Coal of Africa reduces losses and overhead costs

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Losses amounted to 46.3 million US dollars or 4.42 cents per share, compared to a loss of 111.7 million US dollars, 114.39 cents per share for the prior corresponding period.

(WATCH VIDEO: Coal of Africa FY output declines)

The company also underwent a restructure of its non-core assets to decrease overhead costs, which included a reduction in staff numbers at its corporate office and projects.

“These processes were completed by July 2013 and together with the relocation of the corporate office in Johannesburg, resulted in significant cost savings,” said the company (CoAL) in a statement.

The restructuring also resulted in the disposal of their Woestalleen Complex near Middelburg in Mpumalanga, while the Opgoedenhoop New Order Mining Right (NOMR), which previously formed part of the Woestalleen Complex, will be subject to a separate disposal process.  

Mooiplaats Colliery in Mpumalanga will also be undergoing a formal disposal process by the end of 2014.

In December 2013, the company agreed to sell their Holfontein thermal coal project in Secunda. The purchase price for the project is expected to be 50 million rand once the transaction undergoes legislative approval.

CoAl has also signed a Letter of Intent with steel manufacturer, ArcelorMittal South Africa, to supply them with coking coal from their Vele Colliery. Both parties are hoping to turn the deal into a formal off-take agreement.

South Africa’s power utility, Eskom, is also expected to sign an off-take agreement with CoAL for the supply of thermal coal from Vele.

(WATCH VIDEO: Coal approves R220 million expansion project)

In addition, the company is finalising agreements to enable a broad based black economic empowerment consortium, to acquire 26 per cent of the Makhado Project, estimated to  have a net present value in excess of 6.9 billion rand, and is planned to produce two million tonnes per annum (Mtpa) of hard coking coal, over three Mtpa of Eskom’s quality thermal coal.

(WATCH VIDEO: Coal unveils Makhado DFS results)

“The construction of the project, including ramp-up, is expected to take 26 months commencing in 2015 and has an initial life of mine of 16 years. The inclusion of a BEE shareholder ensures that the project has the requisite corporate structure for the granting of the NOMR and in time, the Makhado Project will benefit one of the poorest areas in South Africa,” continued the statement.

Headline losses however were reduced from 7.95 cents to 2.85 cents while cash and cash equivalents decreased from 29.9 million US dollars to 4.2 million US dollars.

(READ MORE: Coal of Africa total coal sales decrease by 25%)

No dividend was declared for the period.

CoAL converted its interest in Madagascan based coal company, Lemur Resources, into Bushveld Minerals shares, a London listed mineral development company, and are in the process of disposing these shares by the end of 2014.

Overall, the company believes that good progress has been made on all elements of their turnaround strategy.