The DFS for CoAL’s Makhado mine said the project was shaping up to be a large coking and thermal coal operation with a 16 year mine life.

It confirmed mining was expected to take place at an average rate of 12.6 million tons per annum run of mine in order to produce 2.3Mtpa of hard coking coal and 3.2Mtpa of thermal coal.

CoAL said it planned to mine the mineable 344.8Mt in situ resource on an opencast basis with the potential for expansion into an underground operation.

Mining will be staggered across three separate mining areas, commencing in the east pit followed by the central and west pits to enable optimisation of mining equipment and other resources and provide a consisent balance of coal quality and quantity.

The Makhado DFS put a price tag of 3.96 billion rand ($US406.3 million), including contingency, on the mine, with the peak funding requirement estimated to be R4.2 billion.

The study delivered an internal rate of return of 30.1% and a net present value of R6.79 billion at a real discount rate of 8%.

CoAL chairman David Brown said the project would not only deliver robust economic returns but also contribute to the economic development of the Limpopo province in South Africa.

“Makhado further provides South Africa with a new coking coal producing asset in the region, utilizing established infrastructure for domestic and international markets,” Brown said.

Makhado will produce coking coal for both the domestic and international markets, with exports set to go through the Matola coal terminal in Mozambique and domestic thermal sales aimed for Eskom power stations.

Brown said the company had entered the financing stage of the project and had also begun discussions with black economic empowerment (BEE) groups as potential partners, as well as seeking other strategic partnerships.

“We are working towards a funding structure which will include debt funding, whereby CoAL retains majority ownership with the incoming partner’s contribution meeting CoAL’s full equity requirement for the project,” he said.

Brown said the company aimed to complete its regulatory approval and funding requirements by the first half of 2014, with full production from 2017.

The remaining approvals are subject to the conclusion of a BEE transaction.

Venmyn Deloitte performed an independent review of the feasibility study and found the company’s JORC reserves and resources to be compliant with the code.

“The DFS has clearly demonstrated that the Makhado project is feasible, with the normal risks typically associated with resource projects,” Venmyn Deloitte said in its review.

“The Makhado project represents CoAL's first project within the greater Soutpansberg coalfield area and the company is poised to become a significant global coking coal producer.

“The potential benefit of this project to the local community, the Limpopo province and South Africa as a whole has been clearly demonstrated in this report.”

CoAL is a tri-listed coal exploration, development and mining company operating in South Africa.

The company’s key projects include the Vele colliery (coking and thermal coal) and the Greater Soutpansberg project, including CoAL’s Makhado coking coal project.