ccc...coal producer on a dream run

COAL PRODUCER ON A DREAM RUN......Contrary to some of our recent posts there are some great reports about CCC!

Some great news about CCC in resource stocks and mining news

You will need to take out a free subscription to read the stories and I reckon it's well worth reviewing.

Great site for future research on mining stocks.


http://www.miningnews.net/storyview.asp?storyid=2382148§ionsource=s88&highlight=continental

Friday, 18 February 2011
COAL PRODUCER ON A DREAM RUN


THIS South African coal producer has turned projects into mines extraordinarily fast and cashed in on robust domestic and international demand. By Blake Wilshaw - RESOURCESTOCKS*



Continental Coal, formerly an investment firm, took on the ambitious challenge of transforming into a mining company during the global financial crisis.

Since then, it has commissioned two mines, has another two close to production, and a suite of growth assets which include a multi-billion tonne target in Botswana. In the process it has also secured rail and Richards Bay port access, vital to the success of its ambitious growth plans.

Continental?s amazing trajectory since January 2009 can be attributed to three factors: a well-stocked management team and board, its success at consolidation and raising capital, and a local and global economy with massive demand for energy minerals.

As the company expands though organic growth and acquisitions, it will increase its presence on the South African coal scene, facilitated by key partnerships and offtakes. Currently producing about 2 million tonnes per annum, the plan is an increase to 7Mtpa in 2012 and 10Mtpa by 2015.

The company began in January 2009, when current executive director Bruce Buthelezi approached Continental Capital (as the company was then called) regarding a London listing of coal assets his Black Economic Empowerment (BEE) firm owned. The GFC wasn?t a good time for initial public offerings, so the assets were backed into Australian Securities Exchange-listed Continental Capital.

?Those initial assets we took through various exploration programs and feasibility studies in 2009,? director Jason Brewer said.

?We subsequently commissioned our first mine, Vlakvarkfontein, within 12 months of acquiring the asset.?

Among most recent developments for Continental have been a significant financing and export coal offtake agreement with EDF Trading and the purchase of the privately owned South African coal producer Mashala Resources.

The transaction with French company EDF Trading, a wholly owned subsidiary of EDF, the world?s largest power utility, initially involved a $US20 million financing agreement and export coal offtake for all production from Vlakvarkfontein, Project X and the Vaalbank projects for the next 20 years. It was subsequently extended to cover some of the assets acquired from Mashala Resources.

Continental produces 100,000 tonnes per month of coal from Vlakvarkfontein for about $US15 per tonne which is sold into the domestic thermal coal market for up to $US25/t.

At its other producing mine, Ferreira, which it acquired through the Mashala acquisition, Continental produces 40,000t/month of export coal for up to $US70/t and sells to EDF Trading under its offtake agreement at the Richards Bay export thermal reference price which is currently more than $US110/t.

The first export sales to EDF Trading under this agreement occurred in November this year.

?They?ve injected capital intothe company, the first time EDF has done that in South Africa so itwas a landmark transaction for us,? Brewer said.

Alongside the EDF transaction was a $US10 million convertible note issue and an $US30 million placement to institutional investors in Europe, Asia and Australia to fund the Mashala purchase.

?Mashala brought with it substantial resources and infrastructure including access to the export markets through the state-owned rail system and the privately owned dedicated coal terminal at Richards Bay,? Brewer said.

?They also owned an established exporting mine [Ferreira], which we assumed ownership of since early November, becoming South Africa?s newest coal exporter, and a series of other advanced pre-production assets that are very complementary to our own.?

Continental raised more than $A100 million in 2010, most of which has gone on acquisitions and project development ? a strategy the company will continue to actively pursue.

?That?s come from both debtand equity, we?re trying to use both sides of the balance sheet to minimise dilution to shareholders where possible,? Brewer said.

In late 2010, a joint venture was signed with KORES, the Korean state mining and exploration company, to fast track development of the Vlakplaats project.

?We had secured an option to acquire Vlakplaats for 180 million rand. Continental had paid R50 million in 2009 and with its focus on mine development of the Mashala assets, it was looking for a suitable joint venture partner to accelerate development of the much earlier stage Vlakplaats coal project.?

The Koreans and a BEE group are now paying the R130 million outstanding of the option fee to secure the 50% balance in the project.

?KORES is a major player in Australia?s coal sector and this is their first investment into the southern Africa coal space. So it?s another landmark transaction for both of us,? Brewer said.

Penumbra, a fully permitted Mashala asset, and the De Wittekrans project, are the development focus for the company in 2011.

?For the next six months, clearly we?ve got to be focused on the operations; the two mines at Vlakvarkfontein and Ferreira,? Brewer said.

?We?ve then got project execution and delivery at Penumbra and De Wittekrans.?

About 30% of current production is exported. This will increase to about 50% with the new mines coming onstream. Most of Continental?s production is sold domestically.

?That?s a purposeful approach. You need that social licence to operate effectively in any country and if we?ve got mines that are dedicated suppliers to the local power utility and other local industries, it demonstrates that we truly are a South African company that respects its obligations to the community,? Brewer said.

Further down the track is a suite of early stage assets in Botswana, picked up in the Mashala acquisition.

Continental will spend R20 million on exploration in the country in 2011.

?We?ve already had our geological consultants define an exploration target of between six and seven billion tonnes in Botswana,? Brewer said.

?So there?s an incredible amount of upside there but it?s not our immediate strategy, because clearly our focus is on producing coal and taking advantage of a very bullish export and domestic coal market.?

Supporting the rapid growth and ambitious expansion plans is a strong management team.

Chief executive Don Turvey was head of BHP?s project development team in South Africa and president of the South African Colliery Manager?s Association.

The former CEO of Mashala, and current chief operating officer Johan Heystek, worked with Turvey for almost 15 years.

?For the size of our company, the management team that we?ve been able to assemble, both in Continental?s own right, and then by securing the executive team through the acquisition of Mashala, is exceptional,? Brewer said.

?We?ve now got a team that is second to none in the junior and mid-tier space.?

The outlook for the company is strong, with South Africa having great infrastructure for coal mining and a market ripe for consolidation.

?In South Africa, besides the majors, you?ve got a very broad group of private companies and BEE groups that have some very good assets, but because of the state of the South African capital markets they don?t have ability to access the risk capital necessary to get them into production,? Brewer said.

?South Africa?s mining sector has largely been built up on the back of the major mining houses, so the big institutions there don?t have that risk-capital allocation that Australia has.

?That provides us with massive consolidation opportunities. The Mashala acquisition was the first one and there are several other companies with similar assets which provide us with an immediate opportunity to grow. If you?re going to do a deal in South Africa, we?re a party of choice at the moment.?

Great news summary of CCC. C'mon CCC......Next week :)