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PROSPECTUS
Universal Coal Plc ARBN 143 750 038
Corporate Adviser and Lead Manager:
Pursuit Capital AFSL 339211
Sponsoring Broker to the Offer:
StoneBridge Securities Limited AFSL 238148
IMPORTANT INFORMATION
This is an important document that should be read in its entirety. If you do not
understand it you should consult your professional advisers without delay.
The CDIs for Shares offered by this Prospectus should be considered speculative.
For the offer of up to 76,923,077 CDIs for Shares at an issue price of $0.26 each to raise up to $20,000,000 (with provision to accept oversubscriptions of up to a further 38,461,538 CDIs for Shares at $0.26 to raise an additional $10,000,000).
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IMPORTANT NOTICEThis Prospectus is dated 30 September 2010 and was
lodged with ASIC on that date. ASIC and its officers take no
responsibility for the contents of this Prospectus or the merits
of the investment to which this Prospectus relates.
The expiry date of this Prospectus is 5.00pm WST on that
date which is 13 months after this Prospectus is lodged with
ASIC (Expiry Date). No CDIs for Shares may be issued on
the basis of this Prospectus after the Expiry Date.
Application will be made to the ASX within seven (7) days
after the date of this Prospectus for Official Quotation of the
CDIs for Shares the subject of this Prospectus.
The distribution of this Prospectus in jurisdictions outside
Australia may be restricted by law and persons who come
into possession of this Prospectus should seek advice on
and observe any of these restrictions. Failure to comply with
these restrictions may violate securities laws. Applicants who
are resident in countries other than Australia should consult
their professional advisers as to whether any governmental or
other consents are required or whether any other formalities
need to be considered and followed.
This Prospectus does not constitute an offer in any place in
which, or to any person to whom, it would not be lawful to
make such an offer.
It is important that investors read this Prospectus in its entirety
and seek professional advice where necessary. The CDIs for
Shares the subject of this Prospectus should be considered
speculative.
WEB SITE – ELECTRONIC PROSPECTUSA copy of this Prospectus can be downloaded from the
website www.universalcoal.com. Any person accessing
the electronic version of this Prospectus for the purpose of
making an investment in the Company must be an Australian
resident and must only access this Prospectus from
within Australia.
The Corporations Act prohibits any person passing onto
another person an application form unless it is attached to a
hard copy of this Prospectus or it accompanies the complete
and unaltered version of this Prospectus. Any person may
obtain a hard copy of this Prospectus free of charge by
contacting the Company.
EXPOSURE PERIODThis Prospectus will be circulated during the Exposure
Period. The purpose of the Exposure Period is to enable this
Prospectus to be examined by market participants prior to the
raising of funds. Potential investors should be aware that this
examination may result in the identification of deficiencies in
this Prospectus and, in those circumstances, any application
that has been received may need to be dealt with in
accordance with section 724 of the Corporations Act.
Applications for CDIs for Shares under this Prospectus will
not be accepted by the Company until after the expiry of the
Exposure Period. No preference will be conferred on persons
who lodge applications prior to the expiry of the
Exposure Period.
DOCUMENTS INCORPORATED BY REFERENCEThe information set out in Section 6 of this Prospectus (which
contains a summary of the Independent Competent Persons
Reports) is dealt with in more detail in separate Independent
Competent Persons Reports. Each Independent Competent
Persons Report was lodged with ASIC on 30 September
2010 and is incorporated by reference into this Prospectus
by operation of section 712 of the Corporations Act.
The Company believes that the information in the
Independent Competent Persons Reports is primarily of
interest to professional advisers, institutional investors and to
investors with similar specialist information needs. However,
if you consider that the information in the Independent
Competent Persons Reports might assist you in making
your investment decision, you should obtain a copy of the
Independent Competent Persons Reports and consult your
broker or financial adviser. The Independent Competent
Persons Reports can be obtained free of charge by
contacting the Company on INT +61 6267 9030, or by email
PHOTOGRAPHSCertain assets that are the subject of photographs contained
in this Prospectus may not be owned by the Company
or any other subsidiary of the Company. The inclusion of
photographs supplied by persons or entities other than
the Company does not constitute an endorsement or
recommendation by those persons or entities of the Shares
offered pursuant to this Prospectus.
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COMPETENT PERSON’S STATEMENTThe information in Sections 4 and 6 of this Prospectus that
relates to Exploration Results, Minerals Resources or Ore
Reserves relating to the Roodekop Project and the Limpopo
Project, and is attributable to the Independent Competent
Person’s Reports in Section 6 is based on information
reviewed and compiled by Mr Nico Denner, who is a
registered natural scientist and a member of the South African
Council for Natural Scientific Professions. Mr Denner is
employed by Gemecs (Pty) Ltd and has sufficient experience
which is relevant to the style of mineralisation and the type
of deposit under consideration and to the activity which he
is undertaking to qualify as a Competent Person as defined
in the 2004 edition of the Australasian Code for Reporting of
Exploration Results, Minerals Resources and Ore Reserves.
Mr Denner consents to the inclusion in the Prospectus of this
information in the form and context in which it appears.
The information in Sections 4 and 6 of this Prospectus that
relates to Exploration Results, Minerals Resources or Ore
Reserves relating to the Brakfontein Project and the Kangala
Project, and is attributable to the Independent Competent
Person’s Reports in Section 6 is based on information reviewed
and compiled by Mr David van Wyk, who is a registered
natural scientist and a member of the South African Council
for Natural Scientific Professions and the Geological Society of
South Africa. Mr van Wyk is a full time employee of GeoCoal
Services and has sufficient experience which is relevant
to the style of mineralisation and the type of deposit under
consideration and to the activity which he is undertaking to
qualify as a Competent Person as defined in the 2004 edition
of the Australasian Code for Reporting of Exploration Results,
Minerals Resources and Ore Reserves. Mr Denner consents
to the inclusion in the Prospectus of this information in the form
and context in which it appears.
REPORTING ON EXPLORATION RESULTSThe Overview of the Projects in Section 4 and the
Independent Competent Persons Reports in Section 6 have
been compiled in accordance with the JORC Code, the
recommendations and guidelines set out in the revised 2007
South African Code for The Reporting of Exploration Results,
Mineral Resources and Mineral Reserves (SAMREC Code)
and the rules and guidelines relating to the independent
expert’s reports set by ASIC and ASX.
IMPORTANT INFORMATION FOR UNITED KINGDOM RESIDENTSThis Prospectus does not constitute a prospectus for the
purposes of the Prospectus Rules published by the United
Kingdom Financial Services Authority (FSA) and has not been
approved by, or filed with, the FSA or the United Kingdom
Listing Authority. Furthermore, this Prospectus contains no
offer to the public within the meaning of Section 102B of the
UK Financial Services and Markets Act 2000 (FSMA), the
Companies Act 2006 (UK Companies Act) or otherwise.
