CoAL starting to feel pinch of high tariffs

Coal of Africa Limited has warned that current rail and port tariffs are too high to allow the coal industry to grow.

CEO John Wallington said unit rates on Transnet's Maputo rail corridor were twice the cost of those on the privately operated Richards Bay corridor.

The company said it was paying an average of R250 to R300 a ton in rail and port fees.

Speaking during a presentation of the company's annual results, Wallington said it was in talks with Transnet Freight Rail to expand the corridor's capacity - something the industry needs if it is going to tap into new coal reserves outside the ageing Witbank coalfield.

CoAL's two newest projects, the Vele Coal Project and the Makhado Coal project - both in Limpopo - would certainly benefit from such an expansion.

The line is currently being upgraded to transport 3 million tons of coal to Maputo, 2 million tons of which will be CoAL's produce in 2011.

The project's development has been controversial because of its location - it lies about 6km from the Mapungubwe National Park.

Vele was 95% complete and already producing coal when development was halted in August last year after the company was issued with a compliance notice by the Department of Environmental Affairs.

CoAL had already spent R600-million in capital at Vele with about R50-million left to go before the company had finished the first phase of capital expenditure.

CoAL's second major coking coal project in Makhado, Limpopo, is also progressing with an application for a new order mining right already made and preparations continuing for regulatory approval of the environmental management programme and the granting of a water-use licence.

In the meantime, the company's earnings are coming from its Mooiplaats and Woestalleen operations.

The company reported a net loss of $219-million for the year to June.

Total run-of-mine production of thermal coal - from the Woestalleen and Mooiplaats Collieries, both situated in Mpumalanga - rose by 75% into 4.4million tons from 2.5million tons a year ago while saleable coal increased by 154% to 3.3million tons from 1.3million tons a year ago.

Total revenue generated rose 166% to $261.4-million, $229.2-million of which came from thermal coal sales and the balance from alloy sales by CoAL subsidiary NiMag, which is deemed non-core.

Gross profit was 40% up year on year at $37.9-million, and the adjusted loss before tax (non-cash items and foreign exchange gains and losses) of $11.4-million was recorded compared with $22.5-million in the previous year.

But the company has described the past financial year as one of transformation - from a developer of coal assets to a producer of coal.

Looking ahead, Wallington said the company remained committed to the rapid development of its Limpopo coking coal assets.

Wallington was also excited about the Rio Tinto-Kwezi transaction, which sees CoAL pay $75-million for large-scale Chapudi properties and several other tenements contiguous with existing CoAL properties.

With nearly 2 billion tons of resources on these combined properties, Wallington said this transaction would be important to CoAL for the next decade. - I-Net Bridge