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Johannesburg - Exxaro Resources has acquired an option to buy up to 30% of Coal of Africa's (Coal) Makhado coking coal project in Limpopo Province.
Coal's report for the March quarter said the option is for a "cash consideration equal to the net present value (NPV) of the project less a 20% discount". The Makhado project NPV has yet to be calculated.
Makhado is situated just north of the Soutpansberg Mountains and south of De Beers' Venetia diamond mine near the town of Alldays.
The deposit was first looked at by the former Iron and Steel Corporation (Iscor) in the early 1970s before the group opted to develop a coking coal mine at Tshikondeni further east, close to the Kruger National Park border.
According to the Coal quarterly report Exxaro, which was formerly part of Iscor, "was responsible for all of the historical drilling and exploration activities undertaken in the Soutpansberg coal field, including Makhado.
"It is currently the only hard coking coal producer in South Africa and the sole South African-based supplier to ArcelorMittal SA. As a result it can bring to Coal a depth of coking coal experience unrivalled in the South African context.
"Exxaro are willing to commit their extensive resources and assist CoAL in the analysis of the project geology, mine planning, beneficiation and marketing of the coal produced."
According to CoAL statistics, the Makhado deposit consists of a measured resource of 230 million tonnes (mt) of coal and an indicated resource of 549mt.
Opposition to Vele mine
Production at this stage is estimated to begin at around 750 000t/year in 2010, rising to 5mt/year from 2014. MD Simon Farrell has previously stated the Makhado resource could be increased through a swap of ground with Rio Tinto, which owns other resources in the region.
If Exxaro exercises the option, this will be Coal's second major link-up with a South African partner.
ArcelorMittal has just bought a 16.3% stake in Coal for R404.5m and holds an option to buy 2.5mt/year of coking coal from Coal's Vele project.
Vele is also situated in Limpopo Province and a new order mining right (NOMR) application was submitted in October.
In February, Farrell talked about obtaining the Vele NOMR by the end of June. However, the March quarterly report states that Coal "remains hopeful of receiving a granted new order mining right by September of this year".
The development of the Vele mine is opposed by a number of parties including South African National Parks (Sanparks), because of its proximity to the Mapungubwe National Park.
The Vele mine environmental management plan is due to be submitted to the department of minerals and energy by the end of April.
The quarterly report also said Coal had reached agreement with Transnet Freight Rail (TFR) for the transport of 1mt/year of coal to the Matola export terminal in Maputo.
Coal has a 1mt/year allocation through Matola, but has now agreed to loan the money to Matola for its next proposed 2mt/expansion phase. By funding this expansion, Coal acquires the right to utilise all the extra capacity created. This will increase Coal's total export allocation at Matola to 3mt/year.
According to the Coal statement, "discussions with TFR to secure an additional 2mt/year rail capacity are ongoing".
- Miningmx.com
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