Name and Location
Vele colliery expansion project, Limpopo, South Africa.

Client
Coal of Africa Limited (CoAL).

Project Description
As at September 28, 2012, Vele had Joint Ore Reserves Committee-compliant resources of 362.5-million tonnes, including 24.2-million tonnes of proven reserves and 301.4-million tonnes of probable reserves.

The project will start producting one-million tonnes a year of coking coal and can potentially produce five-million tonnes a year. The mine will include underground and opencast operations.

The first phase of the project entailed the establishment of a modular coal treatment plant, capable of delivering about one-million saleable tonnes (yield dependent) a year of coking coal, with the capacity to double production, should there be an increase in offtake agreements.

Product evaluation and washability tests have indicated that semisoft coking coal and thermal coal can be produced simultaneously at Vele. Various additions to the Vele processing plant will be undertaken to realise simultaneous production, which will enhance the operational and financial performance of the project. This phase includes the installation of a permanent run-of-mine tip-and-crushing facility, primary and middlings coal wash plant modules, as well as a fines recovery plant.

Value
The total capital expenditure to complete the first phase of the project was initially estimated at R350-million, but this escalated to R450-million.

The next phase of the project is expected to cost R250-million.

Duration
The project was expected to be in production early in the third quarter of 2010, but construction activities were statutorily halted in 2010/11, amid environmental concerns with the project’s development area.

The expansion project will take place in the 2014 calendar year and expanded production will begin in 2015.

Latest Developments
CoAL’s board has approved a R220-million expansion at Vele Colliery. This is in line with the company’s publicly announced strategy to reposition itself as a project development company focusing on its coking coal assets.

The approval follows the re-evaluation and confirmation of the quality of coal at Vele, and the conclusion of a review of the current operations. As part of that process and for the colliery to reduce the current cash losses incurred, the colliery will cease production during October 2013 to prepare for the construction phase of the announced expansion.

The comapny has started the required fundraising activities, which should be finalised by the end of March 2014.

Completion of the expansion is expected by the end of 2014. Thereafter, the colliery will begin to ramp up operations during 2015 and will be at full production by the end of that year.

A collaborative and inclusive engagement process with the contractor companies operating at the mine has been concluded, with 49 people retained. A total of 138 employees have been redeployed to other operations and 155 employees have been retrenched. Throughout this process, the company has attempted to minimise job losses, while proactively engaging with all its stakeholders to minimise these impacts. This has resulted in the preservation of 55% of the jobs.

CoAL’s commitment to recruit from its local labour-sending areas will be upheld once the construction phase starts in 2014.

Key Contracts and Suppliers
ELB and PBA Projects (PBAP − design and construction of the modular plant), DRA (design, construction and operation of the larger Vele coking coal wash plant); GRD Minproc (feasibility study, Phase 1 infrastructure engineering, procurement and construction management contract); MCC (opencast-mining contractor); Raubex (road construction); and ArcelorMittal South Africa (offtake agreement).

On Budget and on Time?
Not stated.

Contact Details for Project Information
CoAL general manager for Vele colliery, Mark Coetzee, tel +27 11 785 4518, fax +27 11 807 2161 or email markm@badgermining.co.za.
DRA International, tel +27 11 202 8600.
ELB Group, tel +27 11 306 0700 or fax +27 11 918 7208.
GRD Minproc, tel +27 11 514 0005 or fax +27 11 514 0006.
MCC opencast mining, tel +27 11 990 6600.
PBAP, tel +27 21 948 8502, fax +27 21 948 8515 or email pbap@pbaprojects.co.za.
Raubex,tel +27 12 665 3226 or fax +27 12 665 2028.