This Prospectus is being supplied in the United Kingdom only
to persons who are (i) a “qualified investor” within the meaning
of section 86(7) of the FSMA and (ii) a “professional client”
or an “eligible counterparty” within the meaning of COBS
3.5.1 and COBS 3.6.1, respectively of the FSA Conduct of
Business Sourcebook and (iii) have professional experience
in matters relating to investments and who are investment
professionals as specified in Article 19(5) of the Financial
Services and Markets Act 2000 (Financial Promotion) Order
2005 (the Order) or who are high net worth companies,
unincorporated associations and others as specified in
Article 49(2) of the Order. Any investment or investment
activity to which this Prospectus relates is available only to
such persons or will be engaged in only with such persons.
Persons who do not have professional experience in matters
relating to investments should not rely on this Prospectus.
This Prospectus is exempt from the general restriction on
the communication of invitations or inducements to enter
into investment activity and has therefore not been approved
by an authorised person as would otherwise be required by
Section 21 of the FSMA.
It is a condition of any application for CDIs for Shares
pursuant to the Offer by any person in the United Kingdom
that such person falls within, and warrants and undertakes
to the Company that it falls within, one of the categories of
persons described above.
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CONTENTS1. CHAIRMAN’S LETTER 6
2. INVESTMENT OVERVIEW 8
3. DETAILS OF THE OFFER 5
4. OVERVIEW OF THE COMPANY AND ITS PROJECTS 14
5. DIRECTORS AND SENIOR MANAGEMENT 22
6. COMPETENT PERSON’S REPORTS – SUMMARY 26
7. FINANCIAL INFORMATION 116
8. INVESTIGATING ACCOUNTANT’S REPORT 113
9. MINING TITLE OPINION 124
10. RISK FACTORS 163
11. MATERIAL CONTRACTS 171
12. ADDITIONAL INFORMATION 179
13. DIRECTORS’ AUTHORISATION 191
14. GLOSSARY 192
REGISTERED AND PRINCIPAL OFFICES
In England
(Registered Office):
Princes House
38 Jermyn Street
London SW1Y 6DN
UNITED KINGDOM
Telephone: +44 207 292 9110
Facsimile: +44 203 214 0079
In South Africa
(Principal Office):
467 Fehrsen Street
Brooklyn 0182
Pretoria
SOUTH AFRICA
Telephone: +27 12 460 0805
Facsimile: +27 12 460 2417
In Australia:
Suite 10, 38 Colin Street
West Perth WA 6005
AUSTRALIA
Telephone: +61 8 6267 9030
Facsimile: +61 8 9481 1840
SHARE REGISTRY
Australia
Computershare Investor Services
Pty Limited
Level 2, 45 St Georges Terrace
Perth WA 6000
AUSTRALIA
Telephone: 1300 850 505
UK
Computershare Investor
Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZY
UNITED KINGDOM
Telephone: +44 (0) 870 702 003
CORPORATE ADVISER AND LEAD MANAGER
Pursuit Capital Pty Ltd
AFSL: 339211
Suite 10, 38 Colin Street
West Perth WA 6005
AUSTRALIA
SPONSORING BROKER
StoneBridge Securities Limited
AFSL: 238148
Level 27, Governor Phillip Tower
1 Farrer Place
SYDNEY NSW 2000
AUSTRALIA
INDEPENDENT COMPETENT PERSONS
Coffey Mining (SA) Pty Ltd
Block D, Somerset Office Estate
604 Kudu Street
Allen’s Nek 1737
Roodeport
SOUTH AFRICA
Gemecs (Pty) Ltd
Visiomed Office Park
Unit 16, Building 5
269 Beyers Naude Drive
Blackheath, Randburg
SOUTH AFRICA
SOLICITORS
In Australia:
Steinepreis Paganin
Lawyers & Consultants
Level 4, Next Building
16 Milligan Street
Perth WA 6000
AUSTRALIA
In UK:
Watson, Farley & Williams LLP
15 Appold Street
London EC2A 2HB
UNITED KINGDOM
In South Africa:
Webber Wentzel Attorneys
10 Fricker Road
Illovo Boulevard
Illovo Johannesburg 2196
SOUTH AFRICA
INVESTIGATING ACCOUNTANT
Ord Nexia Pty Ltd
Chartered Accountants
Level 1, 47-49 Stirling Highway
Nedlands WA 6009
AUSTRALIA
AUDITORS
UK
Mazars LLP
Tower Bridge House
St Katharine’s Way
London UK E1W 1DD
UNITED KINGDOM
South Africa
SAB&T
119 Witch-Hazel Avenue
Highveld Technopark
Centurion 0046
Pretoria
SOUTH AFRICA
CORPORATE DIRECTORY
DIRECTORS
Dr Antony Harwood Executive Chairman (South Africa)
Mr Anton Weber Chief Executive Officer (South Africa)
Mr Hendrik Bonsma Non-Executive Director (South Africa)
Mr Shammy Luvhengo Non-Executive Director (South Africa)
Mr John Hopkins Non-Executive Director (Australia)
JOINT COMPANY SECRETARIES
Mr Daniel Robinson
Mr Timothy Horgan
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INVESTMENT HIGHLIGHTSThe information set out below should be read in conjunction
with the more detailed information set out in this Prospectus.
This Prospectus should be read in its entirety and, in
particular, investors should consider the risk factors that could
affect the financial and operating performance of
the Company.
Key highlights include:
• The Company is a South African focussed coal company
holding interests in three thermal coal projects of
between 25% and 70.5%, which contain over 300Mt of
JORC compliant resources. Refer to Section 4.5, the
Independent Competent Persons Reports in Section 6
and the Mining Title Opinion in Section 9 for
further information.
• The Company is aiming to achieve first coal production
from the Kangala Coal Project in early 2011, ramping up
to full production by the end of 2011, subject to various
regulatory approvals.
• Development of the Kangala Project, located in the
Witbank coalfield in South Africa, which supplies more
than 50% of South Africa’s saleable export and
domestic coal.
• The development of the Kangala Project is planned to be
followed by the development of the Roodekop Project and
Brakfontein Project subject to positive feasibility studies,
financing and other regulatory approvals, with both
projects being planned with the object of maximising their
export coal potential.
• In addition to the thermal coal projects, the Company
has an earn-in agreement over two coking coal projects
(Berenice and Somerville) that together contain 396Mt
of JORC compliant Inferred resources. Refer to Section
4.5 and the Independent Competent Persons Reports in
Section 6 for further information.
