Continental Coal (ASX: CCC) is accelerating development of the...

Continental Coal (ASX: CCC) is accelerating development of the Penumbra Coal Mine, with a focus now on advancing the twin declines.

Continental Resources is targeting first coal at Penumbra in the second half of 2012, and has up to 500,000 tonnes of coal sold under existing off-take agreements.

The twin declines will have a final length of about 390 metres, with one advanced to 60 metres and the other down to 16 metres.

One decline will be equipped with a conveyor, while the second will serve as a travel route for trackless equipment.

The majority of civil work has been completed on site, along with construction of a power line from a sub-station at the Delta Processing Operations and the Penumbra Coal Mine site. Power of 3.5 megavolt amperes has been installed and commissioned.

Orders have been placed with Joy Mining Machinery for continuous miners and shuttle cars, and Rham Equipment for front end loaders and roofbolters.

A temporary shaft conveyor system has been installed and is being commissioned, while tenders are being finalised for the permanent conveyor structure, shaft gantry and drives.

Increasing thermal coal production

Production from Continental’s Ferreira and Vlakvarkfontein coal mines has increased during January and February. At Vlakvarkfontein, Continental achieved run of mine coal production of 200,783, which was up to 6.5% higher than the average over the September and December 2011 quarters.

At Ferreira, run of mine coal production reached 105,119 tonnes in January and February, 14% higher than the budgeted levels. In addition, total production of 100,986 tonnes of high quality export thermal coal was achieved at the Delta Processing operations, 16% above budget.

Under a coal supply agreement announced earlier this month between Continental’s joint venture partner Ntshovelo Mining Resources and South Africa’s state utility company Eskom, domestic thermal coal sales from Vlakvarkfontein are now being made directly to state utility company Eskom.

The agreement is for the supply of 720,000 tonnes per annum of thermal coal over an initial three year period.

Importantly, this is a landmark agreement that positions the Vlakvarkfontein Coal Mine as one of only 25 direct suppliers of coal to Eskom in South Africa.

Eskom is one of the top 20 utilities in the world by power generation capacity, generating around 95% of the electricity used in South Africa and about 45% of the electricity used in Africa.

Power demands in the region will grow significantly in the next 10 years, with substantial coal supplies set to be transported by rail to Eskom’s power stations.