Coal junior HCI Khusela Coal (HKC) would begin production from its first two mines this month, after the Department of Minerals and Energy granted it mining rights, it said on Tuesday night.

The company would invest some R300-million into the development of its Palesa mine, near Bronkhorstspruit, and its Mbali mine, near Ogies, of which it had already spent in the region of R230-million by mid-May.

This sum included the construction of two coal processing plants, which HKC expected to commission in October this year.

In a note to the JSE, the company said that it had already concluded supply agreements with State-owned power supplier Eskom, as well as international customers.

HKC CEO Fleur Honeywill told Mining Weekly Online that the company had contracted to sell Eskom a combined 1,5-million tons a year from both mines, under the utility's emergency coal procurement plan, declining to name the power stations.

"We are also in negotiations with Eskom for a long-term coal supply agreement for Palesa coal, linked to the life-of-mine," she said in reply to emailed questions.

At full production, which it expected to achieve this year, both mines would produce a combined four-million tons of run-of-mine material, HKC said.

THIRD PROJECT

The junior, 80%-owned by JSE-listed Hoskens Consolidated Investments, said that it was busy conducting a bankable-feasibility study on its third project, Nokuhle.

The company was currently completing the geological model for the project, which it would use to compile the mining-work programme for its mining rights application, expected to be submitted in August..

"Once this is done, we will take our time completing the bankable-feasibility study (BFS), because this is potentially an exciting mine, but careful planning is key to maximizing the resource," Honeywill said. "I estimate we should complete the BFS in October."

This mine was also expected to be a multiproduct operation.

COAL MARKET OUTLOOK

Meanwhile, Honeywill told Mining Weekly Online in May that the company was taking a "cautiously optimistic" view on the global coal market, and was running its financial models using conservative API 4 prices.

"We believe it is important to remain low on the cost curve should the price dip," she stated.

"However, it is our view that in the medium-term demand should still outweigh supply, and prices should remain above $90/t for at least three years," said Honeywill.