• The Company has an experienced team of directors,
senior managers and geoscientists with extensive
expertise in both coal exploration and mining in South
Africa and who have a proven track record of
project development.
INVESTMENT RISKSProspective investors should read this Prospectus in its
entirety and, in particular, consider the risk factors set out in
Section 10, before deciding on whether to apply for CDIs for
Shares under this Prospectus.
Key risks include:
• The Company holds a number of Prospecting Rights,
however only currently holds a Mining Right over the
Kangala Project. There is a risk that such rights may not
be granted, which would prevent the Company from
commencing mining operations over its other projects.
• There is no guarantee of future exploration success on the
Limpopo Project, which is required before the Company
would commit to the development of this Project.
• The volatility of the commodity price of coal as well as
exchange rate risks.
• Economic conditions as well as share market volatility
may affect the Company’s performance regardless of the
Company’s operating performance.
• The risks in the mine and water licence permitting
processes associated with the projects.
• South Africa is considered to be a developing country
and, as such, subject to increased sovereign risk.
• There is a risk as to future title and standing in relation to
the tenements in which the Company has or may earn
an interest.
• The ability of the Company to comply with environmental
guidelines and policies.
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1. CHAIRMAN’S LETTER30 September 2010
Dear Investor,
On behalf of my fellow Directors, I am pleased to present this opportunity to you to become a shareholder in Universal Coal plc
(Universal Coal or the Company).
Universal Coal is a public unlisted company incorporated in England and Wales. In April 2010, the Board of Directors resolved to
list Universal Coal on ASX and undertake a capital raising. The Company’s principal assets consist of interests in three thermal
coal projects and two coking coal projects, all of which are located in the Republic of South Africa, in regions with a history of
large and small scale producing coal operations.
Universal Coal holds a 70.5% interest in the Kangala Coal Project which hosts JORC compliant resources totalling 104Mt.
The Company plans to commence mining development in late 2010, after recently being granted a Mining Right. The Kangala
Project is intended to be developed in stages, with early production to be sold to nearby collieries on a run of mine (ROM) basis.
The majority of the coal from the Kangala Project is expected to be sold to domestic power producers, based upon testwork
completed to date.
The Company also has two earn-in agreements over export thermal coal projects, Roodekop and Brakfontein, located close to
Kangala, in the Witbank coalfield. For both of these projects, the Company has the right to earn up to an initial 50% interest by
completing a feasibility study and potentially up to a 74% interest (refer to Sections 11.3 and 11.4 for further details).
The Roodekop Project hosts 78.2Mt of JORC compliant resources and is planned to be the Company’s second mining
operation assuming Mining Rights are granted. The Company intends to lodge a Mining Right application in the fourth quarter of
2010. The Company’s third thermal coal project, Brakfontein, is located between Kangala and Roodekop. Brakfontein contains
147.8Mt of JORC compliant resources. Drilling and modelling is ongoing at Brakfontein with the Company planning to submit a
Mining Right application in the fourth quarter of 2010.
Universal Coal also has earn-in agreements covering several large coking coal projects in the Limpopo region of South Africa.
Whilst at an early stage, these projects contain 396Mt of JORC compliant Inferred resources.
Comprehensive technical information on the Company’s projects together with details of its proposed exploration programmes
are detailed in the Independent Competent Persons Reports set out in Section 6 of this Prospectus. A summary of the coal
resource estimate prepared by the Independent Competent Persons is set out in Section 4.5.
The Company is seeking to issue up to 76,923,077 CDIs for Shares at an issue price of $0.26 each to raise $20,000,000 (with
provision to accept oversubscriptions of up to a further 38,461,538 CDIs for Shares at $0.26 to raise an additional $10,000,000)
to provide funds towards commencing the initial stage of mining at Kangala, progressing the Roodekop and Brakfontein feasibility
studies and completing further exploration at the coking coal projects.
On behalf of the Board of Directors, I thank you for your interest and look forward to welcoming you as a
shareholder in the Company.
Yours sincerely
DR ANTONY HARWOOD CHAIRMAN
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Universal Coal also has earn-in joint ventures covering several large coking coal farms in the Limpopo region of South Africa
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2. INVESTMENT OVERVIEW
2.1 Important Notice
This Section is not intended to provide full information for
investors intending to apply for CDIs for Shares offered
pursuant to this Prospectus. This Prospectus should be read
and considered in its entirety.
2.2 Objectives
The key strategic objectives of the Company are to:
a) progress the Kangala Project to production;
b) complete feasibility studies on the Roodekop and
Brakfontein Projects;
c) undertake exploration at the Limpopo coking coal
projects; and
d) acquire additional coal projects in Southern Africa.
2.3 Indicative Timetable
Lodgement of Prospectus with ASIC 30 September 2010
Opening Date 8 October 2010
Closing Date (5.00pm WST unless extended) 20 October 2010
Despatch of Holding Statements 22 October 2010
Expected date for listing on ASX 27 October 2010
2.4 Purpose of the Offer and Use of Proceeds
It is intended to apply funds raised from the Offer as follows:
Prospectus ($20,000,000) Maximum Subscription ($30,000,000)
Item Year 1 Year 2 Year 1 Year 2
Kangala Development
Feasibility Study 1,500,000 - 1,500,000 -
Infrastructure 3,500,000 3,000,000 4,000,000 3,000,000
Pre-strip 4,000,000 - 4,000,000 -
Roodekop Feasibility Study 1,500,000 500,000 1,500,000 1,500,000
Brakfontein Feasibility Study 500,000 1,500,000 500,000 1,500,000
Coking Coal Exploration 150,000 375,000 2,750,000 3,500,000
New Project Generation - 375,000 500,000 1,500,000
Administration Costs 500,000 500,000 500,000 500,000
Expenses of the Offer 1,940,373 - 2,594,474 -
Unallocated Working Capital 159,627 - 405,526 -
Total 13,750,000 6,250,000 18,500,000 11,500,000
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Funds raised between the minimum subscription amount
of $20,000,000 and the maximum subscription amount of
$30,000,000 are intended to be applied first towards the
expenses of the Offer, and then towards the Roodekop
feasibility study and then towards coking coal exploration on
the Limpopo project, and then towards new
project generation.
The above table is a statement of current intentions as of the
date of lodgement of this Prospectus with ASIC. As with any
budget, intervening events (including exploration success or
failure) and new circumstances have the potential to affect the
ultimate way funds will be applied. The Board reserves the
right to alter the way funds are applied on this basis.
On completion of the Offer, the Board believes the Company
will have sufficient working capital to achieve these objectives.
