Full Disclosure 2016

Company overview

Coal of Africa Limited (CoAL) is a coal exploration development and mining company, with operations in South Africa. CoAL has a primary listing on the Australian Stock Exchange and secondary listings on the Johannesburg Stock Exchange and the Alternative Investment Market of the London Stock Exchange.¹

According to its website, CoAL’s current operations in South Africa include:

• Vele colliery, 48km west of Musina, Limpopo Province and less than 6km from the border of Mapungubwe National Park; and
• Mooiplaats colliery, Ermelo coalfield, Mpumalanga.²

In addition, CoAL’s website states that its current projects in South Africa include:

• Makhado Project, Soutpansberg Coalfield, 65km southwest of Musina, Limpopo;
• Greater Soutpansberg Project (GSP), connected to Makhado; and
• Tshipise Energy Gas Exploration Project, connected to Makhado.³

Until its coal reserves were depleted in March 2013 and the complex was subsequently sold in 2014, CoAL’s operations also included the Vuna Colliery, part of the Woestalleen Complex, of which it owned 49% through a joint ownership venture with Vuna Coal Holdings.⁴

CoAL’s 2016 Integrated Report states that “[t]he Mooiplaats Colliery has been under care and maintenance since September 2013 and is currently undergoing a formal disposal process”.⁵

CoAL’s 2016 Integrated Report states that Vele Colliery “remains on care and maintenance until outstanding regulatory approvals are received and coal prices improve”.⁶ CoAL’s full year results for the period ending 30 June 2016 state that:

Given the prevailing commodity market conditions the Company applied for all approvals to cover future mining areas which includes the diversion of two non-perennial streams. When the latest approval is finalised (expected toward the end of CY2016) the Company will make the decision on the commencement of the plant modification taking into account the prevailing market conditions.⁷

On 25 August 2016, Mutsho Power Company (Pty) Ltd (Mutsho) announced its intention to submit a bid response to the Department of Energy’s Coal Baseload Independent Power Producer (IPP) procurement programme. In its Background Information Document (BID), Mutsho proposed that the power station be located near the Vele colliery so that the station can be “dry-cooled and fuelled from the Vele Colliery with mined coal”.⁸

In a “stakeholder information document” emailed to interested and affected parties on 8 November 2016, stakeholders are advised that:

In response to the comments received from stakeholders and baseline information presented by the EAP, Mutsho has decided to revisit the project approach and locality, as well as to secure legal tenure over the selected sites. Further to this, Mutsho and Jacana [the appointed EAP] have mutually agreed to end the EAP contract with immediate effect.

As a result of the above, the EIA process has been placed on hold temporarily until such time as Mutsho has revisited the approach and locality of the proposed project and has appointed a new EAP for the process.

In respect of the Makhado Project, CoAL reported in its 2016 Integrated Report that the Department of Mineral Resources (DMR) had “granted the Section 11 approval transferring the mining right from CoAL to its subsidiary Baobab [Baobab Mining and Exploration (Pty) Ltd], the project operating entity”.⁹ CoAL is the controlling shareholder in Baobab with a 100% interest. CoAL’s 2016 Integrated Report states that this interest will be reduced to “74% on completion of the Makhado Project BBBEE transactions”.¹⁰

There is an interim interdict in place in respect of the Makhado Project, pending the judicial review of the environmental authorisation.¹¹ The review and interdict applications were launched by a group of interested and affected parties, including local farmers. CoAL’s 2016 Integrated Report states that “CoAL is opposing the matter in the High Court and is confident that the interdict will be rescinded”.¹²

CoAL also reported that the company had applied to amend the holder of the environmental authorisation for the Makhado project from CoAL to Baobab, and that it had applied for the extension of the validity period of the environmental authorisation for an additional five years. Both the extension and the transfer of the holder of the environmental authorisation from CoAL to Baobab were approved.¹³ According to CoAL’s 2016 Integrated Report, construction of Makhado is only expected “to commence in the later part of CY2017” and production is only expected to commence in 2020 “dependent on fundraising and regulatory approvals”.¹⁴

The Greater Soutpansberg Project (GSP) comprises three projects in the North of the Soutpansberg Mountains. CoAL’s 2016 Integrated Report states that this project “remains part of CoAL’s long term strategy”.¹⁵

The Tshipise Energy Gas Exploration Project is a “coal exploration and development project”¹⁶ which is, according to CoAL’s website, “in the initial phase” and “involves the establishment of a test well and flaring facility which will afford compliance with the requirements of the internationally accredited United Nations carbon-credit programme and the sale of carbon credits”.¹⁷

According to CoAL’s 2016 Integrated Report, CoAL has 91 employees and 80 contractors¹⁸ in respect of the Mooiplaats, Vele, and Makhado projects, and the “corporate office”.