Coal Of Africa: Impressive Resources

Published 06/27/2012, 10:51 AM
Updated 07/09/2023, 06:31 AM
RIO
-
MCM
-
OPIN
-
Soutpansberg Resource Upgrade

Coal of Africa released an updated compliant resource estimate for Greater Soutpansberg prepared upon the completion of the Chapudi acquisition. The area’s overall gross resource was upgraded by 429% to an impressive 8.0bn tons, while the more relevant mineable resource estimate grew 209% to 2.0bn tons. The released independent technical report has also provided selective saleable coal qualities for some of the project’s areas, underscoring its high coking coal potential. We have updated our valuation to incorporate the released resource estimate.
Soutpansberg resource upgrade
Greater Soutpansberg Area Resource Upgrade
The Greater Soutpansberg area covers eight coking and thermal coal assets, grouped into three regions -- Mopane, Makhado and Chapudi. The area’s overall gross tons in situ (GTIS) resource was increased from 1.5bn to 8.0bn tons, while its mineable-tons (MTIS) resource grew from 0.6bn to 2.0bn tons. The Chapudi project contributes the biggest portion to the updated resource as it accounts for 72% of gross and 54% of mineable tons in situ. The Chapudi project’s MTIS were reported at 1.3bn compared to the initial estimate of 1.0bn prepared by Rio Tinto in 2008.

Coal Qualities Point To High Coking Coal Potential
Makhado’s washed coal was reported as having 10% ash and 30% volatile matter, which classifies it as high volatile hard coking (HVHCC). The Telema & Gray area has coal qualities similar to Makhado and therefore could potentially deliver a similar HVHCC product. Both the Voorburg and Mount Stuart projects have slightly higher ash and volatiles and are likely to be classified as semi-hard coking coal. While no information on the Chapudi’s washed qualities was provided, the company will have to refocus its work on coking coal as Rio Tinto’s extensive sampling was centred upon the primary thermal coal product and/or coking coal export fraction.

Valuation: £0.66 Per Share SOTP
We employ the SOTP methodology to arrive at the company’s overall equity value of U.S. $0.7bn, or £ 0.66/share. This is an 18% reduction on our previous estimate, but 74% above the current share price. While we leave our valuation of the existing thermal coal business and Vele unchanged, we slightly amended the residual resource valuation methodology and applied a lower target EV/Resource multiple as the company’s share price declined. Among the catalysts that could affect the company’s valuation we would watch the operating (July) and financial (September) results as well as Exxaro’s Makhado option exercise (expected by the end of September).

To Read the Entire Report Please Click on the pdf File Below.

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.