30 April 2013
REPORT FOR THE QUARTER ENDING 31 MARCH 2013
Continental Coal Limited ("Continental" or "the Company") is pleased to provide
its operations report for the quarter ended 31 March 2013.
* Production and operational improvements across all aspects of the Company's
thermal coal mining operations in South Africa:
- Record total ROM coal production of 631,557t, a 35% increase on
- Penumbra ROM coal production of 52,876t, a 99% increase on previous
- Plant feed of 222,532t through the Delta Plant, a 26% increase on
- Export yield of 71.3% on tonnes processed from the Ferreira Coal Mine
- Export yields increase by 46% on tonnes processed from the Penumbra
- Export thermal coal sales increase by 16% on previous quarter
- Increased thermal coal sales of 463,671t, a 4% increase on the previous
* Penumbra Coal Mine cashflow positive in first full quarter of operation
* All the Company's three thermal coal mining operations in South Africa
generating positive cashflow from operations
* Financial settlement of the sale of Company's shareholding in the non-core
Vanadium and Magnetite Exploration and Development Co (SA) (Pty) completed
* Acquisition of the outstanding minority interests in Mashala Resources
completed by the Company's principal subsidiary in South Africa
* Strategic financing agreements entered into with diversified South African
mining company, Village Main Reef Limited
* Placement of 100m shares to South African based Village Main Reef at an
issue price of A$0.08 per share approved by shareholders
During the third quarter of the 2012/13 financial year, the Company continued
to demonstrate strong operational performance across all three of its operating
mines with record total ROM coal production for the Quarter, record export
yields achieved at the Delta Coal Processing Operations and increased total
thermal coal sales to the export and domestic markets. Key corporate
transactions were further completed, including the sale of its shareholding in
the VanMag and the acquisition of the outstanding minority interests in Mashala
In addition, the Company entered into strategic financing agreements with
Village Main Reef Limited, under which Village Main Reef aim to acquire up to a
19.9% interest in the Company through a private placement, at a significant
premium to the prevailing share price, through purchasing the shareholdings of
shareholders holding parcels of shares with a market value of less than A$500
and through proposed subsequent on market share purchases.
Health and Safety
During the Quarter, three Lost Time Injuries ("LTI") were reported at the
Company's mining and processing operations - one LTI was reported at the
Vlakvarkfontein Coal Mine and two LTI's at the Penumbra Coal Mine. Given
incidents over the past Quarter, a number of enhanced health and safety
initiatives are underway to re-emphasise the high safety standards and
practices expected from management, employees and the Company's contractors
across all operations.
Corporate Social Investment Projects
The Company has several Corporate Social Investment Projects on--going at its
operations as part of approved Social and Labour Plans. During the Quarter, the
first group of students obtained their certificates for successfully completing
the first level of their module under the Company's Adult Basic Education and
Training Program at the Vlakvarkfontein Coal Mine. In addition, the Board and
senior management visited the Arbor Village, located near to the
Vlakvarkfontein Coal Mine, where three classrooms at the Arbor Primary School
have been renovated and where the donation of a mobile office to the Arbor Home
Based Care Group was made by the Company to assist in the care of the elderly
and sick and the bi-monthly clinic with the Department of Health. Phase 1 of a
Lavender Oil Program at the Arbor Village commenced in February 2013, with an
initial 8 people employed on this project.
Coal Mine and Processing Operations
OPERATIONS PERFORMANCE FOR 3 MONTHS TO MARCH 2013
DEC 12 MAR 13 Change FY 2013
(Actual) (Actual) QTR on QTR (%) YTD
Vlakvarkfontein 313,495 412,764 +32% 1,148,512
Ferreira 152,280 165,917 +9% 423,954
Penumbra 691 52,876 +99%. 53,567
Total ROMProduction 468,469 631,557 +35% 1,626,033
Feed to Plant
Ferreira 161,605 163,926 +1% 488,693
Penumbra 2,694 58,606 +95% 61,300
Total Plant Feed 164,299 222,532 +26% 549,993
Ferreira 66.2% 71.3% +8% 69.6%
Penumbra 26.2% 38.1% +46% 37.8%
Domestic Sales 351,264 349,911 0% 997,652
Export Sales 97,939 113,760 +16% 323,510
Total Coal Sales 449,203 463,671 +4% 1,321,162
Total record ROM coal production for the Quarter of 631,557t was achieved from
the Vlakvarkfontein, Ferreira and Penumbra Coal Mines. Total ROM production
increased by 35% quarter on quarter. Year to date ROM coal production of 1.6Mt
has been achieved.
