Along with Regulus Investment, Coal of Africa has made a prospecting rights agreement with Kwezi Mining and Exploration and Chapudi Coal, with both of these companies being held in a joint venture by Rio and the Kwezi Group of South Africa.

Under the deal, Chapudi and Kwezi will grant access and cede to Coal of Africa “certain prospecting rights and interests over certain project areas that are contiguous” to its Makhado project.

Coal of Africa will cede to Chapudi “prospecting rights and interests over certain other farms, also located in Limpopo Province”

The company will also pay Chapudi consideration of 12.5 million rand ($US1.59 million) once various conditions are met, which include implementing the agreement by July 2010.

The terms of a joint venture between Coal of Africa and Chapudi in respect of prospecting rights over farms held by both companies are yet to be finalised and will be announced in due course.

But the company said Chapudi, partly held by Rio, will be the operator of the JV.

Coal of Africa managing director Simon Farrell said the rationalisation of the prospecting rights held by the company and Rio removed a significant commercial hurdle to the establishment of the Makhado project.

He said when the farm swap was completed, it would result in the creation of a substantial open cast hard coking coal asset.

Coal of Africa is aiming to apply for a mining permit for Makhado in early 2010, and the project is targeting up to 5 million tonnes per annum of output.

Shares in Coal of Africa shed 3.9% this morning to $A1.845.