🕐25.04.12 - 12:54 Uhr

INVESTEC: COAL OF AFRICA: FIRST COAL EXPORTS FROM VELE (BUY)




CLICK HERE FOR FULL REPORT AND DISCLOSURES
25 April 2012
Coal of Africa (CZA.L) Closing Price: 55p Rating: Buy
A landmark occasion for CZA, as first coal from Vele heads towards the export market.

Production from Vele, a key growth project, had been troubled for some time by permitting issues, now largely resolved.

The first trainload (1500t of thermal coal) is destined for Maputo port, then onto Asia, and forms part of a rail axle load testing process, prior to planned weekly trains.

The thermal coal is product from test work as the plant is commissioned, with Vele planned to produce 1mtpa of saleable coking coal.
* Vele is planned to be a coking coal operation, generating 1.0mt of saleable coking coal product from 2.7mtpa of run of mine (ROM) coal.

The mine will start as an open cut operation, before moving underground in approximately five years. * The operation is still in ramp up and plant test-work mode and we do not forecast any coking coal sales in FY12E, while we expect sales of 0.75mt and 1.00mt in FY13E and FY14E respectively (note that CZA is a June year end company).

CZA has only just taken delivery of the plant from the project engineering consultants. * The thermal product that is being exported is a product of the plant commissioning and test-work process.

Wet commissioning was completed in Dec11 and hot commissioning (running product through the plant) in Feb12.

CZA is currently conducting work to maximise coking coal recovery, while testing production of secondary product other than coking coal.

The company is looking into the potential for a middlings export quality thermal coal, potentially at a similar tonnage to the metallurgical coal.

Required changes to the processing plant to deliver this are estimated to cost ~US$20m, which could be debt financed. * We expect CZA to declare commercial production from Vele in the current quarter, when all remaining capital has been committed and formal sales agreements advanced. * We maintain a Buy recommendation on the back of substantial production and earning growth as CZAs coking coal operations come on stream.

Our target price of 115p is underpinned by a base case NPV valuation.
Louise Collinge +44 (0) 20 7597 5779
Hunter Hillcoat +44 (0) 20 7597 5182
To receive further information or change your Research Preferences please email: South Africa or United Kingdom
IMPORTANT NOTICE: This communication forms part of an electronic communication sent to the intended recipient (or such persons authorised representative) for their sole use and is subject to important legal and regulatory restrictions, qualifications and disclaimers ("the disclaimer") that may be accessed and read by clicking on the following hyperlink: http://www.investec.co.uk/about-investec/what-we-do/investment-banking/i nvestec-securities/company-research/morning-meeting-comments.html or copying the address into your Internet browsers address bar.

If you cannot access the disclaimer, please obtain a copy thereof from us by sending an e-mail to in the case of SA or in the case of UK: The disclaimer is deemed to form part of the information in this communication.

This communication is confidential for the information of the addressee only (or such persons authorised representative) and may not be reproduced in whole or in part, copies circulated, or disclosed to another party, without the prior written consent of Investec Securities Limited.

In particular, the Investec Group of companies does not allow the redistribution of this report to non-professional investors and cannot be held responsible in any way for third parties who effect such redistribution. If you are not the intended recipient of this e-mail (or such persons authorised representative), then: (a) please notify the sender of this e-mail immediately by return e-mail, facsimile or telephone and delete this message from your system; (b) you may not print, store, forward or copy this message or any part thereof or disclose or cause information in this message to be disclosed to any other person. The information in or attached to this e-mail message is confidential and may be subject to legal privilege and client confidentiality. Nothing in this message constitutes an offer, warranty or representation from us.

While we are entitled to rely on and hold you to your offers, warranties, representations or other statements made in or attached to this message, our employees or representatives may not conclude agreements or otherwise bind our company via e-mail. We cannot be held liable for any harm or loss resulting from malicious software code or viruses in this message or attachments, including data corruption resulting therefrom.

None of our employees or representatives are permitted to send unsolicited messages ("spam") and our company cannot be held liable therefore.

If you regard this message as spam, please inform us immediately by sending an e-mail to in the case of SA or in the case of UK:
Unless otherwise agreed: (a) We are only deemed to have received an e-mail once we have confirmed receipt thereof to you; (b) We are deemed to have sent an e-mail once reflected as "sent" on our e-mail server. If this message contains offensive, derogatory or defamatory statements or materials, it means the message has been sent outside the senders scope of employment with us and only the sender can be held liable in his/her personal capacity.

Our corporate information and names of our office bearers can be accessed by sending an e-mail to in the case of SA or in the case of UK:
This disclaimer applies to our original message, any attachments and all subsequent messages or attachments we may send.
-------------------------------------------------------------------------------- CONFIDENTIALITY NOTICE AND LEGAL LIABILITY WAIVER: The content of this email and any attachments are CONFIDENTIAL and may contain privileged information.

If you are not the addressee it may be UNLAWFUL for you to read, copy, distribute, disclose or otherwise use the information contained herein.

The content of the message and or attachments may not reflect the view and opinions of the originating company or any party it is representing.

If you are NOT the intended recipient then please email back to ------------------------------------------------------------------------------------



Products & Services | Jobs