JOHANNESBURG (miningweekly.com) – South African coal producer Coal of Africa Limited (CoAL) has marginally lifted fourth-quarter run-of-mine (RoM) coal production from the previous quarter's 188 921 t to 202 910 t, despite having placed its troublesome Limpopo-based Mooiplaats colliery on care and maintenance in September.

Mooiplaats continued to produce middlings coal for Eskom until a Section 189 restructuring process was completed in early September, resulting in an agreement with stakeholders that the mine be placed on care and maintenance as part of an “enhanced” cost-cutting and turnaround strategy.

The shorter production period resulted in RoM coal production from the beleaguered colliery decreasing from 179 603 t in the fourth quarter of the previous financial year to 75 146 t in the three months under review.

Similarly, coal processed at the colliery more than halved from 178 856 t to 80 037 t, with Mooiplaats producing a narrowed 61 057 t of middlings coal for Eskom.

A formal disposal process of the operation was currently under way, with CoAL aiming to complete this process before the end of the year.

The bulk of CoAL’s quarterly production came from the Vele colliery, which lifted RoM output for the three months ended September 30, from the previous quarter's 9 318 t, to 127 764 t – a sizeable increase from the third quarter, which was affected by the suspension of operations owing to a train derailment.

Vele processed 136 864 t of coal during the quarter, producing 32 399 t of export quality thermal coal.

This came amid continuing pressure on index-linked RB1 export quality thermal coal prices, which declined from $77/t at the end of June to $73/t at the end of September.

Lower coal prices were partially offset by the weakening of the rand, with average exchange rates declining from R9.47 in the June quarter to R9.98 in the September quarter.

Meanwhile, export coal sales from the Matola Terminal decreased from the previous quarter's 136 372 t to 56 799 t as a result of the exhaustion of export quality coal stockpiles.

Production of semi-soft coking coal for metallurgical coal trials was completed at the Vele colliery during the September quarter and over 300 t was shipped to ArcelorMittal South Africa to be tested in its coke batteries.

Following the completion of optimisation studies for the colliery in October, the company announced that operations at Vele would temporarily cease pending the modification of the plant in 2014.

During the quarter, the coal developer also progressed the sale of its Woestalleen processing complex and the undeveloped Opgoedenhoop new-order mining right, with both transactions requiring Ministerial consent in terms of Section 11 of the Mineral and Petroleum Resources Development Act.

“The company made good progress in satisfying the suspensive conditions for the disposals, including lodging the consent applications,” executive chairperson David Brown said in a results statement on Thursday.

The company continued to reprocess discard dumps at the Woestalleen site during the quarter, producing 99 257 t for sale to Eskom.

In addition, in terms of an interim agreement with the buyer, Woestalleen processed 71 565 t of third-party RoM coal on a cost recovery plus margin basis.

Meanwhile, the company’s Makhado coking coal project received environmental authorisation from the Limpopo Department of Economic Development, Environment and Tourism, bringing the project closer to full regulatory compliance.

CoAL was currently working on finalising the required black economic-empowerment aspects prior to the granting of a new-order mining right.

The company also initiated the environmental-impact assessment and environmental management programme processes for the Generaal and Chapudi projects, which comprised the larger MbeuYashu project, over the quarter, while continuing with the process for the Mopane project. These processes were expected to be completed in early 2014.

“The company has made significant progress in the execution of its enhanced turnaround strategy, which will allow it to concentrate on the next phase of the process. This entails the construction of the modified plant at Vele and the move to full production,” commented Brown.

CORPORATE FEATURES

Meanwhile, in alignment with its turnaround strategy, CoAL repaid the remaining $12.5-million of a $50-million Deutsche Bank facility it secured in 2011, leaving only $1.1-million of the Investec-derivative facility outstanding at the end of the quarter.

The company also resolved several outstanding litigation matters, including the withdrawal of legal action instituted by Motjoli Resources for 4.75-million shares; the settlement of legal action instituted by Coria Investments for damages from subsidiary NuCoal; and the settlement of litigation instituted by Ferret Mining & Environmental Services related to their historic shareholding in Mooiplaats.

CASH POSITION

Cash outflow from operations for the period reduced from $18.4 -million in the June quarter to $8.1-million in the current quarter, owing to the reduction in activity at the company's collieries.

Expenditure on exploration and evaluation in the December quarter was expected to be $2.7-million and included expenditure for public participation programmes for the MbeuYashu projects.

The company expected to spend $2.4-million on development, which would include costs associated with Vele.

Estimated production costs for the three months ended September 30, of $41 000, related to net expenses at the Mooiplaats and Woestalleen operations, while administration expenses of $2.5-million would be incurred to cover head office costs.