CZA

Coal of Africa Ltd. (CZA.AU) said Monday it will buy the Chapudi coal project and other South African assets off Rio Tinto Ltd. (RIO) in a US$75 million deal that will increase the miner's coal resource by 1.04 billion tons.

Coal of Africa said the acquisition would make it the dominant landholder in the Soutpansberg Basin, South Africa's main source of the coking coal used in steelmaking.

Major diversified miners have been re-examining their South African assets against a backdrop of rising energy costs in the country and a sale of Rio Tinto's local coal mines had long been expected.

Coal of Africa said that 90 million tons of the coal resource was in the most-reliable measured category, with 220 million tons of indicated resources and 730 million tons of least-reliable inferred coal.

"The properties being acquired significantly extend the scale and scope of Coal of Africa's existing Voorburg and Jutland coal projects," Coal of Africa said in a statement. "Coal of Africa's working knowledge of this acreage, which has been established during its period of ownership, exploration and resource delineation of Makhado, will aid in further exploring the contiguous acreage which it has now acquired."

Coal of Africa will pay US$45 million in cash on completion of the sale, with US$30 million dependent on grant of mining rights or fulfilment of conditions.

-By David Fickling, Dow Jones Newswires; +61 2 8272 4689; david.fickling@dowjones.com

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