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Continental Coal acquires Mashala Resources

Oilfield Technology,

Continental Coal Ltd is poised to become South Africa’s latest export coal producer, following the settlement of the company’s South African subsidiary Continental Coal Ltd’s acquisition of unlisted South African thermal coal mining and export coal producing company Mashala Resources.

The financial settlement of the acquisition of Mashala is a major milestone for Continental as it looks to establish itself as a successful mid-tier coal mining company producing 10 million tpa ROM thermal coal by 2015. Continental’s CEO, Don Turvey said: “This is an exciting time for Continental. Over the past six months we have undergone a major transformation from developer to coal producer, and with the acquisition of Mashala now settled, we have already railed our first export thermal coal to the Richards Bay Coal Terminal (RBCT) for sale to EDF Trading, one of the world’s largest energy traders and the subsidiary of the world’s largest energy utility.”

The US$ 35 million acquisition costs for Mashala, the repayment of existing loans and the replacement of bank and environmental guarantees was funded from the first US$ 15 million tranche of drawings under the recently executed US$ 20 million EDF Trading coal loan and supplemented by existing equity funds.

Under a coal sales agreement, EDF Trading will advance up to US$ 20 million through an advance purchase of thermal coal from the Ferreira, Penumbra and De Wittekrans, which the company recently acquired an interest in following its acquisition of Mashala. Under the agreement, EDF Trading has also agreed to an off-take agreement with Continental that will see them secure thermal coal production from these mines for an initial period of 20 years at a market API4 benchmark price FOB Richards Bay.

The company has also commenced coal production at its Vlakvarkfontein mine and strengthened both its executive management and key logistics capabilities with RBCT export allocation and Transnet Freight Rail contracts in place.

Under its contract with Transnet Freight Rail, the company has commenced the delivery of export thermal coal to RBCT with its first train from the Ferreira opencast mine. First sales under the coal sales agreement with EDF Trading are expected shortly with a further three trains with an estimated 33,000 t of export sales from Ferreira scheduled in the remainder of the December 2010 quarter.

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