Projects in South Africa are making ‘significant progress’, reports AIM-quoted Coal of Africa.

The Western Australia-based company says its Makhado coking coal project, with a ‘measured’ resource of 230 million tonnes out of a possible 1.3 billion tonnes, is on track to produce five million tonnes a year at an economical cost of $54 a tonne, with another project, Vele, set to produce the same amount at a cost of $54 a tonne. Managing director Simon Farrell says Coal of Africa has secured long-term port allocation for Makhado’s output through Maputo in Mozambique and is now focusing on completing a formal off-take agreement with steel giant ArcelorMittal, following a letter of intent in April.

The company has upgraded the potential coal resource at Vele from 441 million tonnes to 721 million tonnes, of which 133 million tonnes is in the ‘measured’ category. With its other projects also looking robust, Coal of Africa is debt free and suggests it will still have around £90 million in the bank after bringing another project, Mooiplats, into production.

Recommended by Growth Company Investor at 14p two years ago, Coal of Africa shares surged through 217p (at which level GCI suggested partial profit-taking) to 223p three months ago, before falling sharply. Now 104p, up 8p this morning, they value the company at £428 million and might fare better than some in the sector.

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