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

Client
Baobab Mining & Exploration, a subsidiary of Coal of Africa Limited (CoAL).

Project Description
The Makhado project is CoAL’s anchor project in the Soutpansberg coalfield, in Limpopo, where the company has access to a significant hard coking and thermal coal resource, with the gross tonnes in situ estimated at eight-billion tonnes.

A definitive feasibility study has defined a 16-year life-of-mine, with mining expected to take place at an average rate of 12.6-million tonnes a year of run-of-mine to produce 2.3-million tonnes a year of hard coking coal and 3.2-million tonnes a year of thermal coal at a steady state.

The resource will be mined on an opencast basis, with potential underground expansion.

The project has been divided into the East, Central and West pits for technical, logistical and practical reasons.

Mining will be staggered, starting with the East pit, followed by the Central and West pits. The development of the East pit will include plant and infrastructure components, which will cater for the production volumes from the other pits.

The processing plant will comprise:
• a double-stage dense-medium separation plant to destone and beneficiate the hard coking coal and the thermal product, achieved through a high-gravity wash and followed by a low-gravity wash for the coarse-size fraction of –50 +1 mm;
• a fines (–1+0.15 mm) circuit, encompassing a low-gravity reflux classifier process for the production of the coking coal, and a high-gravity reflux classifier for the production of the thermal product; and
• an ultrafines (–0.15 mm) circuit of Jameson column flotation cells for the production of the coking coal and a potential thermal product.

Net Present Value/Internal Rate of Return
Not stated.

Value
Capital expenditure is pegged at R3.96-billion, including contingency.

Duration
Not stated.

Latest Developments
Singaporean private investment firm Yishun Brightrise Investment has started a due diligence investigation of CoAL’s Makhado coking coal project, expressing its intent to acquire a stake in the potential 5.5-million-ton-a-year prospect.

Potential transactions under discussion between the parties include an equity investment in the Makhado project, the provision of a shareholder loan on commercial terms to provide the debt required to develop the colliery and the award of the Makhado project engineering, procurement and construction contract.

During the quarter ended September 30, CoAL also entered into a subscription agreement with Yishun, which holds interests in coal and nickel projects in China and Indonesia, under which it received $14.7-million to finance preconstruction costs at Makhado and for general working capital.

An additional deal resulted in the Singapore-based firm lending CoAL $10-million, which bore no interest and was repayable only if an unrelated third party made an equity investment in the Makhado project prior to June 30, 2016, or if the company decided not to proceed with the sale of an equity interest in the project to Yishun.

Makhado’s 26-month construction phase is expected to begin in the second half of 2016, with a further four-month ramp-up phase.

Consultations are continuing with possible project funders and potential customers to secure offtake agreements for Makhado’s hard coking and thermal coal products.

While an interim court interdict seeking to halt any mining or construction activity was issued against the Makhado project during the September quarter, CoAL has said that, as one of the respondents, it is preparing to have the interdict set aside. The matter is to be heard in court in November.

“CoAL does not anticipate that the process will affect Makhado’s construction timetable,” CEO David Brown has said.

Key Contracts and Suppliers
Too early to state.

On Budget and on Time?
Too early to state

Contact Details for Project Information
CoAL head of engineering Nico Pretorius, email nico.pretorius@coalofafrica.com; or investor relations and business development manager Celeste Harris, email celeste.harris@coalofafrica.com.