Chairman’s interim report
Monday 26th November, 2007
Category :
Regulator News Service
Interim results for the 6 months ended 31st August 2007
Chairman’s Statement
It gives me great pleasure to present to shareholders the first set of interim results for Strategic Natural Resources PLC (’SNR’) since it was admitted to AIM in August, 2007 and to report on the progress being made by your Company.
Immediately prior to the flotation on 7th August 2007, 10 million Ordinary shares in SNR were placed at 30p per share raising a total of £3 million for the Company. At admission there were 65 million Ordinary shares in issue giving a market capitalisation of £19.5 million at the placing price. The current share price is 32p per share which reflects the continuing confidence of our investors.
The Company, through its subsidiary Elitheni Coal (Pty.) Limited (’Elitheni’), is engaged in the exploration for and extraction of coal in the Eastern Cape Province of South Africa. Elitheni’s current prospecting area comprises approximately 9,000 hectares under current prospecting licences and a further 16,000 hectares are subject to a prospecting rights application.
Commercial production is expected to commence in approximately 12 months time. The primary market for our coal will be a state of the art, independent coal-fired power plant of 500 MW which is planed for construction at the mouth of the Indwe mine. It is anticipated that this plant, which will be developed, owned and operated by IPSA Group PLC (’IPSA’) with whom the Company has entered into a framework agreement for supply, will consume 2.2 million tonnes per annum of coal extracted from our mine. IPSA is quoted on the AIM Market and on the Alternative Exchange of the JSE Limited (’AltX’).
Our coal will also be supplied to the industrial heat and power market, with a planned IPSA development near East London (SA) for Da Gama Textiles, and to the metallurgical market, with a new ferromanganese smelter under development at Coega near Port Elizabeth (SA).
Other markets that will be supplied from the Elitheni mine are the local brick manufacturing industry and the domestic household market.
The Company was admitted to AIM on the basis of a coal resource of some 15 million tonnes. We have since continued our drilling programme, raising the resource to some 40 million tonnes, having drilled only 4 per cent. of the area under licence. Drilling is continuing, with four rigs currently on site. Further increases of resource tonnage are expected to be announced over the coming
months as the drilling rate is stepped up, as planned.
It is a well publicised fact that there is an acute shortage of electrical power capacity serving South Africa’s domestic and industrial sectors and that the price of the sector’s primary energy source, coal, is rising rapidly (Eskom, the South African para-statal electric utility reported an increase in coal costs of 30 per cent. in its 2006/7 financial year). Most of the existing large scale power plants and coal mines are situated in the northern part of South Africa close to Johannesburg and Pretoria. Much power is lost in the transmission lines before reaching the southern half of the country. Elitheni therefore has a distinct advantage in that its coal is located almost 900km to the south of the northern coal reef. Furthermore, its low volatile content make Elitheni coal well suited for use in a clean coal fluidised bed boiler system.
SNR has completed an application to South Africa’s Department of Minerals and Energy (’the DME’) to begin mining 5.5 million tonnes of coal. I am delighted to announce today that this application has now been accepted and extraction rights are expected to be granted in 12 months time following the completion of a number of steps required by the DME including an environmental impact study and the conclusion of a placing of a total of 26% of Elitheni shares into the hands of Black Economic Empowerment (’BEE’) shareholders.
I am pleased to say that we are at an advanced stage in the negotiations for completing our BEE commitment.
Your Company has a highly professional team in place which has considerable managerial, geological, coal extraction and marketing expertise. They have worked and continue to work very hard and cohesively as a team over the testing times before actual mining commences on site with the resultant cash flow from coal sales. They are also seeking to broaden the acreage of the Elitheni mine with new prospecting licences on land adjacent to the existing 25,000 hectares over which Elitheni currently holds licences or has submitted an application for a licence. I am confident that your Company will continue to progress and develop as more coal reserves are added.
We look forward to an exciting six months ahead.
Richard Latham
Chairman
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Interim results are downloadable as a pdf file by clicking here
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