Universal Coal eyes Sept start for NCC

JOHANNESBURG (miningweekly.com) – ASX-listed Universal Coal expects to start thermal coal processing at its second coal operation, the New Clydesdale colliery (NCC), in Mpumalanga, in September, despite not cementing a coal supply agreement as yet.

The drawn-out negotiations with potential offtake partners, including State-owned power utility Eskom, are reaching an “advanced state” with final assessment and selection of nominated offtakers expected imminently.

The South Africa-focused company, which also operates the Kangala colliery, has started refurbishing the coal handling and processing plant (CHPP) at NCC ahead of the restart of mining operations at the Diepspruit shaft area, says CEO Tony Weber.

Ingwenya Mineral Processing has been tasked with the CHPP recommissioning and its future operational requirements.

“Weighbridge infrastructure has already been installed in anticipation of coal product flows before the end of the 2016 calendar year,” he adds.

NCC has been idle since the end of 2013, when an internal review of group coal assets by former owner, South African coal major Exxaro Resources, determined that the operation was a negative-margin operation with a short mine life.

This was exacerbated by lower coal prices and exchange rate movements, mining difficulties leading to increased mining costs at lower yields and a shortfall of sales owing to the “unique characteristics” of the NCC siding.

Universal acquired the asset, which is located adjacent to its own Roodekop deposit, in 2014 in an effort to transform into a multimine coal producer.

By July last year, the miner had been cleared to start recommissioning work at the colliery following the transfer of the mining right.

The return to operations funding will initially be covered on an equity basis from existing cash reserves, while discussions continue with existing debt providers for the enlarged Universal Coal.

This followed the July lapsing of triple-listed Coal of Africa Limited’s A$126.4-million takeover bid for Universal Coal on the back of continued uncertainty in finalising the coal sales agreement and the other working capital funding opportunities.

Despite this, Universal Coal has taken the decision to push through with its underground mining ambitions, to supply the export and domestic coal markets. The latter would either entail supplying Eskom on a short-term basis or other local buyers or traders of domestic thermal coal.