ASX-listed thermal coal miner, Continental Coal is set to achieve its third consecutive record year of thermal coal production, domestic coal sales and earnings from its Vlakvarkfontein colliery.

Vlakvarkfontein is a conventional opencast contract mining operation located approximately 90 km east of Johannesburg. The mine is operated under a joint venture, Ntshovelo Mining Resources, with the company’s principal South African subsidiary, Continental Coal South Africa holding a 60% economic interest and having operating and management control.

Conventional opencast mining of two coal seams, each about 5 m in width, at a strip ratio of 2:1 to produce 1.2 Mtpa of run-of-mine (ROM) production has taken place since June 2010. With around 11 Mt of JORC compliant proven reserves, the mine has a remaining mine life in excess of seven years. The mine has to date produced in excess of 3.5 Mt of ROM coal production and over 3.1 Mt of thermal coal sales into the South African domestic market.

In FY2013, it 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 mine produced 1.4 Mt ROM, approximately 16% above budget. For the FY2013, ROM production of approx. 1.55 Mt is forecast. This ROM production is 23% and 70% above ROM production of 1.24 Mt and 0.89 Mt achieved in FY2012 and FY2011 respectively.

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

Vlakvarkfontein mine reported R224 million in sales revenue for the 11 months ending 31 May 2013, with total mine production and administration costs of R150 million, the operation has recorded a gross operating profit of R74 million and a margin of 33%.

For the FY2013, the mine is now forecast to achieve record sales revenue of about R244 million and a record gross operating profit of about R80 million. Gross operating profit for FY2013 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 seven years,” says Continental’s CEO Don Turvey.

“To continue to report increased production and sales is very pleasing, and to be able to further report significantly increased earnings from Vlakvarkfontein, 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,” he adds.

For the FY2014, the mine is forecast to produce 1.32 Mt ROM coal and achieve thermal coal sales of 1.10 Mt, generating approximately R242 million in total sales revenue.


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