Feed to the Delta Processing Operations for the Quarter of 222,532t,
represented a 26% quarter on quarter increase. Export yields increased to a
record 71.3% on tonnes processed from the Ferreira Coal Mine and to 38.1% on
tonnes processed from the Penumbra Coal Mine.
Increased total thermal coal sales of 463,671t were achieved for the Quarter,
an 8% quarter on quarter increase. Export thermal sales increased by 16% over
Vlakvarkfontein Coal Mine
The Vlakvarkfontein Coal Mine produced 412,764t ROM for the Quarter, 32% above
the 313,495t ROM achieved in the previous quarter. ROM production for the
Quarter exceeded the budget of 328,948t by 25%. ROM production YTD of 1.1Mt is
16% above budgeted production levels.
A total of 220,017t were produced from the No 4 seam and 192,748 t from the No
2 seam. Total waste of 775,540 BCM was moved by the open pit mining contractor
during the Quarter. An average strip ratio of 1.9:1 was achieved for the
Quarter. Activities during the Quarter focused on expanding the faces to the
north and south of the existing mine.
Total thermal coal sales during the Quarter from the Vlakvarkfontein Coal Mine
were 349,911t, in line with the previous quarter's sales of 351,264t and 2%
above budgeted sales.
Sales during the quarter comprised 305,929t for Eskom, 10% above budget and 25%
above the previous quarter's sales of 244,033t. A further 43,982t of non-select
coal sales were made during the Quarter to the domestic market.
The Vlakvarkfontein Coal Mine is forecast to exceed budgeted ROM production and
thermal coal sales for FY2013.
Year to date mining costs have averaged ZAR78/t ROM (approx. 22% below budget).
Total FOT costs year to date have averaged ZAR132/sales tonne (approx. 9% below
budget). Average sales price received year to date was ZAR184/t, a 2% increase
over the quarter, reflecting an increased percentage of sales to Eskom.
Ferreira Coal Mine
ROM coal production at the Ferreira Coal Mine for the Quarter totaled 165,917t,
a 9% increase on the 152,280t in the previous quarter. ROM coal production has
increased quarter on quarter in FY2013. ROM production YTD of 423,954t is 5%
above budgeted production levels.
ROM production for the Quarter exceeded budget of 138,450t by 20% or 27,467t.
Budgeted ROM production was exceeded despite ROM production in March 2013
limited to 45,500t as a result of the availability of trains for transportation
of export coal product to RBCT.
Total material movement of 1,341,051 BCM was moved by the open pit mining
contractor during the Quarter. An average strip ratio of 7.8:1 was achieved for
Year to date mining costs at the Ferreira Coal Mine have averaged ZAR273/t ROM
(approx. 5% below budget). Total FOR costs year to date have averaged ZAR561/
sales tonne (approx. 9% below budget) with total FOB costs to Richards Bay Coal
Terminal of ZAR690/sales tonne (approx. A$77/t).
Penumbra Coal Mine
During the Quarter ROM coal production of 52,876t was achieved, a 99% increase
on the 691t achieved in the previous quarter.
Underground production increased steadily throughout the Quarter from 14,031t
of total material mined (coal and sandstone) in January 2013, to 27,311t in
February 2013 and 30,867t in March 2013. Production increased as more pitrooms
were developed in the bord and pillar underground operations and following the
commissioning of the second Joy 14HM15 Continuous Miner in late February 2013.
