CoAL plans further expansion of Vele

Date: 06 September 2013 By: 

Coal of Africa Limited (CoAL) sees its own board’s approval of the future expansion of the Vele Colliery as an enormously positive achievement. This according to CoAL’s annual financial statement announced by new CEO Mr David Brown on 30 August.

In the meantime, pro-environment groups have continuously opposed the coal mine’s “destruction of the beautiful Limpopo valley”, and have declared their intention to fight the Australian-based, Chinese-“funded” company nail and tooth. The frustration of continuous litigation was named by CoAL’s former CEO, Mr John Wallington, as being a reason that he stepped down (www.fm.co.za). Brown announced that a significant milestone this year was the investment of $100million and the signing of a cooperation agreement with strategic investor Beijing Haohua Energy Resource Co. Ltd (BHE).

“The Board has approved our Vele technical plan and expansion project, subject to off-take agreements to support the procurement of funding for the capital and working capital expenditure. This now allows the company to move forward in developing a project which will produce sufficient future cash flows to support the group overhead. This is augmented, in the short term, by the company receiving a credit-approved term sheet which will provide sufficient bridging financing for CoAL,” said Brown.

Though the company’s losses were R148million for the year ended in June 2013, Vele’s expansion plan is to the worth of R220million. The construction is planned for 2014 and the expanded production for 2015. CoAL was granted a mining right for Vele, near the Mapugubwe World Heritage Site, at the beginning of 2010.

Brown said that the Vele Colliery was adversely affected by higher than normal rainfall in January 2013, resulting in flooding of the pit and the declaration of a force majeure. A force majeure is a French term (for a “greater force”) and is a clause included in contracts to remove liability for natural and unavoidable catastrophes that interrupt the expected course of events and restrict participants from fulfilling obligations. After cessation of mining activities, Brown said that the colliery recommenced the railing of export quality thermal coal in May this year.

Water expert Mr Hendrik du Toit said that the flooding might imply that the mining company did not comply with the regulations on minimum standards for water use of mines. “The mines conveniently ignore the fact that surface flow forms part of surface water and therefore it is also a water resource and subject to the regulations that prohibit placing residue deposits or dirty water areas within the 1:100 flood line area. Mines can be ordered to rectify the polluting effect,” said du Toit.

“What is going to happen to the gaping hole at the Vele Colliery in the rainy seasons in the months that pass while funding for the expansion is being secured? It is filled with coal mud. There seems to be very little activity there, and if they are not actively pumping out water, there could be a danger of polluted water seeping into the underground aquifer. Vele is located 5km from the river bank of the Limpopo River as the crow flies,” said Suzet Burger, a concerned resident who used to manage Dongola ranch for CoAL.

CoAL also announced that it is putting up its non-core assets up for sale, including Woestalleen in Mpumalanga and Mooiplaats in Ermelo. What if the Vele Colliery eventually becomes an operation held for sale? Who is then going to fulfil CoAL’s intention expressed to groups to completely rehabilitate Vele? Those are questions coming to mind, especially when an expert of Bench Marks Foundation, an organisation which measures principles for global corporate responsibility,  Mr David van Wyk, says that 6000 mines in South Africa had been abandoned, despite promises made.

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