Johannesburg, South Africa — ESI-AFRICA.COM — 07 March 2012 – Continental Coal’s joint venture partner and operator of the Vlakvarkfontein coal mine, Ntshovelo Mining Resources, has clinched a coal supply agreement with South African national power utility Eskom Holdings for the supply of 720,000tpa of thermal coal over an initial three year period.
Revealing this here, a company statement describes it as a landmark agreement that positions the mine as one of only 25 direct suppliers of coal to Eskom in South Africa.
Eskom is one of the top 20 utilities in the world by power generation capacity, generating around 95% of the electricity used in South Africa and about 45% of the electricity used in Africa.
Power demands in the region will grow significantly in the next 10 years, with substantial coal supplies set to be transported by rail to Eskom’s power stations.
Continental Coal “’ an established South African thermal coal producer with two operating mines producing 2Mtpa of thermal coal for the export and domestic markets “’ is on a strong growth path as it heads towards its target of 7mtpa of coal production in 2013.
Continental is strengthening its team and securing substantial financing to realise its goal of doubling thermal coal export growth in 2012 by bringing a third mine “’ which is currently in development “’ into production.
The company is also strengthening its relationship with broad based Black Economic Empowerment partner Sishen Iron Ore Company Community Development Trust, with the appointment of chairperson Connie Molusi as non-executive director of Continental.
Sishen is Continental’s 26% partner in the company’s South African subsidiary, after committing a A$17.4 million initial investment to further fund the growth and development of Continental’s thermal coal mining business in South Africa.
Continental also recently secured a US$65 million coal hedged debt agreement with ABSA Capital and a subsidiary of Barclays Bank to fund the Penumbra Coal Mine development.
The company has hedged about 664,550t of coal over the life of the term loan facility at an average price of A$131.44/t. This represents only 12% of the JORC Reserves at the Penumbra coal mine and provides upside to any rise in thermal coal prices, as well as providing operating flexibility.
Continental shares have been on an upward trajectory since early January, with shares trading as high as $0.285 recently, a 72% increase over the $0.165 closing price on 3 January.