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The ASX-listed, South African thermal coal miner currently has two operating mines in that country providing approximately 2 million tones per annum (Mtpa) of run of mine (ROM) production, however, it is well advanced with plans that will see it bring up to a further six SA mines into production within the next four years, as well as potentially expanding its operations into Botswana, Kenya, Tanzania and Mozambique. At the same time, the Company continues to fine tune the performance of its currently producing mines at Vlakvarkfontein and Ferreira with combined ROM coal production in the first quarter of 318,800 tonnes from the Vlakvarkfontein and Ferreira mines providing a 24% increase on production in the previous quarter. The Company recently demonstrated its commitment to maintaining that strong production growth by bringing on line a new spiral plant at the Delta Processing Operations for the processing of ROM coal from the Ferreira Coal Mine and the proposed new Penumbra coal mining operation. The spiral plant is beneficiating coal mined at Ferreira to export quality as well as increasing primary yields, which are forecast to result in up to an additional 3,000 to 5,000 tonnes per month of saleable export thermal coal product. Based on current export coal prices, that has the potential to generate up to an additional US$250,000 of monthly free cashflow for Continental. The Delta Processing Operations currently process approximately 60,000 tonnes/month of ROM coal from Ferreira. In early 2012 processing of ROM coal from the Company?s third mining operation, Penumbra is forecast to reach approximately 80,000 tonnes/month of ROM coal production. ?The commissioning of the spiral plant demonstrates Continental?s continued focus on identifying and implementing ways to improve and optimise operating performance at our existing coal mining operations. The new spiral plant has already had an immediate impact on overall yields achieved at the Delta Processing Operations on production from the Ferreira Mine and will have a further positive impact on reducing unit operating costs and enhancing productivity,? Continentals CEO, Don Turvey, said during the official commissioning of the plant in late April.
PENUMBRA PROJECT DEVELOPMENT The Company recently reported that it is set to begin construction of the Penumbra coal project by the end of the second quarter of 2011, with first production expected to commence in early 2012, ramping up to reach full production in the third quarter of the year. The Penumbra coal project is to be developed as a conventional underground bord and pillar mining operation at a forecast cost of approximately A$40 million. It is budgeted to produce 750,000t of ROM coal production annually over an initial 13 year mine life. ROM coal produced at Penumbra will be beneficiated through the existing Delta Processing Operations, located just 3 km away, which comprises a 300tph coal processing plant and 1.2Mtpa railway siding.
DE WITTEKRANS PROJECT The next ?cab off the rank? in Continental Coal?s South African development portfolio is the De Wittekrans Coal Complex located near Hendrina, in Mpumalanga Province. The Company?s Board formally approved the commencement of the Bankable Feasibility Study (BFS) for De Wittekrans in December 2010 and is currently advancing the main components of that study, with the preliminary results to be released to the market in July 2011. The initial development concept for De Wittekrans is for a conventional opencast and underground mine, targeting production of 3.6 to 4.0Mtpa ROM coal over an initial 30 year mine life. The Company?s South African subsidiary recently completed an agreement to increase its interests in the Vaalbank and Project X Coal Projects, which form part of the De Wittekrans Complex to 75% and 70% respectively. The developments at Penumbra and De Wittekrans over the next 12 months, and the continued production increases at Vlakvarkfontein and Ferreira, is forecast to take Continental?s ROM production up to 7 Mtpa, just two years after it produced its first coal at the Vlakvarkfontein mine. Further proposed developments at Vlakplaats, Mooifontein, Wesselston II and Leiden, will ensure that it maintains its climb up the rankings of South African thermal coal producers. But the Company is not stopping there, with Continental well primed to complete further consolidation in South Africa as well as being set to take its successful development model to other leading coal mining areas in southern Africa.
BOTSWANA EXPLORATION PROJECTS In March 2011 the Company appointed independent South African consulting geologists Gemecs to consolidate and interpret newly acquired geological data on its Kweneng and Serowe thermal coal projects in Botswana. Gemecs is expected to hand down the results of its review by the end of the second quarter which will provide an updated assessment of the coal potential within each of its projects as well as the planned exploration and drilling programs that are scheduled to commence in the near future. The Company is also in the process of identifying and appointing an in-country project manager to oversee its significant Botswana exploration program which will be drilling into an Exploration Target assessed by independent geological consultants to have the potential to contain 6 to 7 billion tonnes (Bt) of coal, of which 2.7 Bt has been identified as being at shallow to moderate depth. Botswana?s coalfields are considered to be highly prospective and to contain 212 Bt of thermal coal, approximately 65% of Africa?s total resource.
KENYA EXPLORATION AND` DEVELOPMENT The Company recently received a ?Notification of Successful Bidder? from the Kenyan Ministry of Energy following the Company?s submission of an ?Expression of Interest? to participate in coal exploration and development of Kenya?s Mui Coal Basin. The Mui Coal Basin is located 180km northeast of Nairobi and has been the subject of exploration by Kenya?s Ministry of Energy since 1999. The Mui Coal Basin is considered by the Company to be a highly prospective and strategically located coal basin for the production of both domestic and export thermal coal. The Company is currently waiting to receive the final tender documents from the Ministry of Energy ahead of the Company?s planned submission of its tender by mid-2011.
CORPORATE DEVELOPMENTS Continental Coal?s ever increasing production profile is supported by a strategic off-take and funding agreements with EDF Trading for its export thermal coal production. It has also signed a joint development agreement with KORES, Korea?s state mining and exploration company. Continental has also been extremely active on the investor market side, having announced it intends to seek an admission of its shares to trading on the AIM Market of the London Stock Exchange (AIM). The Company has appointed GMP Securities Europe LLP and Renaissance Capital Limited as its joint UK brokers and RFC Corporate Finance Ltd as the Company?s Nominated Adviser. It is anticipated that the AIM listing will be completed in the third quarter 2011. The Company also recently announced that its American Depository Receipts (ADR) had commenced trading in the United States on OTCQX International. Each ADR represents 40 ordinary shares listed on the Australian Securities Exchange. ?Gaining access to U.S. investors and being able to share Continental Coal?s story and value proposition are very important to our future. We?re confident that the combination of being quoted on OTCQX paired with the extensive expertise and support of advisor and Principal American Liaison Madison Williams will provide the connection we are seeking with the U.S. investment community,? Continental Coal?s Executive Director, Jason Brewer, said. ?The Board of Continental Coal is very pleased to have started the Company?s ADR program trading.? Continental continues to review a number of additional consolidation, acquisition and development opportunities for advanced and producing thermal and coking coal assets in southern Africa as it maintains its medium-term goal of investing in highly prospective coal resources, with early cash flow to fund its ongoing financial requirements and minimum equity dilution.
CCC Price at posting:
0.0¢ Sentiment: ST Buy Disclosure: Held