31 July 2014
REPORT FOR THE QUARTER ENDED 30 JUNE 2014
Continental Coal Limited ("Continental" or "the Company") provides its
operations report for the quarter ended 30 June 2014.
Operations
- Significant revenue received from the ABSA Hedge during the Quarter
- Penumbra production on track to achieve design capacity
- Penumbra yields improving
- Vlakvarkfontein has met production and cost guidance for year end
Corporate
- Wider balance sheet restructure and Rights Issue being finalized
1. OPERATIONS
1.1 Health and Safety
During the Quarter, one Dressing Station Case ("DSC") accident and one Medical
Treatment Incident ("MTI") were reported at the Company's mining and
processing operations - all accidents were relatively minor incidents reported
at the Penumbra Underground Mine with none reported at the Vlakvarkfontein Mine
and Delta processing facility. The accidents had no material impacts and their
causes are being addressed.
1.2 Operational performance
Operational performance (tonnes)
Quarter ended Quarter ended 12 months 12 months
ended ended
30 June 2014 30 June 2013 30 June 2014 30 June 2013
Run of Mine (ROM)
production
Vlakvarkfontein 383,363 377,957 1,382,487 1,526,469
Ferreira - 135,153 247,129 559,107
Penumbra 155,726 42,247 498,176 143,299
Total ROM production 539,089 560,357 2,127,792 2,228,875
Feed to plant
Ferreira - 138,636 269,670 627,329
Penumbra 151,925 81,999 491,424 143,299
Total feed to plant 151,925 220,635 761,094 770,628
Export yields
Ferreira - 72% 72% 70.4%
Penumbra 60.2% 36% 57.2% 36.8%
Export coal buy-in 10,831 - 31,784 -
Domestic sales 360,729 318,129 1,401,080 1,315,701
Export sales 82,053 130,072 523,906 453,582
Total sales 442,782 448,201 1,924,986 1,769,283
Total ROM coal production for the Quarter of 539,089t was achieved from the
Vlakvarkfontein and Penumbra Coal Mines. Mining at the Ferreira Coal Mine
ceased during the first half of the financial year as previously reported.
Feed to the Delta Processing Operations for the Quarter of 151,925t was
achieved from the Penumbra Coal Mine and has increased since the last quarter
feed for this mine (being 123,098t). The increase from the comparable quarter
in 2013 and on a year-end basis for the 12 months ended 30 June 2013 is in line
with the ramp up of the Penumbra Coal Mine.
Export yields at the Penumbra Coal Mine have shown a steady increase during the
past 12 months with the average yield of 60.2% recorded for the quarter and
57.2% for the year.
Domestic sales from the Vlakvar kfontein Coal Mine have increased in comparison
to the previous quarter, the comparable quarter in 2013 and on a year-end
basis.
1.3 Vlakvarkfontein Coal Mine
Vlakvarkfontein Coal Mine produced 383,363t ROM for the Quarter, which is a
significant increase to the previous quarter (being 270,141t) and higher than
the comparable quarter in 2013. The increase is due to ROM of non-select product
being placed.
An average strip ratio of 2.34:1 was achieved for the Quarter (2.22:1 YTD).
Total thermal coal sales during the Quarter from the Vlakvarkfontein Coal Mine
were 360,729t and comprised 311,741t to Eskom and 48,987t of non-select coal.
Sales for the year ended 30 June 2014 of 1,149,216t to Eskom were above budget
with non-select coal sales of 251,861t being below budget.
Vlakvarkfontein achieved its target of planned production of 1.3 Mt ROM at a
cost of ZAR 90.00/t (US$8.50/t) for FY2014.
1.4 Ferreira Coal Mine
Inventory clean-up at the Ferreira Coal Mine was completed in the previous
quarter. The rehabilitation work will commence upon finalisation of the closure
plan and appointing contractors.
1.5 Penumbra Coal Mine
ROM coal production at the Penumbra Coal Mine for the Quarter totaled 155,726t.
As previously reported the Company has encountered stone rolls that are
displacing the coal seam in the current mining area and this is impacting on
the production rate and the delivered yield due to added contamination.
