Introduction
Strategic Natural Resources PLC (“SNR”) was established on 5 October 2004 as a vehicle to develop, own and manage natural resource extraction enterprises in Southern Africa. As its first project, SNR acquired control of Elitheni Coal in the Eastern Cape some 200 miles north east of Port Elizabeth. The principal assets of Elitheni are a new order mining right over 92 Km2 as well as new order prospecting rights for coal which it holds in the Guba Hoek/ Macubeni area of the Eastern Cape, South Africa.
It is anticipated that there will be strong demand for Elitheni’s coal from several markets including the independent Indwe Power Station, proposed to be built by IPSA Group PLC (“IPSA”), and various major Eastern Cape industries who will convert their industrial boiler operations to accommodate Elitheni’s coal.
History
The first mines near Molteno and Indwe were opened in 1864 and 1877. The annual coal output from these mines reached a peak between 1900 and 1904 when production averaged 176,000 tonnes per annum. With the discovery of large deposits of coal in the former Transvaal and Natal Provinces closer to where major industrial development had commenced, production declined sharply in 1917 and ceased altogether in 1948. However, the Directors believe that, with the development of CFB Combustion Technology and increasing electricity prices large scale mining in this area is now economically viable. A coal mine based in the Eastern Cape will fuel the growing demand for power in South Africa.
Elitheni coal and its licences
Elitheni has increased its prospecting rights area in the Eastern Cape province of South Africa by more than 2,000% from the initial Phase 1 and Phase 2 area of 9,283.80ha, granted in 2005, to practically 190,000ha. The 190,000ha has been demarcated into Phases 1, 2, 3 and 4 and 5. The latter having been named Project Indlovu. Prospecting rights to Phase 3 (approximately 28,000ha) were obtained in December 2007. Applications to Phase 4 and 5 were accepted by the DME during 2008 and approvals are expected to be obtained early in 2009.
Elitheni was granted its full mining licence to access all the coal in its Phase 1& 2 prospecting rights area, in December 2008. The mining right will give Elitheni access to the 100Mt of in situ coal verified by the Competent Persons Report (CPR) in 2009 and is a major achievement for the company being the first company in the Eastern Cape of South Africa to be awarded new order coal mining rights. This will enable Elitheni to ramp up to full scale production in time to meet commitments made to IPPL for supply to their mine mouth power plant to be commissioned in 2011.
The mining permit according to which production commenced in September 2008, is being used to supply some of the smaller industrial markets that exist in the Eastern Cape but is primarily intended for bulk sampling and testing purposes in preparation for supply to meet the larger contractual demands such as the mine mouth power plant
The Company was admitted to AIM on 7th August 2007 on the basis of a resource under Elitheni’s control of approximately 15 million tonnes of coal in the Phase 1 and Phase 2 areas. Subsequent drilling confirmed a resource of 92.7 million tonnes on an area of less than 5% of the whole in September 2008. Based on this, IPSA has announced that it is planning to fast track the development of the first 250 MW power station and that it will plan the further installation of an additional 1000 MW in the Eastern Cape, all to be fuelled by Elitheni’s coal.
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