2.5 Capital Structure
The capital structure of the Company following completion of the Offer is summarised below1:
Minimum Subscription
Maximum Subscription
Securities
Existing Shares on issue at
date of Prospectus2,3
118,999,432 118,999,432
Shares now offered 76,923,007 115,384,615
Total Shares on issue at completion of the Offer
195,922,509 234,384,048*
Options4
Existing Options 24,101,258
Options now Offered Nil
Total Options on issue at completion of the Offer5,6,7
24,101,258
Notes:
1. Refer to the Investigating Accountant’s Report for
further information.
2. The Company has agreed to issue 3,012,000 Shares to
Mountain Rush Trading 6 (Pty) Limited (Mountain Rush)
within 10 days of the dual-listing of the Company on JSE.
This issue of shares relates to a consultancy agreement
in relation to the Kangala Project for services provided
by Mountain Rush to facilitate compliance with the BEE
requirements to the satisfaction of the Company. Refer to
Section 11.10 for further details.
3. The Company has agreed to issue 2,200,000 Shares
to Shammy Luvhengo, a director of the Company,
in consideration for services provided to facilitate the
Company’s acquisition by UCD II of the Prospecting Right
MPT 342/2009 from Bono Lithihi Investments Group
(Proprietary) Limited (which relates to the Limpopo Project)
and for other consulting services. The Shares will be
issued upon the registration of the transfer of Prospecting
Right 342/2009 to UCD II under section 11 of the
MPRDA. Refer to Sections 11.5 and 11.6 for
further details.
4. Refer to section 12.5 for a summary of the terms and
conditions of the Options on issue.
5. Pursuant to the terms of the Lead Manager Agreement
with Pursuit Capital, the Company has agreed to issue
to Pursuit the number of Options equal to 5% of the total
number of CDIs for Shares issued excluding CDIs for
Shares issued to parties introduced by the Company and
other specific entities. The Options have an exercise price
of $0.26 and an expiry date of 5 years from the date of
admission of the Company to the Official List. Refer to
Section 11.10 for further details.
6. Pursuant to the terms of the Sponsoring Broker
Agreement with StoneBridge, the Company has agreed
to issue to StoneBridge the number of Options equal to
2.5% of the total number of CDIs for Shares as at the
date of admission of the Company to the Official List. The
details of the Options are set out in Section 11.11 below.
The Options will have an expiry date of 31 December
2013. Refer to Section 11.11 for further details.
7. Pursuant to the terms of a Cornerstone Investor
Agreement with Cong Ming, the Company has agreed
to issue to Cong Ming 5,000,000 Options if Cong Ming
successfully introduces a cornerstone investor that takes
a significant stake in the Company. The Options have an
exercise price of $0.26 and an expiry date of 5 years from
the date of admission of the Company to the Official List.
Refer to Section 11.12 for further details.
2.6 Restricted Securities
Subject to the Company being admitted to the Official List,
certain CDIs for Shares and Options on issue prior to the
Offer and certain CDIs for Shares issued on the exercise of
the Options issued prior to the Offer to promoters, vendors,
seed capital investors and others, are likely to be classified by
ASX as restricted securities and will be required to be held
in escrow.
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3. DETAILS OF THE OFFER
3.1 The Offer
By this Prospectus, the Company offers for subscription
76,923,077 CDIs for Shares at an issue price of $0.26 each
to raise $20,000,000.
The Shares underlying the CDIs for Shares offered under this
Prospectus will rank equally with the existing Shares on issue.
Investors should note that Shares offered under this
Prospectus will trade on ASX by way of CHESS Depositary
Interests (CDIs or CDIs for Shares).
Refer to Sections 3.10, 12.2 and 12.3 for a further
explanation of CDIs.
3.2 Applications
Applications for CDIs for Shares under the Offer must be
made using the Application Form.
Payment for CDIs for Shares must be made in full at the issue
price of $0.26 each. Applications for CDIs for Shares must
be for a minimum of 8,000 CDIs for Shares representing an
investment of $2,080 and thereafter in multiples of 1,000
CDI’s for Shares.
By mail to: By Person to:
Computershare Investor
Services Pty Limited
Universal Coal plc – Share Offer
GPO D182
PERTH WA 6840
Computershare Investor
Services Pty Limited
Level 2, 45 St Georges Terrace
PERTH WA 6000
Cheques should be made payable to “Universal Coal
plc – Share Offer Account” and crossed “Not Negotiable”.
Completed application forms in respect of the Offer must
reach one of the above addresses by no later than the Offer
Closing Date.
The Company reserves the right to close the Offer early.
3.3 Allotment
Subject to ASX granting conditional approval for the Company
to be admitted to the Official List, allotment of CDIs for
Shares offered by this Prospectus will take place as soon
as practicable after the Closing Date. Prior to allotment, all
application monies shall be held by the Company on trust.
The Company, irrespective of whether the allotment of CDIs
for Shares takes place, will retain any interest earned on the
application monies.
The Directors reserve the right to allot CDIs for Shares in full
for any application or to allot any lesser number or to decline
any application. Where the number of CDIs for Shares allotted
is less than the number applied for, or where no allotment
is made, the surplus application monies will be returned by
cheque to the applicant within seven (7) days of the
allotment date.
3.4 Minimum Subscription
The minimum subscription to be raised pursuant to this
Prospectus is $20,000,000.
If the minimum subscription has not been raised within four (4)
months after the date of this Prospectus, all applications will
be dealt with in accordance with the Corporations Act.
3.5 Oversubscriptions
The Company reserves the right to accept oversubscriptions
in respect of the Offer up to an additional 38,461,538 CDIs
for Shares to raise an additional $10,000,000.
3.6 ASX Listing
The Company will apply to ASX within seven (7) days after
the date of this Prospectus for admission to the Official List
and for Official Quotation of the CDIs for Shares offered under
this Prospectus. If ASX does not grant permission for Official
Quotation of the CDIs for Shares within three (3) months
after the date of this Prospectus, or such longer period as
is permitted by the Corporations Act, all applications will be
dealt with in accordance with the Corporations Act.
3.7 Applicants outside Australia
This Prospectus does not constitute an offer or invitation in
any place in which, or to any person to whom, it would not
be lawful to make such an offer or invitation. The distribution
of this Prospectus in jurisdictions outside Australia may be
restricted by law and persons who come into possession of
this Prospectus should seek advice on and observe any such
restrictions. Any failure to comply with such restrictions may
constitute a violation of applicable securities laws.
No action has been taken to register or qualify the CDIs for
Shares, or the Offer, or otherwise to permit a public offering of
the CDIs for Shares, in any jurisdiction outside Australia.
This Prospectus does not constitute a prospectus for the
purposes of the Prospectus Rules published by the FSA and
has not been approved by, or filed with, the FSA or the United
Kingdom Listing Authority. Furthermore, this Prospectus
contains no offer to the public within the meaning of Section
102B of the FSMA, the UK Companies Act or otherwise.
