🕐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
------------------------------------------------------------------------------------