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Coal of Africa (CoAL) says that it is considering placing the Mooiplaats colliery on care and maintenance.

The coal producer advised that it will embark on a regulatory Section 189A (S189A) process with effect from 3 June 2013 with stakeholders, a decision it notes, was reached following sustained and concerted attempts over the past two financial years to make the operation profitable and enable it to produce positive cash flows.

CoAL pointed out that efforts to improve productivity and establish profitable operations at Mooiplaats, including capital investment, have been hampered by the global downturn in thermal coal prices over the last year.

Further, the company said that the situation has been exacerbated by the inability of the colliery to ramp up production to achieve required targets due to poor operational performance and challenging geological conditions. Consequently the company has continued incurring an unacceptable level of operational losses.

According to CoAL, Mooiplaats recorded a loss of approximately R167 million for the financial year ended 30 June 2012 and has generated an average monthly loss of R20 million since the beginning of the current financial year. The company has an allocation of three million tons in Maputo at the Matola Terminal and is working to mitigate the take or pay exposure. CoAL’s cash position as at 31 March 2013 was US$67.4 million.

Meanwhile, the company advised that the regulatory S189A process will begin on 3 June 2013 and will involve a two month consultation period whereby CoAL must engage with all relevant stakeholders. This process will evaluate alternatives to placing the colliery on care and maintenance.

“This decision has not been taken lightly as CoAL recognises the importance of conserving jobs, but at the same time the need to preserve the company’s financial structure and ensure its future sustainability is paramount,” said CoAL’s chairperson David Brown.

Mooiplaats currently employs 290 employees and 258 contractors. Coal of Africa said it will continue to provide updates on material developments as they occur.

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