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This Prospectus is being supplied in the United Kingdom only
to persons who are (i) a “qualified investor” within the meaning
of section 86(7) of the FSMA and (ii) a “professional client”
or an “eligible counterparty” within the meaning of COBS
3.5.1 and COBS 3.6.1, respectively of the FSA Conduct of
Business Sourcebook and (iii) have professional experience
in matters relating to investments and who are investment
professionals as specified in Article 19(5) of the Order or who
are high net worth companies, unincorporated associations
etc as specified in Article 49(2) of the Order. Any investment
or investment activity to which this Prospectus relates is
available only to such persons or will be engaged in only
with such persons. Persons who do not have professional
experience in matters relating to investments should not rely
on this Prospectus.
This Prospectus is exempt from the general restriction on
communication of invitations or inducements to enter in
investment activity and has therefore not been approved by
an authorised person as would otherwise be required by
Section 21 of the FSMA.
It is a condition of any application for CDIs for Shares
pursuant to the Offer by any person in the United Kingdom
that such a person falls within, and warrants and undertakes
to the Company that it falls within, one of the categories or
persons described above.
The Offer pursuant to an electronic Prospectus is only
available to persons receiving an electronic version of this
Prospectus within Australia.
3.8 Underwriter
The Offer is not underwritten.
3.9 Commissions on Application Forms
Universal Coal has appointed StoneBridge Securities
as Sponsoring Broker of the Offer. StoneBridge will be
paid fees in relation to the Offer in accordance with the
Sponsoring Broker Agreement detailed in Section 11.11 of
this Prospectus. Universal Coal will not pay any lodgement
fee to any broker on Applications lodged bearing a stamp
representing a licensed broker. Each broker has made or will
make its own arrangements for payment of any fees directly
with StoneBridge.
3.10 CHESS and CDIs
The Company will apply to participate in the Clearing House
Electronic Subregister System (CHESS), which is the
ASX electronic transfer and settlement system in Australia.
Settlement of trading of quoted securities on the ASX market
takes place on CHESS. CHESS allows for and requires the
settlement of transactions in securities quoted on ASX to
be effected electronically. No share or security certificates
are issued in respect of shareholdings or security holdings
that are quoted on ASX and settled on CHESS, nor is it a
requirement for transfer forms to be executed in relation to
transfers that occur on CHESS.
CHESS Depository Interests (CDIs) will be used by the
Company to hold and transfer title to the Shares issued
pursuant to this Prospectus. CDIs are electronic depository
receipts issued and are units of beneficial ownership in
securities registered in the name of CHESS Depository
Nominees Pty Ltd (CDN). CDN is a wholly-owned subsidiary
of ASX. The main difference between holding CDIs and
Shares is that the holder of CDIs has beneficial ownership
of the underlying Shares instead of legal title. Legal title is
held by CDN. The Shares to be issued pursuant to this
Prospectus will be registered in the name of CDN for the
benefit of CDI holders.
CDI holders have the same economic benefits of holding the
underlying Shares. Holders of CDIs are able to transfer and
settle transactions electronically on ASX.
Holders of CDIs are entitled to all dividends, rights and
other entitlements as if they were legal owners of Shares,
and are entitled to receive notices of general meetings of
shareholders. As holders of CDIs are not the legal owners
of the underlying Shares, CDN, which holds legal title to the
Shares underlying the CDIs, is entitled to vote at shareholder
meetings of the Company on the instruction of the CDI
holders. Alternatively, if a holder of a CDI wishes to attend and
vote at shareholder meetings, the holder may instruct CDN to
appoint the holder (or a person nominated by the holder) as
CDN’s proxy in respect of the underlying Shares beneficially
owned by such holder for the purposes of attending and
voting at a shareholder meetings of the Company. Holders of
CDIs are entitled to one vote for every underlying Share held
by CDN.
3.11 Risk Factors
Prospective investors in the Company should be aware that
subscribing for securities the subject of this Prospectus
involves a number of risks. These risks are set out in
Section 10 of this Prospectus and investors are urged to
consider those risks carefully (and if necessary, consult their
professional adviser) before deciding whether to invest in
the Company.
The risk factors set out in Section 10, and other general risks
applicable to all investments in listed securities not specifically
referred to, may in the future affect the value of the Shares.
Accordingly, an investment in the Company should be
considered speculative.
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3.12 Privacy Statement
If you complete an application for CDIs for Shares, you will
be providing personal information to the Company (directly
or by the Company’s share registry). The Company collects,
holds and will use that information to assess your application,
service your needs as a shareholder, facilitate distribution
payments and corporate communications to you as a
shareholder and carry out administration.
The information may also be used from time to time and
disclosed to persons inspecting the register, bidders for your
securities in the context of takeovers, regulatory bodies,
including the Australian Taxation Office, authorised securities
brokers, print service providers, mail houses and the
Company share registry.
You can access, correct and update the personal information
that we hold about you. Please contact the Company or its
registry if you wish to do so at the relevant contact numbers
set out in this Prospectus.
Collection, maintenance and disclosure of certain personal
information is governed by legislation including the Privacy Act
1988 (as amended), the Corporations Act and certain rules
such as the SCH Business Rules. You should note that if you
do not provide the information required on the application for
CDIs for Shares, the Company may not be able to accept or
process your application.
3.13 Financial Forecasts
The Directors have considered the matters set out in ASIC
Regulatory Guide 170 and believe that they do not have a
reasonable basis to forecast future earnings on the basis
that the operations of the Company are inherently uncertain.
Accordingly, any forecast or projection information would
contain such a broad range of potential outcomes and
possibilities that it is not possible to prepare a reliable best
estimate forecast or projection.
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Universal Coal is a South African focussed coal company withinterests in over 700Mtof coal resources
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4. OVERVIEW OF THE COMPANY AND ITS PROJECTS
4.1 Introduction
Universal Coal is a South African focussed coal exploration
and mining company. The Company’s key licensed assets
are the Kangala, Roodekop and Brakfontein thermal coal
projects located in the Witbank coalfield and the Berenice
and Somerville coking coal projects located in the Limpopo
region, all of which are in the Republic of South Africa.
The Company holds interest in the projects via its holdings
in the entities set out in the table below and in accordance
with the agreements summarised in Section 11 of this
Prospectus. The Company has the opportunity to increase its
interest in those entities (and therefore the projects) under the
terms of the various acquisition agreements. Please refer to
Sections 4.5 and 11 for further detail.
*These subsidiary are not 100% owned subsidiaries of the
Company. Refer to Section 4.4 for further detail.
