rail infrastructure developments, and will be determined once the projects that are allocated the increase in terminal capacity have been identified. Initial estimates indicate that the full rail and mine capacity will only be available after 2009.

Commissioning of the new mine is scheduled for the first half of 2009, with full production anticipated from 2011.

Xstrata Coal is facilitating ARM Coal’s participation in the Goedgevonden project by providing all funding required to reach commissioning. Its funding will be on preferential terms through the use of interest and capital repayment holidays.

MORE THAN 300 PERMANENT JOBS
It is anticipated that the project will create over 1 100 jobs during the construction phase and 300 permanent jobs when fully operational.

Goedgevonden2

Goedgevonden will be an open-cut
mine producing 6.7 Mtpa once
fully operational

The Goedgevonden JV and ARM Coal will also make a significant contribution to the sustainable development of communities associated with the operation, in particular in maximising local employment and procurement, and through supporting the development of small and medium enterprises.

Patrice Motsepe, executive chairman of African Rainbow Minerals, has expressed his delight at announcing the development of this major greenfield export project. “This is a significant milestone for the ARM growth programme,” he points out, “particularly with respect to our recent investment into coal.”

Xstrata Coal Chief Executive Peter Coates points out that the Goedgevonden mine is the first of its kind to be undertaken by a majority black-owned and controlled company. “It will benefit from state of the art infrastructure,” he assures, “and it will be a high productivity, low operating cost business.”

Goedgevonden will be very competitive in the Atlantic market, and is well positioned to compete in the domestic thermal market, given the fact that the JV fully complies with BEE procurement criteria. “This significant investment marks Xstrata Coal’s commitment to growing our South African coal business in partnership with ARM Coal, through structures that facilitate ongoing black economic and management participation,” Coates concludes.

In his comment, the director-general of the Department of Minerals and Energy, Advocate Sandile Nogxina says the Goedgevonden project represents meaningful majority black participation in the growth of South Africa’s important coal industry.“This new mine will provide an ongoing source of wealth creation for our nation for over 30 years,” he contends, “and it represents an important foreign investment for the Mpumalanga province and the country as a whole.”