CoAL granted New Order Mining Right for Makhado Project

The South African Department of Mineral Resources (DMR) recently granted a New Order Mining Right (NOMR) to Coal of Africa Limited (CoAL) for its flagship Makhado hard Coking And Thermal Coal Project. In addition, the DMR granted Section 11 approval, transferring the NOMR from CoAL to its wholly-owned subsidiary Baobab Mining & Exploration, which will be the project development company.

Makhado is located north of Soutpansberg, 65 km southwest of Musina in Limpopo Province, South Africa, consisting of 18 farms covering an area of 23 000 hectares. CoAL completed a Class II Definitive Feasibility Study on the Makhado Project during 2013 and anticipates developing the colliery to produce 2.3 million tonnes per annum (Mtpa) of hard coking coal and a further 3.2 Mtpa of thermal coal over a 16 year life of mine. Tests have confirmed that the coal can be successfully beneficiated to produce high strength coke for the steel manufacturing industry.

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Shareholding and funding

Following the granting of the Section 11 approval, the Makhado Colliery Community Development Trust, representing seven local communities living in the project vicinity, will acquire a 20% interest in Baobab. Yoright Investments, formed by entrepreneur Mike Nkuna whose shareholder grouping will include other historically disadvantaged South Africans, has acquired a further 6% interest in Baobab. The Trust and Yoright have two years to raise sufficient funding to acquire their interests in Baobab with the final amount payable, subject to due diligence, to be negotiated with the CoAL. The completion of the acquisition transactions will result in the Trust owning 20%, Yoright 6% and CoAL 74% of Baobab.

CoAL has initiated discussions with potential customers following the granting of the NOMR, a critical step in the process to secure off take agreements for the coal products. The granting of the NOMR is an important step towards sourcing the funding required to develop the Makhado Project. Construction is expected to begin in the first half of 2016, and CoAL anticipates that construction will take 26 months, with an additional four-month ramp-up phase. It is envisaged that the project will produce 5.5 Mtpa of saleable product by that time.

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Potential for domestic and export

“The granting of the NOMR is a significant milestone for CoAL, as it allows us to proceed towards developing Makhado,” says CoAL Chief Executive David Brown. “Makhado’s capacity to produce hard coking and thermal coal, and its close proximity to underutilised rail infrastructure, ensures the potential for domestic and/or export supply. The level of production from the Project has the potential to stimulate domestic industrialisation once it reaches full capacity.”

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