Management, in conjunction with mining consultants, have been reviewing the
planned production lay-out in order to mitigate the impact of the stone rolls
on the production rate of the continuous miners. As procedures are implemented
the ROM and yield are increasing with the month of June 2014 producing 58,013t
which is on track to the targeted 70,000t per month.
Export yields at Penumbra have been steady during the quarter with the average
yield of 60.2% recorded. The yield is expected to improve to the planned 62%
with the increase in production and the mitigation of the additional
contamination caused by the stone rolls.
Mining costs of ZAR 175.17/t (US$16.53/t) ROM were similar to the costs
achieved in the prior quarter with FOB costs of ZAR 841.13/t (US$79.40/t) per
sales tonnes recorded for the Quarter. Total FOB costs will likely reduce in
the coming months given the forecast increase in production.
Penumbra delivered 498,176t ROM for the year ended 30 June 2014 comparable to
the revised forecast of 500,000t at a FOB cost of ZAR 841.13 (US$79.40) per
sales tonne.
The Company received ZAR 2.7 million revenue for the quarter from the ABSA
forward hedging contract at Penumbra.
2. DEVELOPMENT PROJECT
2.1 De Wittekrans Coal Project
The Integrated Water Use License (IWUL) application has been submitted and the
Company awaits approval.
With the Mining Right successfully executed during the quarter the Company now
has 12 months to commence mining operations, however should the IWUL not be
received within this 12 month period the Mining Right can be delayed.
During the quarter two sites were selected for mining and these are now being
evaluated as to which site will be selected for the first phase of mining.
3. EXPLORATION PROJECTS
3.1 Botswana Coal Projects
The Company is in advanced discussions in respect of the two remaining
Prospecting licenses (PL 340/2008 and PL 341/2008). PL341 has been transferred
and the transfer documents for PL340 have been submitted to the Botswana
Ministry of Minerals, Energy.
4. CORPORATE
4.1. Recapitalisation
During the Quarter the Company progressed with its previously announced Rights
Issue. This proposed non-renounceable pro-rata Rights Issue is planned to raise
approx. A$35.1m (previously noted as up to A$31.7m) at an offer price of
A$0.005 per new share and the Company has appointed Paterson's Securities
Limited as Corporate Advisor and Lead Manager to the offer.
The Company has received strong interest in participation in the Rights Issue
from institutional and sophisticated investors in Australia, Europe and South
Africa as well as a number of commodity trading groups and specialist coal
mining investment funds. Proceeds from the Rights Issue will be primarily used
by the Company to repay unsecured convertible noteholders, loans and royalty
holders, repay bridging finance, reduce the Group's other borrowings, provide
funds towards the development of the Company's advanced coal mining projects
and provide working capital.
The fund raising will allow the Company to complete its planned
recapitalisation and restructure of the Company's balance sheet, substantially
reducing the Group's total indebtedness
The fund raising is being completed after reaching standstill agreements with
key unsecured convertible note and royalty holders, after negotiations of its
Coal Supply Agreement with EDF Trading and with negotiations with ABSA Bank (in
respect to the debt financing for the Penumbra Coal Mine) which are ongoing.
Full details of the Rights Issue are scheduled to be released to the market
shortly.
4.2 Proposed listing on the Johannesburg Stock Exchange
The proposed listing has been postponed until such time as the recapitalisation
of the Company has been completed.
4.3 ASX and AIM share trading suspension
As at the date of this report Continental's securities on both the ASX and AIM
markets continue to be suspended whilst the Company completes the Rights Issue.
Peter Landau
Interim Executive Director
For further information please contact:
Media (Australia)
David Tasker
Professional Public Relations
T: +61 8 9388 0944
Nominated Advisor
Oliver Morse / Trinity McIntyre
RFC Ambrian Limited
T: +61 8 9480 2500
Brokers
Jonathan Williams
RFC Ambrian Limited
T : +44 203 440 6817
About Continental Coal Limited
Continental Coal Limited (ASX:CCC/AIM: COOL) is a South African thermal coal
producer with a portfolio of projects located in South Africa's major coal
fields including two operating mines, the Vlakvarkfontein and Penumbra Coal
Mines, producing approx. 2Mtpa of thermal coal for the export and domestic
markets. A Feasibility Study was also completed on a proposed third mine, the
De Wittekrans Coal Project with a mining right granted in September 2013.
