South Africa’s ailing power utility, Eskom, could have a new potential coal supplier as Coal of Africa Limited received mining rights for the Makhado Project.
Coal of Africa Limited (CoAL) said it was pleased to receive the mining rights from the Department of Mineral Resources (DMR) of a New Order Mining Right in terms of the Mineral and Petroleum Resources Development Act for its flagship Makhado hard coking and thermal coal project.
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DMR also granted the Section 11 approval transferring the right from CoAL to its wholly owned subsidiary Baobab Mining & Exploration, which will be the project's development company.
The mining group said it completed a Class II Definitive Feasibility Study on the Makhado Project during 2013 and anticipates developing the colliery to produce 2.3 million tonnes per annum of hard coking coal and a further 3.2 Mtpa of thermal coal over a 16 year life of mine.
“The project can produce hard coking coal that has been benchmarked by independent consultants. Tests confirmed that the coal can be successfully beneficiated to produce high strength coke for the steel manufacturing industry,” read the company’s statement.
“Following the granting of the Section 11 approval, the Makhado Colliery Community Development Trust representing seven local communities living in the vicinity of the project will acquire a 20 per cent interest in Baobab.”
The company added that a further six per cent interest in Baobab has been acquired by Yoright Investments (Pty) Ltd formed by black entrepreneur Mike Nkuna whose shareholder grouping will include other historically disadvantaged South Africans.
“The Trust and Yoright have two years to raise sufficient funding to acquire their interests in Baobab with the final amount payable subject to due diligence which will be negotiated with the company,” added the group.
The company also said the completion of the acquisition transactions will result in the Trust owning 20 per cent, Yoright six per cent and CoAL 74 per cent of Baobab.
David Brown, CEO of CoAL, said the granting of the mining right is a significant milestone for CoAL as it allows the Company to proceed towards developing Makhado, its flagship project.
“It is an important vote of confidence in the economic potential of the Project, not only for the region, but also for the Limpopo province. As soon as development starts at Makhado a meaningful contribution will be made to the growth and development goals of the province, improving the socio-economic environment of the communities in the area of operation,” said Brown.
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CoAL looks forward to a successful working relationship with its partners in the area.
“Makhado’s capacity to produce hard coking and thermal coal alongside its close proximity to underutilised rail infrastructure ensures its role as a potential domestic and/or export supplier.”