Ramping up to full production is progressing, with the establishment of all
remaining underground services required for mining operations nearing
completion. The first main trunk conveyor was successfully installed and
commissioned late in the Quarter. Geotechnical work related to support of the
sandstone roof above the coal seam has been a focus during the Quarter, as this
has impacted on the mines planned accelerated ramp-up, with particular focus on
determining the optimal amount of support required. Further work on methane
monitoring in areas below the overlying wetlands is also a key focus for the
Work on the outstanding project development continued throughout the Quarter,
blasting of the roof excavation in the belt road for the first main trunk
conveyor installation was completed. ENI has completed 95% of the electrical
installation on site and are on schedule to be completed by end May 2013. The
instrumentation installation will also be completed by end May 2013. Enbitec
Consultants further completed the water purification, sewerage and
pre-treatment plants during the Quarter. Geopractica completed the
pre-cementation holes around the main ventilation shaft collar. The piling of
the shaft collar to competent rock was completed during the Quarter, with
construction of the shaft collar civil work now underway.
The project development at the Penumbra Coal Mine is approx. 95% complete with
the remaining development work to be completed in the current quarter and to be
funded from amounts available under the ABSA Capital Debt Facilities.
Delta Processing Operations
During the Quarter a total of 222,532t was processed through the Delta
Processing Plant. Plant feed was a quarterly record and was a 26% increase on
the previous quarter's 164,299t ROM processed.
Feed to the plant was primarily from the Ferreira Coal Mine, with 163,926t
processed, a 1% increase on the previous quarter. Feed from the Penumbra Coal
Mine increased to 58,606t, a 95% increase on the previous quarter.
An export yield of 71.3% was achieved for the Quarter for coal processed from
the Ferreira Coal Mine. Export yield of 38.1% was achieved for the Penumbra
Coal Mine, a 46% increase on the 26.2% export yield achieved in the previous
Export yield for coal from the Penumbra Coal Mine is forecast to increase
towards the budgeted 67.0% in the current quarter.
Export thermal coal sales of 113,760t was railed and sold FOB Richards Bay Coal
Terminal during the Quarter, a 16% increase on the 97,939t railed and sold FOB
Richards Bay Coal Terminal during the previous quarter.
As at the end of the Quarter the Company had 43,861t of export coal stocks at
the Delta Processing Operations and Anthra Rail Siding awaiting railing to
De Wittekrans Coal Project
During the Quarter the Company continued to progress its application for a New
Order Mining Right and Integrated Water Use License for the De Wittekrans Coal
In parallel with the permitting and approval processes underway, the Company
also continued its discussions and negotiations in respect to a potential
long-term off-take agreement, strategic partnership and stand alone funding
agreement for the De Wittekrans Coal Project.
Discussions with several parties are on-going and are focused on finalisation
of a funding arrangement that will allow the Company to bring the planned
initial 7 year open cast mine into development and provide funding for the
subsequent forecast 30 year, 3.6Mtpa underground mine development and secure a
long-term strategic off-take partner for the operations.
Vaalbank Coal Project
During the Quarter the Company progressed the Section 11 approval in respect to
the Vaalbank Coal Project. On receipt of the approval from the DMR, a two phase
and 12 month exploration program will commence in 50:50 joint venture with
Forzando Coal, 74% owned by Total Coal South Africa, a subsidiary of
international energy company, Total.
Total Coal South Africa has been operating for more than 25 years and produces
over 4Mtpa of export quality thermal coal from operations located near to and
adjacent to the Company's Vaalbank Coal Project.
The Section 11 approval is anticipated to be received in the current quarter
following which the two phase exploration program will commence with an initial
20 hole diamond drilling program with associated raw and washed analyses of
Leiden Coal Project
During the Quarter the Company submitted a Mining Right application to the DMR
for the Leiden Coal Project.
The Leiden Coal Project, located approx. 55km south of the Company's Ferreira
and Penumbra Coal Mines and Delta Processing Operations has total JORC
compliant resources of 18.4Mt (CCC attributable: 3.3Mt Measured, 1.5Mt
Indicated and 8.9Mt Inferred).