4.2 The Witbank Coalfield Projects
The Kangala, Roodekop and Brakfontein Coal Projects are
located between 65 and 120 km due east of Johannesburg
within the Witbank coalfield. The projects are located near
to operating coal mines, road and railway infrastructure and
within a radius of 30-70km from four coal-fired
power stations.
Location of the Witbank Thermal Coal Projects
The Witbank coalfield is one of the largest producing
coalfields in South Africa, supplying more than 50% of South
Africa’s saleable coal. It produces both metallurgical coal
and A-grade to D-grade thermal coal for the export and local
markets and hosts most of the major coal-fired power stations
in South Africa. The extensive exploitation of the coalfield
has resulted in the area being well-served by efficient coal
transportation and other infrastructure.
In the Witbank coalfield, five depositional sequences with
associated potentially economic coal seams are contained
within a 70m thick succession of Vryheid Formation
sedimentary rocks. The seams are numbered from 1 at the
base to 5 at the top. The distribution and attitude of the No.
1 and No. 2 seams are primarily controlled by the pre-Karoo
topography, particularly erosional glacial valleys, with the
No. 4 and No. 5 seams controlled by the present day land
surface. In some areas parts or all of these seams have been
eroded away.
Kangala Coal Project
The Kangala Coal Project consists of three properties, namely
Wolvenfontein (Phase 1), Middelbult and Modderfontein
and is located approximately 65km east of Johannesburg in
the Delmas District, Mpumalanga Province. The area is well
serviced with rail and road infrastructure and is adjacent to
Exxaro’s Leeuwpan Colliery.
Universal Coal Plc
Universal Coal & Energy Holdings South Africa (Proprietary)
Limited (UCEHSA)
UCD I
KangalaBerenice & Somerville
Brakfontein Roodekop Applications
UCD II UCD III UCD IV Twin Cities
Location of the Kangala Coal Project
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The Kangala Project is located on the western edge of the
Witbank coalfield where the coal seams closely resemble
those of the South Rand coalfield to the west. Three seams,
namely the Top, Mid and Bottom seams are recognized. The
Top and Mid seams are interpreted to be correlated with the
No. 5 seam and the combined No. 4 and No. 3 seams of the
Witbank coalfield respectively. The thicker Bottom seam is
interpreted to represent a combination of the No. 2 and No.
1 seams of the Witbank coalfield. Refer to the Independent
Competent Persons Reports in Section 6 for further details.
Within the project area, the Mid and Bottom seams are
of economic interest. The Mid seam averages 0.98 m to
3.74 m in thickness and consists of high quality bright to
dull coal. The Bottom seam consists of alternating coal and
carbonaceous shale layers and averages between 8.45 m
and 17.5 m in thickness, but can attain a thickness of up to
30m within local basement lows.
The gross coal resources at Kangala total 104.1 million
tonnes (in situ before losses) of which 34.3 million tonnes are
classified as Measured, 0.1 million tonnes as Indicated and
69.6 million tonnes as Inferred. The Company holds a 70.5%
interest in the Kangala Project, representing total attributable
resources of 73.4 million tonnes. The bottom (No. 2) seam
accounts for 78% of the total coal resource at Kangala.
Studies completed by the Company indicate that the coal
at Kangala has the potential to be mined by open pit mining
techniques, with these studies indicating an average strip
ratio of less than 2:1.
Kangala is planned to be the Company’s first mining
development project. On 27 September 2010, UCD I (70.5%
indirect interest held by the Company) was granted a Mining
Right to mine for coal on the Wolvenfontein property. The
Company is aiming to commence initial coal production
from Kangala in early 2011. A water licence has been
applied for which will allow the Company to proceed with the
construction of a wash plant.
The Kangala Project is intended to be developed in stages.
The 1st stage will entail the mining and sale of ROM coal. The
Company is in discussions with both Eskom (South Africa’s
public electricity utility) and nearby collieries to sell its initial
production of the ROM coal whilst the Company proceeds
with its plan to construct a 3Mt per annum coal processing
facility during 2011. The construction of the processing facility
is subject to finalisation of the definitive feasibility study, the
conclusion of a BOOT financing agreement with the preferred
engineering company and the conclusion of an off-take
agreement with Eskom. The Company has appointed AMEC
Minproc to complete the definitive feasibility study for the
Kangala coal mine. The Company intends to finance the
processing facility on a Build-Own-Operate-Transfer
(BOOT) basis.
BOOT is a form of project financing, wherein a private entity
(such as an engineering company) receives a contract from
the private or public sector to finance, design, construct
and operate a processing facility for the period stated in the
contract. This enables the project proponent to recover its
investment, operating and maintenance expenses in the
project. Upon expiry of the period, the ownership of the facility
is transferred back to the mining company. This may involve
a balloon payment for the residual capital. The Company
has submitted a tender to a Request for Proposal (RFP, ref
no. GEN 3031) issued by Eskom in September 2009 for the
supply of coal. Following a technical review, the Kangala coal
resource was pre-qualified by Eskom in March 2010. The
washability studies for Kangala indicate that the majority of
the coal will be domestic power station quality (Eskom) with
approximately 25% of the saleable product being suitable for
either a higher specification domestic or export type thermal
coal market.
Refer to the Independent Competent Persons Reports in
Section 6 for further information in relation to the
Kangala Project.
Roodekop Coal Project
The Roodekop Coal Project is located approximately 120km
due east of the centre of Johannesburg, 30km south of
Middelburg and approximately 9km north of the town of Kriel,
Mpumalanga Province, and immediately adjacent to Exxaro’s
New Clydesdale Colliery.
The project is located centrally on the southern margin of the
Witbank coalfield. The Roodekop Project hosts all five seams,
namely the No. 5, No. 4, No. 3, No. 2 and No. 1, of which
the No. 4, No. 2 and No. 1 seams are of economic interest.
Location of the Roodekop Coal Project
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The Roodekop Project was acquired by UCD IV from Xakwa
Investments (Proprietary) Limited and is jointly owned by
the Company, through UCEHSA and Xakwa Investments
(Proprietary) Limited, the BEE partner. Refer to Section 11.3
for further information.
The Company completed a 25-hole drilling campaign at
Roodekop in 2009. The data collected was used to compile
a geological model and establish gross coal resources of
78.2 million tonnes (in situ before losses) of which 26.1 million
tonnes are classified as Measured, 50.5 million tonnes as
Indicated and 1.6 million tonnes as Inferred. The No. 2 seam
represents 72% of the coal resources on the property.
Typical Stratigraphic Section through the Roodekop Coal Project
Studies by the Company indicate that the coal is amenable
to extraction by both opencast and underground means. The
opencast resources (at a strip ratio cut-off of up to 5:1, and
averaging 3.8:1) amount to a total of 42.0 million tonnes; of
which 23.3 million tonnes are Measured, 17.8 million tonnes
are Indicated and 0.90 million tonnes are Inferred.
