Coal of Africa Ltd CZA Makhado Project Update

  Coal of Africa Ltd (CZA) - Makhado Project Update

RNS Number : 5345F
Coal of Africa Limited
18 June 2012

18 JUNE 2012



· CoAL  and Exxaro  target  completion of  further studies  and  conclude 
negotiations by 30 September 2012

Coal of Africa Limited ("CoAL" or  the "Company") and Exxaro Coal  Proprietary 
Limited ("Exxaro") are  pleased to  announce that, subsequent  to the  initial 
review of  the draft  Definitive  Feasibility Study  ("DFS") for  the  Makhado 
Project by Exxaro, the  Parties have agreed to  continue negotiations and  the 
assessment process to finalise the valuation of the Makhado Project, and  that 
the deadline for a formal decision regarding the exercise of Exxaro's right to
a 30% equity participation in the Makhado Project ("the Option") shall now  be 
30 September 2012. During  this period, further  detailed analysis of  several 
key aspects of the Makhado Project will be conducted, in order to finalise the
project valuation.

Coal of Africa chief  executive, John Wallington said  today, "We are  pleased 
with the  significant  progress  achieved  to  date  in  the  discussions  and 
negotiations with  Exxaro.  The decision  for  Exxaro to  continue  with  this 
process is encouraging and  will enable both parties  jointly to complete  the 
remaining work required to finalise  the review of the Definitive  Feasibility 
Study and valuation  of the  Makhado Project.  Against the  background of  the 
detailed testing results that confirmed the  ability to produce a hard  coking 
coal product  and  the  recently  announced consolidation  of  the  New  Order 
Prospecting Rights  ("NOPRs")  over the  adjacent  tenements acquired  in  the 
Soutpansberg coalfield,  this bodes  well for  the future  development of  the 
Makhado Project."

Exxaro chief executive Sipho  Nkosi commented today  "The development of  high 
quality metallurgical coal  assets is  fully in line  with Exxaro's  strategic 
growth objectives. During  the past number  of months we  have established  an 
excellent working relationship  with Coal of  Africa and look  forward to  the 
joint  effort  to  finalise  the  review  of  the  Makhado  Project  and   the 
negotiations for Exxaro's possible participation in the Project."


CoAL and Exxaro  have agreed on  the deliverables  for the next  phase of  the 
evaluation process, which  includes further detailed  analysis of several  key 
aspects of the Makhado Project. The mandate for the joint technical teams  and 
the scope of work has been agreed  in broad terms. The work has commenced  and 
both parties  remain  committed to  completing  the process  in  the  shortest 
possible time period,  to enable  Exxaro to make  a final  decision under  the 
Option by 30 September 2012.

The agreed scope of work to be completed by 30 September 2012 includes:

· Further  technical work  to  be conducted  on  the upside  potential  of 
thermal coal production;

· Additional large diameter drilling  and related additional test work  to 
confirm the coking and
thermal coal yield assumptions over the total mining area;

· A review of the optionality of coal assets in respect of adjacent  farms 
to the  proposed Makhado  Project mining  area, following  the update  on  the 
reserve and resources for the Greater  Soutpansberg area announced on 13  June 

· Progressing  commercial  discussions  with  ArcelorMittal  South  Africa 
regarding future off-take
arrangements for the Makhado Project;

·  Finalisation  of  the  Makhado  Project  valuation  as  calculated   in 
accordance with the DFS, after
taking into account the additional work to be completed; and

·Finalisation of  a definitive  shareholders  agreement between  CoAL  and 
Exxaro to be implemented, should Exxaro decide to exercise the Option.

Makhado Project

The  Makhado  Project  represents  CoAL's  most  advanced  exploration   stage 
development project  in the  Greater Soutpansberg  area with  NOPRs over  five 
farms, namely Lukin, Salaita,  Fripp, Tanga and Windhoek  covering an area  of 
8,190  hectares.  Based  on  the  reserve  and  resource  update  announcement 
published on  13  June 2012,  the  JORC  compliant resource  for  the  Makhado 
Project, drilled over a 16.5km strike length was reported as follows:

· Gross tonnes in situ  - 795.6 million tonnes

· Total tonnes in situ  -  691.7 million tonnes

· Mineable tonnes in situ  -  344.4 million tonnes

CoAL commenced work on the DFS in early 2010 and between August 2010 and April
2011, excavated a 19,000 tonne bulk sample from the farm Tanga. The results of
the detailed product tests  confirmed that the 10%  ash product performs  well 
relative to other  hard coking  coals based  on Coke  Strength Reaction,  Coke 
Reactivity Index and Reflectance. Testing  on an individual and blended  basis 
confirms that the hard coking coal's higher than average fluidity,  dilatation 
and high vitrinite content can be regarded as the strongest characteristics of
the coal.  The Company  expects that  these characteristics  will to  a  large 
extent  balance  the  lower  maximum  reflectance  and  higher  volatiles  for 
potential customers.

