Name and Location
Makhado coking coal project, Limpopo, South Africa.

Client
Coal of Africa Limited (CoAL) – 100% interest.

Project Description
The full-scale project plan is based on the production of five-million tons of coking coal a year, as determined by market conditions.

Core analyses from the large-diameter drilling programme have indicated good-quality coking coal, with the latest resource statement indicating 305.7-million tons reconnaissance, 250.7-million tons inferred, 548.6-million tons indicated and 230.1-million tons measured for a total in situ resource of 1 336-million tons.

On the completion of a modular plant-based first phase, a capacity of one-million saleable tons of coking coal a year is expected.

Value
A capital investment of R500-million is required, with the cost of a full-scale development estimated at R2.7-billion.

Duration
A timeframe for the project has not been confirmed.

Latest Developments
In the six months ended December 31, 2013, the Makhado coking and thermal coal project definitive feasibility study (DFS) on the opencast mining area, which includes hard coking coal and a thermal coal fraction, was upgraded to provide greater operational certainty and reduced project risk. The company expects that the additional work on the DFS will be completed and released during the second quarter of 2013.

CoAL continues to make progress on the acquisition of various properties required for the Makhado project rail infrastructure and operations. The company has bought or has an option to buy the remaining properties required for the rail load-out and rail spur for the project. However, negotiations to acquire the two properties where the planned processing plant and initial opencast mining are to start have not been concluded.

Further, during the interim period CoAL and the Nzhelele farmers signed a memorandum of agreement (MoA) in respect of the more efficient use of water in the Nzhelele river catchment area of Limpopo. The signing of the MoA enabled the submission of the project’s integrated water-use licence application. Under the terms of the MoA, the Nzhelele farmers have relinquished portions of their water-use entitlements, facilitating a bulk water supply for the Makhado project. The parties have undertaken to form a technical working group with the aim to identify projects, which will replenish the allocation relinquished by the farmers.

CoAL has also made significant progress on the regulatory requirements for the new-order mining rights application. The black economic-empowerment (BEE) shareholding, required under South African mining legislation, is a work in progress, as CoAL needs to ensure that funding is in place to progress the project. It is envisaged that a BEE partner will provide a pro rata share of the funding required to develop the project.

Meanwhile, on March 15, 2013, the company confirmed that the Makhado project had the potential to produce hard coking coal. Wood Mackenzie confirmed that the typical quality of the coal at Makhado as hard coking coal, based on its specifications relative to other international coking coal producers.

Key Contracts and Suppliers
Not stated.

On Budget and on Time?
Too early to state.

Contact Details for Project Information
CoAL, tel +27 11 785 4518, fax +27 11 807 6654 or email adminza@coalofafrica.com.