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Coal of Africa and Exxaro Coal continue negotiations

Oilfield Technology,

Coal of Africa Limited and Exxaro Coal Proprietary Limited have announced that, subsequent to the initial review of the draft definitive feasibility study 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 shall now be 30th 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’s chief executive, John Wallington said, “We are pleased with the … 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.”

Sipho Nkosi, Exxaro’s chief executive commented that, “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 have stated that they remain committed to completing the process in the shortest possible time period, to enable Exxaro to make a final decision under the option by 30th September 2012.

The agreed scope of work to be completed by 30th 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 13th June 2012.
  • 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.
  • Finalisation of a definitive shareholders agreement between CoAL and Exxaro to be implemented, should Exxaro decide to exercise the option.

Adapted from a press release by David Bizley

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