Washability tests confirm that the Roodekop Project hosts
bituminous coal suitable for export and domestic thermal
coal markets.
UCD IV plans to submit Mining Right and water licence
applications for Roodekop in the December quarter of 2010.
A portion of the funds raised under this Prospectus will
be applied towards the completion of a feasibility study at
Roodekop. Refer to Section 2.4 for further details.
Brakfontein Coal Project
The Brakfontein Coal Project is located approximately 80km
due east of Johannesburg and 16km south of the town
of Delmas. The Project is immediately adjacent to Keaton
Energy’s Vanggatfontein Coal Project and 5 km north of the
Haverglen Rail Siding.
Location of the Brakfontein Coal Project
The Brakfontein Project was acquired by UCD III from Unity
Rocks Mining (Proprietary) Limited and is jointly owned by
the Company through UCEHSA, and Unity Rocks Mining
(Proprietary) Limited, the BEE partner. Refer to Section 11.4
for further details.
The project is located on the south western margin of the
Witbank coalfield and hosts the complete sequence of
Witbank coalfield coal seams, namely the No. 1, 2, 3, 4 and
5 seams.
The No. 5 seam has been eroded over a large portion of
the project area and is limited to the western portion of
the property. The No. 5 seam averages 1.32m to 1.85m
in thickness. The No. 4 seam averages 4.96m where it
is intersected and varies from zero to 10.39m. The No. 2
seam varies in thickness from zero to 15m in places with
an average of 5.00m where it is present. The No. 2 seam
consists of a number of zones of alternating bright and dull
coal and shaly coal.
Historic drilling (93 holes) delineated a gross coal resource
of 147.8 million tonnes (in situ before losses) of which 113.7
million tonnes is classified as Indicated and 34.1 million
tonnes as Inferred.
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Typical Stratigraphic Section through the Brakfontein Coal Project
The No. 5 seam traditionally will yield coal suitable for the
metallurgical market. The No. 4 seam will need beneficiation
prior to sale domestically to a South African power producer.
The No. 2 seam will produce a raw product ready to sell
domestically to a South African power producer and could
possibly have an export fraction after beneficiation. The No.
1 seam could possibly be low in phosphorus and be suitable
for the metallurgical market.
UCD III plans to submit Mining Right and water licence
applications for Brakfontein in the December quarter of 2010,
once mine planning studies are completed. A portion of the
funds raised under this Prospectus will be applied to the
completion of a feasibility study at Brakfontein.
Prospecting Right Applications
Twin Cities, a subsidiary of the Company, has applied
for Prospecting Rights for coal covering a total area of
approximately 2030 hectares, located approximately 90
km due east of Johannesburg and 5-10 km east of the
Brakfontein Project.
Twin Cities has submitted an application for Prospecting Rights over the following properties:
a) The farm Darwina Louw No. 254 IR, Local Municipality of
Delmas, Mpumalanga; and
b) RE of Portion 3, Portion 6, Portion 8, Portion 9, Portion 12,
Portion 13 and RE of the farm Strehla No. 261 IR, Local
Municipality of Delmas, Mpumalanga Province.
The Prospecting Right Application areas are located on the
south western margin of the Witbank coalfield and have a
similar geological setting as the Brakfontein Project.
The Company has no certainty that Twin Cities will be granted
these rights to prospect on these properties and accordingly
they do not presently constitute a material component of the
Company’s tenement portfolio.
4.3 The Limpopo Projects
The Limpopo Projects cover an area of 39,484 hectares and
include the Berenice Project (Soutpansberg coalfield) and
the Somerville Project (Tuli coalfield). These 2 coalfields have
seen relatively little mine development to date and present
a potential for future exploitation, particularly in view of the
relatively high-value of the coking coal fractions commonly
contained within the coal zones of these localities.
The Berenice Project is located immediately north of the
Soutpansberg Mountain Range, approximately 50 km
northwest of the town of Makhado. The project lies within a
relatively large area and represents isolated farms as well as
‘blocks’ of ground (groups of contiguous farms).
The Somerville Project is located approximately 45km north
of the town of Alldays and 90km west of Musina (formerly
Messina). The project includes six original farms in a semi-
contiguous area, and stretches south from the Limpopo River
in the Limpopo Province of South Africa.
Refer to Section 11.5 for further information.
Location of the Berenice and Somerville Coking Coal Projects
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Berenice Coal Project
The principal properties that have coal potential are located in
the western part of the Mopane Sector of the Soutpansberg
coalfield. The railway line from Musina to Makhado runs in a
north-easterly to south-westerly direction, to the east of the
area. The nearest sidings are at Baobab and Waterpoort,
approximately 25km to the south-east.
The project is located in the Mopane Sector of the
Soutpansberg coalfield. The Karoo Sequence rocks in
the Soutpansberg area are preserved within graben-type
structures in the Kaapvaal Craton. The Karoo Sequence
rocks and associated coal measures overlie Soutpansberg-
age rocks and dip at 3°-20° northwards, terminating against
faults forming the northern margins of the coalfield. The region
is severely faulted with displacements of 60m-200m.
Where developed, the coal component of the seams/zones
is generally high in vitrinite content and the coal rank (carbon/
energy content) steadily increases towards the East as well
as to a more limited extent with depth.
The gross in situ coal Inferred Resources (excluding major
mudstone partings) for the Soutpansberg resource area
amount to 122.0 million tonnes and the in situ tonnes after
geological loss to 73.2 million tonnes. The resource estimate
is limited to a portion of the project area where drillhole
information was available and the Company believes that
additional coal potential exists on the neighbouring
untested areas.
The Berenice Project has potential for yielding metallurgical
coal low density fractions and a thermal coal “middlings”
product. It is to be noted that coking properties are also
evidenced by the higher density fractions, which is a positive
factor in favour of further exploration.
The attractiveness of the Berenice Project is enhanced by
the indication of certain areas that could be amenable to
opencast mining, as well as areas that would be suitable for
exploitation by incline shafts, to access the deeper
coal deposits.
The Somerville Coal Project
The Somerville Project is located on the western edge of the
Limpopo coalfield.
The coal is contained in an east-west striking basinal
structure of Karoo rocks (the Limpopo Basin Coal Province)
which straddles the boundaries of South Africa, Botswana
and Zimbabwe. The coal-bearing zone is located at depths
of less than 50 m along the southern margin of the basin,
but increases to over 300 m deep towards the Limpopo
River valley. No evidence of major faulting is indicated by the
available exploration results.
As stated in the Independent Competent Persons Report and
based on the interpretation of the independent competent
person, a single “Main Coal Zone” is developed on the
Project Area. The “coal zone” ranges from 3.8 to 11.0m in
thickness, consisting of up to 22 thin coal bands alternating
with mudstone.
