coal quality

In Continental Coal's (ASX: CCC) bid to become a substantial mid-tier South African thermal coal producer and exporter it has reported "extremely encouraging" results from mining activities at its Vlakvarkfontein mine in South Africa.

It has also updated the status of its previously announced export thermal coal off-take agreements and funding agreements with EDF Trading, additional funding agreement with a South African based investment consortium and sale of the Companys Vanmag magnetite / vanadium project.

Following the first coal production blast and three months of pre-stripping and overburden removal, Continental commenced coal mining activities at its first South African coal mine, Vlakvarkfontein, on 27 May 2010.

The company said first coal blasted from the 4-seam at Vlakvarkfontein, which averages approx. 5 metres thick, has continued to be loaded out onto the stockpile over the past 2 weeks. Samples have been taken and analysed. The RAW coal qualities from these analyses are summarised below.

The analyses of the RAW coal qualities are within the coal quality specifications of South Africas power utility Eskom.

Don Turvey, chief executive, believes the initial coal quality analyses are extremely encouraging.

The initial mine plan at the Vlakvarkfontein mine was developed to access the resource in the lowest yield area first. This was done to ensure we would access the higher yield areas when we are operating at full capacity and potentially with the benefit of having access to coal processing facilities nearby."

"Initial indications that we may be able to meet Eskoms quality requirements without any blending required is a great result," he added.

Over 5,000 tonnes of coal from the first production blast has been delivered to two 3rd party wash plants for treatment and further analyses to determine the opportunity to upgrade the coal to a higher value domestic product.

The next coal production blast of approx. 40,000 tonnes is scheduled to occur later this week. This coal will be delivered as "a RAW run-of-mine coal product to a 3rd party for first sales later this month."

Continental said details of this interim off-take agreement will be finalised shortly ahead of the finalisation of the long term off-take agreement for Vlakvarkfonteins domestic coal product by the end of the month.

The company expects receipt of its first coal sales revenues in July 2010.

Continental has significantly advanced the previously announced Heads of Agreement with one of the worlds leading energy traders, EDF Trading, over the past month.

The company has also reported that it has received official confirmation from the Department of Minerals and Energy that its mining right on its Vanmag magnetite / vanadium project has been successfully converted to a New Order Mining Right, following an 18 month process.

The Company can now proceed with the sale of the project for net consideration of US$10 million with an anticipated completion date of 13 July 2010 in line with the procedural execution of the New Order Mining Right.

Continental has significantly progressed the proposed investment by a South African based investment consortium into Continental and hopes to conclude this financing in June.

The investment consortium intend to allocate additional funding to the company to assist in a number of project and corporate acquisition opportunities that are currently under consideration.