Preliminary environmental studies have commenced and are to be completed in the
Botswana Coal Projects
During the Quarter, the Company continued in its discussions with several
strategic parties in respect to potential joint ventures for the Company's
three coal prospecting licenses in Botswana.
The Prospecting Licenses, PL339/2008 and PL340/2008 (the Serowe Coal Project)
and PL341/2008 (the Kweneng Coal Project) are considered to be strategically
located, with the Serowe Coal Project located immediately north of Botswana's
only major producing thermal coal mine, the Morupule Coal Mine, and the Kweneng
Project is 25kms west of Jindal Steel and Power Ltd of India's Mmamabula Coal
The Company anticipates finalisation of one of the joint venture agreements on
its Botswana Coal Projects to be completed in the current quarter.
Transformational Strategic Deal with Village Main Reef
During the Quarter the Company entered into binding funding agreements with
Village Main Reef Limited (JSE:VIL) ("VMR"), a South African-based diversified
The Company believes that the transaction will further strengthen the Company's
growth strategy and operating credentials in South Africa. Funds raised under
the transaction will be used by the Company towards debt reduction, working
capital and overall strengthening of the Company's balance sheet.
Under the terms of the funding agreements, VMR has agreed to acquire up to a
19.9% strategic cornerstone interest in the Company through a three tranche
a. A$8m Private Placement
VMR has entered into a private placement transaction under which they have
agreed to subscribe for 100 million ordinary shares in the Company at an issue
price of A$0.08 per share, raising a total of A$8.0m.
The A$0.08 per share issue price under the placement represents a premium to
the Company's last traded share price on the ASX and a premium to the Company's
90 Day VWAP share price.
As part of the placement, VMR will be issued with a further 25m unlisted
options with an exercise price of A$0.10 per option and an expiry date of 31
March 2016. During the Quarter VMR advanced A$2.0m of the placement. The
placement received shareholder approval at the General Meeting on 28 March
2013. The final condition of the placement is receipt of South African Reserve
Bank approval, which as at the end of the Quarter remains outstanding
Upon conclusion of the placement VMR will be entitled to nominate one board
member to the Board of the Company.
b. Sale of Small Shareholdings
In addition to the placement, VMR has further entered into an agreement with
the Company and established a mechanism for the sale of parcels of shares held
by shareholders with a market value of less than $500 (being shareholdings less
than a Minimum Shareholding as provided for in the Company's constitution).
As at the close of business on 11 March 2013 the Company had 11,054
shareholders of which 5,614 held shareholdings less than a Minimum Shareholding
and, as such, are described as `Minority Members' in the Company's
constitution. The holdings of the Minority Members totaled 19,352,630 shares.
Under the terms of the agreement VMR has agreed to acquire all of the shares
held by Minority Members (other than those held by Minority Members who elect
to retain their shares in the Company) on the Record Date at a price per share
that is equal to the minimum sale price in accordance with the Company's
constitution of $A0.0521. The minimum sale price is equal to the simple average
of the last sale prices of the Company's shares quoted on ASX for each of the
ten trading days prior to 11 March 2013, being the date the offer was received
The Company has elected to proceed with the sale of the shareholdings less than
a Minimum Shareholding as it expects to benefit from a reduction in
administrative costs and an improvement in efficiencies with managing a smaller
shareholder base. In addition it will give Minority Members, who may find it
difficult or uneconomic to dispose of those shareholdings through the normal
means, a cost effective and convenient way of selling their shareholdings
without incurring brokerage fees. The Closing Date of the Sale of Small
Shareholdings is scheduled on 29 April 2013, with the expected sale
consideration to be distributed by 10 May 2013.
c. On-Market Share Purchases
In addition to the placement and sale of small shareholdings, VMR has also
indicated its intention to hold a 19.9% interest in the issued share capital of
the Company and will look to acquire further shares in the Company through on
The completion of the transaction with VMR followed a detailed technical and
financial due diligence, that was successfully undertaken during the Quarter.
