Name of the Project
Waterberg coal project (WCP).

Location
Limpopo, South Africa.

Client
The Waterberg Coal Company (WCC) and its controlled entity Firestone Energy, collectively forming the Waterberg Energy Group (WEG), have a combined 70% interest in the WCP.

Project Description
The WCP currently has identified coal resources of 3.883-billion tonnes.

The various work streams and technical studies that have been conducted to date have resulted in the WCP now comprising the Eskom, Export and independent power producer (IPP) projects.

The WEG commissioned a definitive feasibility study (DFS) in mid-2012 for the proposed development of an opencast mining operation to produce ten-million tonnes a year of coal for State-owned power utility Eskom, predicated on a memorandum of understanding (MoU) entered into with Eskom in March 2012.

The Eskom project DFS reviewed the design, manufacture, supply, delivery, assembly, installation and commissioning of a 220-million-tonne-a-year coal-handling and preparation plant in a phased approach within an engineering, procurement and construction framework.

The preliminary results of the DFS were delivered in mid-2014 to WEG. Since then, WEG has been engaged in an optimisation exercise to enhance the overall economic and capital efficiency of the project while engaging with Eskom to finalise the outstanding issues, which include coal specification, final pricing, delivery dates and providing Eskom with a satisfactory due diligence report on the DFS.

Arising from the Eskom technical and economic study is  WEG’s also completion a DFS for the Export development project through which it intends to mine high-grade coal.

Additionally, WEG is well advanced in its IPP strategy, which it expects will form a significant part of the overall development plan going forward. 

The economic thesis for the Eskom and WEG Export projects is based on the vast in situ coal resources as confirmed by the resource statement emanating from the competent persons report, dated September 24, 2014, from Gemecs. The confirmed resources now underpin the proposed production and delivery of export-quality coal product for the international market for up to four-million tonnes a year and coal product to Eskom and local IPPs.

The target markets mentioned above are being addressed through two separate and distinct projects and operations, while the production of low-calorific-value coal is the resulting by-product of the Export project and Eskom projects that will be used to supply the IPPs.

With the technical and economic studies now completed, it is considered that the WCP can significantly increase coal production from the confirmed resource base in a cost-effective manner to become one of the largest independent suppliers of power generation to the South African market.

Jobs to be Created
Not stated.

Net Present Value/Internal Rate of Return
Not stated.

Value
A capital requirement of $150-million has been identified, based on the DFS for the export project.

Duration
WEG is targeting first coal to market in the first quarter of 2017.

Latest Developments
The WCC is in ongoing discussions with an existing stakeholder to conclude a short-term bridging loan of up to A$1.8-million until its recapitalisation is completed.

Despite the coal market having suffered “serious degradation” in pricing over the past few years, the company believes that the value of its WCP is too significant not to pursue its development.

Discussions between WCC and AME International with respect to the recapitalisation and provision of working capital for advancing the project are also continuing, with legal documentation and conditions precedent still under consideration.

In addition, the company reports that it has engaged with senior Eskom officials to start negotiations for potential long-term future coal supply arrangements, while it is discussing the development of an independent power project with other parties.

To further advance the WCP, WCC has appointed two new directors – Dr Thivhilaeli Rathogwa, an anaesthetist who practises in Polokwane, and economic geologist Christopher Tinney.

Key Contracts and Suppliers
SRK Consulting (feasibility study); Coffey Mining (geotechnical investigation) and Ardbel, an ELB Engineering Services and DRA Group joint venture (preliminary design and basic engineering works); and Gemecs (competent persons report).

On Budget and on Time?
Not stated.

Contact Details for Project Information
WCC, tel +27 10 594 2240, fax +27 10 594 2253 or email info@waterbergcoal.net.
SRK Consulting, tel +27 11 441 1111, fax +27 11 880 8086 or email johannesburg@srk.co.za.
Coffey Mining, tel +27 11 679 3331, fax +27 11 679 3272 or email Coffey.Africa@coffey.com.
Ardbel, tel +27 11 032 1150 or email info@ardbel.com.
Gemecs, tel +27 11 431 2327 or fax +27 11 388 5243.