Continental Coal’s Vlakvarkfontein mine to achieve record production

vlakvarkfontein_3Continental Coal Limited, the South African thermal coal production, development and exploration company, has provided an update on  its Vlakvarkfontein Coal Mine where for full year is set to achieve its 3rd consecutive record year of thermal coal production, domestic coal sales and earnings.

The Vlakvarkfontein Coal Mine is a conventional open cast contract mining operation located approx. 90km east of Johannesburg. The mine is operated under a joint venture, Ntshovelo Mining Resources, with the company’s principal South African subsidiary, Continental Coal Limited South Africa (“CCL”) holding a 60% economic interest and having operating and management control.

Conventional open cast mining of two coal seams, each of approx. 5m width, at a strip ratio of 2:1 to produce 1.2Mtpa of ROM production has taken place since June 2010. With approx 11Mt of JORC compliant Proven Reserves, the mine has a remaining mine life in excess of 7 years. The Vlakvarkfontein Coal Mine has to date produced in excess of 3.5Mt of ROM coal production and over 3.1Mt of thermal coal sales into the South African domestic market.

In FY2013, the Vlakvarkfontein Coal Mine is set to achieve a number of operational and financial records for the third consecutive year.

Year to date (for the 11 months ending 31 May 2013), the Vlakvarkfontein Coal Mine produced 1.40Mt ROM, approx. 16% above budget. For the FY2013, ROM production of approx. 1.55Mt is forecast. This ROM production is 23% and 70% above ROM production of 1.24Mt and 0.89Mt achieved in FY2012 and FY2011 respectively.

Thermal coal sales of 1.21Mt have been achieved year to date, with total sales of 1.33Mt forecast for FY2013. Coal sales for FY2013 are forecast to be 5% and 100% above thermal coal sales of 1.27Mt and 0.60Mt achieved in FY2012 and FY2011 respectively.

The Vlakvarkfontein Coal Mine reported ZAR224m of sales revenue for the 11 months ending 31 May 2013 and with total mine production and administration costs of ZAR150m, the operation has recorded a gross operating profit of ZAR74m and a margin of 33%.

For the FY2013, the Vlakvarkfontein Coal Mine is now forecast to achieve record sales revenue of approx. ZAR244m and a record gross operating profit of approx. ZAR80m. Gross operating profit for FY2013 at the Vlakvarkfontein Coal Mine is forecast to exceed FY2012 gross operating profit by over 50%.

“The Vlakvarkfontein Coal Mine has been a real success story for Continental. It was our first coal mine into operation, a true greenfield project development and first coal production was achieved within 12 months of its acquisition. The operation has fully repaid all its capital development costs and is forecast to continue to generate free cashflow and dividends to its shareholders over the next 7 years.” Continental’s Chief Executive Officer Don Turvey said.

“To continue to report increased production and sales is very pleasing, and to be able to further report significantly increased earnings from the Vlakvarkfontein Coal Mine, demonstrates the value of our domestic thermal coal sales contracts with South African power utility Eskom, which ensures robust and secure margins even in the current environment of low export thermal coal prices and inflationary cost pressures.” Turvey added.

For the FY2014, the Vlakvarkfontein Coal Mine is forecast to produce 1.32Mt ROM coal and achieve thermal coal sales of 1.10Mt generating approx. ZAR242m of total sales revenue.

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