Settlement of sale of VanMag and Acquisition of Minority Shareholders in
During the Quarter, the Company completed financial settlement of the sale of
its shareholding in Vanadium and Magnetite Exploration and Development Co (SA)
(Pty) Limited ("VanMag") to a Chinese based group.
Proceeds from the sale of its shareholding in VanMag were used towards
purchasing all the outstanding minority interests in Mashala Resources
("Mashala") not already held by the Company's principal and 74% owned
subsidiary in South Africa (Continental Coal Limited ("CCL")).
Following the acquisition of the outstanding interests in Mashala, the
Company's principal subsidiary, CCL, holds 100% interests in the operating
Ferreira Coal Mine and the operating Penumbra Coal Mine as well as the De
Wittekrans Coal Project that is forecast to become the Company's fourth coal
Acquisition and Direct Investment in the Company's South African Coal Assets
The Company continued with its discussions with a number of Indian based coal
and power utility companies and major global commodity trading groups that have
expressed interest in the Company's South African thermal coal business and in
a potential long-term off-take agreement, strategic partnership and funding and
/or joint venture arrangement on the De Wittekrans Coal Project.
As at the end of the Quarter these discussions and negotiations are continuing
with the greater focus being on finalisation of a transaction on the De
Wittekrans Coal Project.
FINANCIAL AND OPERATIONAL PERFORMANCE
Summary financial and operating results for the Ferreira, Penumbra and
Vlakvarkfontein coal mining operations for the FY2013 year to date are provided
MINE OPERATIONAL AND FINANCIAL PERFORMANCE
2013 FINANCIAL YEAR TO DATE
Ferreira Penumbra Vlakvarkfontein
Coal Mine Coal Mine Coal Mine
ROM Production 423,954 53,567 1,148,512
Feed to Plant 486,979 61,300 -
Export Yields 69.6% 38.1% -
Export Sales 300,311 23,199 -
Eskom Sales - - 846,340
Other Sales - - 151,312
Total Sales 300,311 23,199 997,652
Export Sales 228,166 23,533 -
Domestic Sales - - 176,222
Other Sales - - 5,744
Total Revenue 228,166 23,533 181,966
Mining Costs 115,786 9,377 90,685
Processing Costs 29,006 5,258 18,552
Materials Handling 4,759 1,359 -
Indirect Costs 11,814 4,885 4,568
Export Costs 41,818 3,436 192
Bought in Coal Costs 14,599 - -
Administration Costs 6,683 858 7,453
Stock Movement (1,148) (2,187) (1,591)
Total Production Costs 223,317 22,985 119,107
Gross Profit 4,849 548 62,107
For the Quarter, based on the unaudited management accounts, the Company
reported total group sales revenue of A$13.8m, total production costs of
A$11.1m and a gross profit of A$2.7m. Revenue for the Quarter of A$13.8m was
4.1% lower than the previous quarter, total production costs were 12.6% below
the previous quarter. EBITDA of A$0.7m for the Quarter was achieved. Group
EBITDA year to date of A$1.7m was achieved.
Total cash and cash equivalents as at the end of the Quarter was approx.
A$6.2m. The Company has available approx. A$8m under the ABSA Capital Debt
Facilities to fund outstanding capital expenditure and working capital costs
associated with the development and commissioning of the Penumbra Coal Mine.
During the Quarter, financial settlement of 12,900t of coal hedge contracts was
completed and a hedging gain of ZAR2.6m (approx. A$0.3m) was realised. As at
the end of the Quarter the Company had a total of 637,734t of coal hedging
contracts in place at an average price of ZAR1070/t (approx. A$118/t) that was
ZAR16.8m (A$1.9m) in-the-money.
