CoAL’s Troubles Continue as Environmental Group Ends Truce

Dec. 20, 2012 - PRLog -- The prospect of legal action against Coal of Africa (CoAL) follows a decision by the ‘Save the Mapungubwe Coalition’ (the Coalition) to withdraw from a memorandum of understanding (MoU) signed 13 months ago which had signalled a truce between CoAL and organisations such as the Endangered Wildlife Trust.

In terms of the MoU, the parties agreed to a stay of legal action pending completion of a memorandum of association (MoA).

The MoA was to establish various controls and systems that would enable the Coalition to keep watch over CoAL’s environmental management performance at Vele in terms of various operating licences it had received from the South African government, including an integrated water use licence.

The Vele mine is in proximity to the Mapungubwe Wildlife Park, a recognised national heritage site that has attracted the scrutiny of the United Nations.

In June, the South African government was forced to intervene in a dispute involving UN National Heritage officials who were surprised to see mining had resumed at Vele, a semi soft coking and thermal coal mine with targeted run-of-mine production of 2.7Mpta.

Responding to a statement from the Coalition on December 7 that CoAL was non-compliant with the terms of its water licence, John Wallington, CEO of CoAL, said the mine was regularly audited by the environmental authorities and had not been found to be non-compliant.

“In addition, the Coalition has to date not been to the Vele mine site in spite of the numerous invitations from the company for it to visit in order to observe and appreciate the systems introduced to manage the environment,” Wallington said.

The withdrawal of the Coalition from the MoU would not impede mine production, he said. The risk of renewed legal action at Vele puts the icing on a miserable month for CoAL.

Despite finalising the first tranche of investment from new Chinese shareholder, Beijing Huahoa Energy (BHE), which is the US$20M preamble for significant balance sheet restructuring totalling $100M, CoAL has had to contend with industrial action at its Mooiplaats thermal coal mine in Mpumalanga province.

Mooiplaats was already identified as a restructuring candidate prior to the outbreak of industrial unrest which last week resulted in some 178 striking employees being dismissed. Further disruption at the mine would have: “… a severe impact on the viability of Mooiplaats and is likely to result in job losses,” CoAL said in a statement to the JSE last week. The colliery employs 368 people of which 244 are National Union of Mineworkers members.

According to Percy Takunda, an analyst at Imara SP Reid, CoAL’s short-term cash flow problems will require quicker-than-expected treatment.

“Mooiplaats and Woestalleen will likely enter into closure proceedings within the next 12 months,” Takunda said in a note dated December 5.

“The immediate future for CoAL will hinge on the successful ramp-up at Vele and future funding of Makhado. We don’t think Vele on its own can sustain the development of Makhado and additional funding will be required for Makhado,” Takunda said of the project that could contribute to coking coal output of 10Mtpa from the Soutpansberg region where Makhado is situated.

Added to these pressures, CoAL recently lost its CFO, Wayne Koonin, who resigned only 18 months into the job. CoAL’s chairman, David Brown, said Koonin will consult to the company until March when he will assist with a new appointment.

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