Competent Persons Statement
The information in this release that relates to Coal Resources on
Vlakvarkfontein, Vlakplaats and Wolvenfontein is based on resource estimates
completed by Dr. Philip John Hancox. Dr. Hancox is a member in good standing of
the South African Council for Natural Scientific Professions (SACNASP No.
400224/04) as well as a Member and Fellow of the Geological Society of South
Africa. He is also a member of the Fossil Fuel Foundation, the Geostatistical
Association of South Africa, the Society of Economic Geologists, and a Core
Member of the Prospectors and Developer Association of Canada. Dr. Hancox has
more than 12 years' experience in the South African Coal and Minerals
industries and holds a Ph.D from the University of the Witwatersrand (South
Africa).
The information in this release that relates to Coal Resources on Penumbra, De
Wittekrans, Knapdaar, Leiden and Wesselton II is based on coal resource
estimates completed by Mr. Nico Denner, a full time employee of Gemecs (Pty)
Ltd. Mr. Denner is a member in good standing of the South African Council for
Natural Scientific Professions (SACNASP No. 400060/98) as well as a Member and
Fellow of the Geological Society of South Africa. He has more than 15 years'
experience in the South African Coal and Minerals industries.
The information in this release that relates to Coal Resources on Project X and
Vaalbank is based on coal resource estimates completed by Mr. Coenraad van
Niekerk, a full time employee of Gemecs (Pty) Ltd. Mr. van Niekerk is a member
in good standing of the South African Council for Natural Scientific
Professions (SACNASP No. 400066/98) as well as a Member and Fellow of the
Geological Society of South Africa. He has more than 38 years' experience in
the South African Coal and Minerals industries.
The information in this release that relates to Coal Resources on Mooifontein
is based on coal resource estimates completed by Mr. Dawie van Wyk, a full time
employee of Geocoal services (Pty) Ltd. Mr. van Wyk is a member in good
standing of the South African Council for Natural Scientific Professions
(SACNASP No. 401964/83) as well as a Member and Fellow of the Geological
Society of South Africa. He has more than 30 years' experience in the South
African Coal and Minerals industries.
The Coal Reserves on Vlakvarkfontein, De Wittekrans and Penumbra is based on
reserve estimates completed by Eugène de Villiers. Mr. de Villiers is a
graduated mining engineer (B.Eng) Mining from the University of Pretoria and is
professionally registered with the Engineering Council of South Africa (Pr.eng
no - 20080066). He is also a member of the South African Institute of Mining
and Metallurgy (SAIMM Membership no. 700348) and the South African Coal
Managers Association (SACMA Membership no. 1742). Mr. de Villiers has been
working in the coal industry since 1993 and has a vast amount of production and
mine management as well as project related experience.
Forward Looking Statement
This communication includes certain statements that may be deemed
"forward-looking statements" and information. All statements in this
communication, other than statements of historical facts, that address future
production, reserve potential, exploration drilling, exploitation activities
and events or developments that the Company expects to take place in the future
are forward-looking statements and information. Although the Company believes
the expectations expressed in such forward-looking statements and information
are based on reasonable assumptions, such statements are not guarantees of
future performance and actual results or developments may differ materially
from those in the forward-looking statements and information. Factors that
could cause actual results to differ materially from those in forward-looking
statements include market prices, exploitation and exploration successes,
drilling and development results, production rates and operating costs,
continued availability of capital and financing and general economic, market or
business conditions. Investors are cautioned that any such statements are not
guarantees of future performance and actual results or developments may differ
materially from those stated.
South Africa Australia
T +27 11 881 1420 F +27 862064487 W T +61 8 9488 5220 F +61 8 9324 3400 W
www.conticoal.com www.conticoal.com
9th Floor Fredman Towers, 13 Fredman Ground Floor, 1 Havelock Street, West
Drive, Sandton 2196 Perth, WA 6005
PO Box 787646, Sandton 2146 PO Box 684, West Perth, WA 6872
Interim Executive Chairman: Dr Paul D'Sylva Interim Executive Director: Mr
Peter Landau
Non-Executive Directors: Mr Connie Molusi and Dr Lars Schernikau