Chief Executive Officer
For further information please contact:
Jason Brewer Don Turvey
Executive Director Chief Executive Officer
T: +61 8 9488 5220 T: +27 11 881 1420
Media (Australia) Media (UK)
David Tasker Mike Bartlett/Jos Simson
Professional Public Relations Tavistock Communications
T: +61 8 9388 0944 T: +44 20 7920 3150
Nominated Advisor Brokers
Stuart Laing Mark Wellesley-Wood / Chris Sim
RFC Corporate Finance Investec Bank plc
T: +61 8 9480 2500 T: +44 20 7597 4000
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 three operating mines, the Vlakvarkfontein,
Ferreira and Penumbra Coal Mines, are set to produce at an annualised rate of
2.8Mtpa of thermal coal for the export and domestic markets. The Company's
first underground mine, the Penumbra Coal Mine, commenced development in
September 2011 and produced first coal in November 2012. In 2011, a Feasibility
Study was also completed on a proposed fourth mine, the De Wittekrans Coal
Project and further optimisation studies completed in 2012. The Company has
further concluded strategic off-take and funding agreements with EDF Trading
for its export thermal coal production, signed a joint development agreement
with KORES, Korea Resources Corporation and secured debt funding from ABSA
Capital to fund its growth.
Competent Persons Statement
The information in this report that relates to the Coal Resources and Reserves
has been prepared in accordance with the Australian Code for Reporting of
Exploration Results, Mineral Resources and Ore Reserves as published by the
Joint Ore Reserves Committee (JORC Code). The Australasian Joint Ore Reserves
Committee (JORC) and the JORC Code requires that Competent Persons must belong
to the Australasian Institute of Mining and Metallurgy (AusIMM), or the
Australian Institute of Geoscientists (AIG), or a Recognized Overseas
Professional Organisation (ROPO). ROPOs are professional organisations that the
ASX, acting on advice from JORC and its parent organisations, accepts as bodies
to which Competent Persons may belong to for the purpose of preparing
documentation on Exploration Results and Mineral Resources, on which reports to
the ASX are based. The South African Council for Natural Scientific Professions
(SACNASP) as well as the Geological Society of South Africa are considered as
ROPOs by JORC.
The information in this report that relates to Coal Resources is based on data
and 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. Mr. Denner has sufficient experience which is relevant to the style
of mineralisation and type of deposit under consideration and to the activity
which he is undertaking to qualify as a Competent Person as defined by the 2004
Edition of the `Australasian Code of Reporting of Exploration Results, Mineral
Resources and the Ore reserves. Within the constraints mentioned above, all
work undertaken by Mr. Denner and related to the resource estimate was carried
out following industry best practice standards using the South African Code for
Reporting of Mineral Resources and Mineral Reserves (the SAMREC Code, 2007) in
conjunction with the South African guide to the systematic evaluation of coal
resources and coal reserves (SANS 10320:2004) as a basis. As such the resource
statements contained in this report may be considered compliant with the JORC
Code. Mr. Denner consents to the inclusion in the ASX release of the matters
based on his information in the form and context in which it appears.
Forward Looking Statement
Certain statements made during or in connection with this communication,
including, without limitation, those concerning the economic outlook for the
coal mining industry, expectations regarding coal prices, production, cash
costs and other operating results, growth prospects and the outlook of
Continental's operations including the likely commencement of commercial
operations of the Penumbra and De Wittekrans, its liquidity and the capital
resources and expenditure, contain or comprise certain forward-looking
statements regarding Company's development and exploration operations, economic
performance and financial condition. Although Company believes that the
expectations reflected in such forward-looking statements are reasonable, no
assurance can be given that such expectations will prove to have been correct.
Accordingly, results could differ materially from those set out in the
forward-looking statements as a result of, among other factors, changes in
economic and market conditions, success of business and operating initiatives,
changes in the regulatory environment and other government actions,
fluctuations in coal prices and exchange rates and business and operational
risk management. For a discussion of such factors, refer to the Company's most
recent annual report and half year report. The Company undertakes no obligation
to update publicly or release any revisions to these forward-looking statements
to reflect events or circumstances after today's date or to reflect the
occurrence of unanticipated events.