Company Profile

Review of Operations

Continental Coal Limited (ASX:CCC : US-OTCQX:CGFAY) is a South African thermal coal producer with a portfolio of producing and advanced coal projects located in South Africa’s major coal fields.

Continental currently has two operating mines, Vlakvarkfontein and Ferreira, producing 2Mtpa of thermal coal for the export and domestic markets. In 2011 Continental is set to commence development of two further thermal coal mines. Continental is targeting a ROM production rate of 7Mtpa by the end of 2012.

The Company has concluded strategic off-take and funding agreements with EDF Trading for its export thermal coal production and recently signed a joint development agreement with KORES, Korea’s state mining and exploration company.

Export Coal Off-take Agreements

Continental Coal has announced that it had signed a Heads of Agreement with EDF Trading under which EDF Trading would acquire the Group’s production of export thermal coal from the Vlakvarkfontein, Vaalbank and Project X mines for a period of 20 years at a market API4 benchmark price FOB Richards Bay.

Under the terms of the Heads of Agreement EDF Trading also agreed to provide the Group with a US$20 million  “coal loan” through an advance purchase of forecast thermal coal exports.

EDF Trading is a leader in the international wholesale energy markets. It is a wholly-owned subsidiary of EDF S.A., and with its own portfolio of assets, combined  with those of the EDF Group businesses, it has the ability to source, supply, transport, store, blend and convert physical commodities across the wholesale energy markets.

Future Developments, Prospects and Business Strategies

To further improve the group’s profit and maximise shareholders wealth, the following developments are intended to be implemented in the near future;

  • The Group will continue to expand its coal interests in South Africa. It has established its first operating coal mine, namely Vlakvarkfontein, and has at the date of this report entered into a binding heads of agreement to acquire 100% of the shares in unlisted South African mining and export coal producing group Mashala Resources; and
  • The Group will develop these investments to production through its South African subsidiary Continental Coal Ltd.

These investment opportunities, together with the current strategy of continuous improvement and an adherence to quality control in existing markets, are expected to assist in the achievement of the group’s medium-term goal of investing in highly prospective coal resources in South Africa, with early cash flow to fund its ongoing financial requirements and minimum equity dilution.

Looking Forward

  • High quality portfolio of advanced development/pre-production mines
  • Location within one of the world’s largest, most developed coal mining regions
  • Excellent access to surface infrastructure including rail sidings, wash facilities, road, port, power and water Conventional open cast and underground mines
  • Thermal coal exports to commence immediately
  • Production ramping up to over 10Mtpa of run of mine coal by end of 2015
  • EDF Trading off-take and funding arrangements
  • Strong financial platform and robust operating margins
  • Strong fundamentals in a very bullish coal market
  • Ongoing review of future opportunities with EDF Trading
  • Outlook exceptional for Continental in short-term with revaluation expected on commencement of coal production, coal sales and generation of positive operating cashflow
  • Future – Consolidation opportunities in SA, growth potential in Mozambique and other Southern African Countries

Corporate Videos
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Australian Research Independent
Investment Research
November 2011
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