The application for a New Order Mining Right was submitted in January 2011 and
the process is at an advanced stage. During the quarter ended 31 March 2012, a
preliminary review  of the  draft DFS  was  undertaken by  the CoAL  Board  of 
Directors. Further work is  required to evaluate various  options in order  to 
finalise the DFS  which is anticipated  to be completed  in the third  quarter 
2012, following the revision of the  time period required for CoAL and  Exxaro 
to finalise the project valuation. The  interim report on the Makhado  Project 
was included in  the report  for the  quarter ended  31 March  2012, which  is 
available on the company website at


John Wallington

Chief Executive Officer

For more information contact:

John Wallington  Chief        Coal of Africa                            +27 11
                 Executive                                              575
                 Officer                                                4363
Wayne Koonin     Financial    Coal                                   of +27 11
                 Director     Africa      575
Shannon Coates   Company      Coal of Africa                            +61 89
                 Secretary                                              322
Sakhile Ndlovu   Investor     Coal of Africa                            +27 11
                 Relations                                              575
Charmane         Financial PR Russell & Associates                +27 11
Russell/Jane     (South                                                 880
Kamau            Africa)                                            3924

                                                                        +27 82
Jos Simson/Emily Financial PR Tavistock                                 +44 20
Fenton           (United                                                7920
                 Kingdom)                                               3150
Chris Sim/Jeremy Nominated    Evolution Securities        +44 20
Ellis/Neil       Adviser                                                7071
Elliot                                                                  4300
Reuben Govender  JSE Sponsor  J.P. Morgan Equities Limited              +27 11

Competent Person

The information in this announcement that relates to mineral resources or  ore 
reserves has been compiled by Ms C Telfer (B.Sc. Hons. (Geol.), (DMS) Dip  Bus 
Man Pr. Sci. Nat., FGSSA, MAusIMM, M.Inst.D)and Mr G Njowa (M.Sc. (Min. Eng),
MRM, B.Sc.Hons. (Min. Eng),  Grad CIS, MSAIMM, Pr  Eng, MIAS),both full  time 
employees  of   Venmyn  Rand   (Pty)   Ltd,  who   both  have   relevant   and 
appropriateexperience and independence to appraise the coal assets. Both Ms C
Telfer and Mr G Njowa are  considered"Competent Persons", and each have  more 
than five years relevant  experience in the  assessment andevaluation of  the 
types   of    coal   exploration    and   mining    propertiespresented    in 
thisannouncement. Both Ms C Telfer and  Mr G Njowa consent to the  inclusion 
of the  resourceinformation in  this  announcement and  as presented  in  the 
Technical Statement dated 31  May 2012 and  issued by the  company on 13  June 


All coal resources  are defined  in accordance  with the  Australian Code  for 
Reporting of Exploration Results, Mineral Resources and Ore Reserves  prepared 
by the Joint Ore  Reserves Committee of the  Australasian Institute of  Mining 
and Metallurgy,  the  Australasian  Institute of  Geoscientists  and  Minerals 
Council of Australia.

About CoAL:

CoAL is an AIM/ASX/JSE listed coal exploration, development and mining company
operating in  South Africa.  CoAL's  key projects  include the  Vele  Colliery 
(coking and thermal coal), the Greater Soutpansberg Project, including  CoAL's 
Makhado Project (coking  coal) and the  Mooiplaats and Woestalleen  Collieries 
(both thermal coal).

The Mooiplaats Colliery commenced production in 2008 and is currently  ramping 
up  to  produce  2  Mtpa.  The  Woestalleen  Colliery,  acquired  through  the 
acquisition  of  NuCoal  Mining  (Pty)  Limited  in  January  2010,  currently 
processes approximately  2.5Mtpa  of saleable  coal  for domestic  and  export 
markets. The Woestalleen Complex also incorporates three beneficiation  plants 
with a total processing capacity of 350,000 run-of-mine (ROM) feed tonnes  per 

CoAL's Vele  Colliery commenced  production  in Q1  2012. During  the  initial 
phase, the operation is targeting 2.7  Mtpa ROM production to produce  1.0Mtpa 
of saleable coking coal. The Makhado  Project, CoAL's flagship project in  the 
Soutpansberg coalfield, is well into the feasibility stage, with a  Definitive 
Feasibility Study having  been reviewed by  the CoAL Board  in March 2012.  An 
application for a New Order Mining Right for the Makhado Project was submitted
in January 2011.

In May 2012,  CoAL acquired the  Chapudi coal project  and several other  coal 
exploration properties  in  the  Soutpansberg  coal  basin  in  South  Africa, 
subsequently renamed  the Greater  Soutspansberg  Project, from  the  previous 
owners,  including  Rio   Tinto.  The  Greater   Soutpansberg  Project  is   a 
consolidation of nine potential  coking and thermal  coal assets grouped  into 
three proximate regions, namely Mopane,  Makhado and Chapudi. The  acquisition 
of these  assets strengthens  Coal of  Africa's position  as one  of the  most 
substantial holders of prospecting and mining rights for coking coal in  South 
Africa's Soutpansberg coalfield.

About Exxaro

Exxaro Coal Proprietary Limited is  a subsidiary of Exxaro Resources  Limited. 
Exxaro Resources Limited  is a  JSE-listed diversified resources  group and  a 
constituent of the JSE's  Top 40 companies index.  It has direct and  indirect 
interests in the coal,  mineral sands, iron ore  and base metals  commodities. 
The group has operations  and a strong pipeline  of projects in South  Africa, 
Australia, Republic of Congo and China. At year end 2011 Exxaro had assets  of 
R37 billion.

                     This information is provided by RNS
           The company news service from the London Stock Exchange


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