ian culbert managing director

Xceed Resources has received a mining right for the company's 70% held Moabsvelden thermal coal project, with the South African Department of Mineral-Resources (DMR).

Xceed will now arrange for the posting of the required environmental bond and the notarial registration of the right in order for the right to become effective.

Moabsvelden will be one of the largest new mines located in the vital Witbank coal basin when developed, and importantly its close proximity to Johannesburg is an advantage over other mines - giving it access to industrial/inland market in South Africa.

A plus for Moabsvelden is that it will be entirely open cast, and has a low stripping ratio, with a mine life in excess of 14 years. Production is targeted for mid-2014.

Ian Culbert, managing director of Xceed, commented: “We are delighted with this development. The granting of the mining right for Moabsvelden is unquestionably a significant milestone for the project and maintains our momentum towards commencing with project construction this year.”


Markets for Moabsvelden coal

Xceed also has the opportunity to tap several markets, such as Eskom (the State owned power utility) or the industrial domestic market.

The demand for coal from Eskom is set to rise as it is building and commissioning the third and fourth largest coal fired power stations in the world on the basis that they are being configured to burn lower quality coal.

This will allow suppliers to be able to extract more product at potentially better prices from their existing reserves.

Competition from Eskom and export markets has increased prices paid by the Industrial Domestic Market such that the net return received in this market is currently at a premium to the net return were we to sell FOB Richards Bay for export

Xceed's Moabsvelden is well placed to supply coal into this demand due to being only 50 miles away from Johannesburg, providing the project with a freight advantage equivalent to US$9/t over the majority of the company's competitors.


Xceed and Thebe Mining Resources

Culbert said that Xceed’s management have been working closely with Thebe Mining Resources, the proposed co-sponsor of the Moabsvelden project.

Thebe’s engagement, not only with respect to the DMR, but with all elements of the project, is adding impetus to the project development timetable, which Xceed is pleased to acknowledge.


Project finance from Standard Bank

Xceed has continued to make progress in 2013 project finance progress in recent months with the receipt of a credit approved offer from Standard Bank of South Africa, which together with a proposed equity subscription by Thebe for its direct project interest, accounts for around 90% of the expected project construction and commissioning expenses.

It is anticipated that a coal supply agreement with Eskom will be finalised shortly and that the remaining development permits will follow in due course.

Xceed had over $4.1 million in cash at the end of March 2013.


Moabsvelden project snapshot

- Resource: 66 million tonnes.
- Reserve: 44 million tonnes.
- Annual coal sales; Industrial & Eskom 1.7 million tonnes; or All Eskom 2.1 million tonnes.

- Estimated cost to build $29 million;
- Annual Forecast Sales: $69 million;
- Annual Forecast operating costs: $39 million;
- Annual Forecast Cash flow: $22 million; and
- Project NPV: $146 million.


Analysis

The granting of a mining lease puts Xceed on track for first production from Moabsvelden in mid-2014.

The project has many competitive and economic advantages over other projects, and by being just 50 miles away from Johannesburg and the end user market, this provides the project with a freight advantage equivalent to US$9/t over the majority of its competitors.

Another plus is that all mine production is by means of a single box cut, thereby avoiding the need for expensive development in future.

With Eskom's coal demand set to increase dramatically as it builds the third and fourth largest coal fired power stations in the world - Xceed is well placed to tap this demand.