The gross in situ coal Inferred Resources (excluding major
mudstone partings) for the Somerville resource area amount
to 274.2 million tonnes and the in situ tonnes after geological
loss to 192.0 million tonnes. The resource estimate is limited
to a portion of the project area where drill hole information
was available and the Company believes that additional coal
potential exists on the neighbouring untested areas.
4.4 Tenements
The tenements in which the Company holds an interest
comprise 1 granted Mining Right, 5 granted Prospecting
Rights and 2 Prospecting Right Applications. The Mining
Right covers an area of 951 hectares, whilst the granted
Prospecting Rights cover an area of approximately
43,279 hectares.
Further details about the Company’s granted tenements are
set out in the Mining Title Opinion in Section 9 and diagrams
of the Company’s resources and deposits are set out in the
Independent Competent Persons Reports, set out in Section
6 of this Prospectus.
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19
Pro
ject
Ass
etR
egis
trat
ion
Num
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Per
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Num
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##
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urth
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ls.
###
In
App
licat
ion.
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4.5 Coal Resources
The coal resource estimate prepared by Coffey Mining and
Gemecs is presented in the following table. The table shows
the total coal resources for each of the projects, for which the
Company has or is in the process of earning various equity
levels. The details of these attributable equity amounts are
described in the notes to the table.
Coal Resource Statement (gross in situ tonnages) at 31 May 20
Notes:
1. Universal Coal has an attributable interest of 70.5% of
these coal resources.
2. Under the terms of the earn in agreement, Universal Coal
is earning up to 50% in the Roodekop Project via the
completion of certain milestones (refer to Section 11.3).
Upon completion of these various milestones, Universal
Coal’s attributable interest increases and when all of the
milestones are completed, Universal Coal will have an
attributable interest of 50% in these coal resources (with
the option to acquire up to a 74% interest). As at the date
of this Prospectus, Universal Coal has an attributable
interest of 25% in these coal resources.
3. Under the terms of the earn in agreement, Universal Coal
is earning up to 50% in the Brakfontein Project via the
completion of certain milestones (refer to Section 11.4)
Upon completion of these various milestones, Universal
Coal’s attributable interest increases and when all of the
milestones are completed, Universal Coal will have an
attributable interest of 50% in these coal resources (with
the right to negotiate to acquire up to a 74% interest).
As at the date of this Prospectus, Universal Coal has an
attributable interest of 30% in these coal resources.
4. Witbank coal resources were estimated by Coffey Mining.
5. Under the terms of the earn in agreement, Universal
Coal is earning up to 50% in the Berenice and Somerville
Projects via the completion of certain milestones (refer
to Section 11.5). Upon completion of these various
milestones, Universal Coal’s attributable interest increases
and when all of the milestones are completed, Universal
Coal will have an attributable interest of 50% in these
coal resources (with the option to acquire up to a 74%
interest). As at the date of this Prospectus, UCEHSA
holds a 7% interest in UCD II. Ministerial consent to the
transfer of 342/2009PR is still pending.
6. Limpopo coal resources were estimated by Gemecs.
7. Rounding (conforming to the JORC Code) may cause
computational discrepancies.
The principal methods used for estimating coal resources
are detailed in the Independent Competent Persons Reports,
which are set out in Section 6.
4.6 Exploration Potential and Budget
Universal Coal is proposing phased resource drilling on the
advanced thermal coal projects, namely Kangala, Roodekop
and Brakfontein with the aim of progressing all resources into
the Measured category. In addition, a regional exploration
program will be undertaken at the Berenice and Somerville
projects.
The Independent Competent Persons have stated that the
programmes and budgets proposed for the projects are
appropriate.
The exploration programmes of the Company are subject
to change and are contingent on positive progress,
circumstances, results and other opportunities which may be
identified in line with the Company’s objectives and strategy.
Expenditure may be reallocated amongst existing or new
projects or to general working capital. The final expenditures
of funds may vary from the above depending on the
circumstances in which the business develops and operates.
Project Measured (‘000t)
Indicated (‘000t)
Inferred (‘000t)
Total
(‘000t)
Kangala1 34,350 125 69,601 104,076
Roodekop2 26,095 50,539 1,601 78,235
Brakfontein3 - 113,680 34,117 147,797
Sub-Total Witbank Coal Projects4
60,445 164,344 105,319 330,108
Berenice5 - - 122,023 122,023
Somerville5 - - 274,224 274,224
Sub-Total Limpopo Coal Projects6
396,247 396,247
Total coal Resources7
60,445 164,344 501,566 726,355
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Over two thirds ofthe resources in theWitbank thermal coal projects are in the Measuredand Indicated categories
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5. DIRECTORS AND SENIOR MANAGEMENT
5.1 Directors
Dr Antony Harwood Executive Chairman BSc (Hons). PhD (Geology)
Dr Harwood is a mining executive and an exploration and
economic geologist, with extensive global management
experience across a range of commodities, focussing
primarily in Africa. Dr Harwood has moved from academia into
consulting, consolidating a career in senior management and
Board appointments.
In 2006 he was appointed President and CEO of Africa
Resources Limited (resigned 2009). The company was listed
on the Toronto Stock Exchange following a capital raising of
$124 million.
Prior to this, Dr Harwood was Vice President of Placer Dome
Inc. and established Placer Dome in Africa, opening the
Johannesburg regional office. Placer Dome acquired 2 mines
which outlined over 17 million ounces of PGM resources
through exploration in 2006.
He has over 10 years experience as a consultant and
has introduced and facilitated many international mining
companies into Africa for exploration ventures in property or
equity acquisitions.
Dr Harwood is currently a non-executive director of ASX-listed
Adamus Resources Limited and Director of several unlisted
mineral explorers.
Mr Anton Weber Chief Executive Officer BSc Engineering (Mining). MSc Engineering
Mr Weber is a mining engineer with over 15 years experience
in project assessment, finance, development and operations.
He was previously an Executive Director of Nkwe Platinum, an
Australian listed Platinum developer.
Prior to joining Nkwe Platinum in 2003, Mr Weber worked
for Anglo Platinum from 2000 as Operations Manager load
and haul at the 40-60 million tonne per annum Potgietersrus
Platinum Mine.
Between 1999 and 2000 he worked on the Gamsberg
Feasibility Study for Anglo Operations Limited. Between 1995
and 1997 he worked at the Greenside Colliery for Goldfields
South Africa and after 10 months at the Prosper Hanniel
Colliery in Germany he returned to South Africa in 1998 to
work at the New Clydesdale Colliery for Goldfields
South Africa.
Mr Weber has significant skills and experience in coordinating
project feasibility studies and hands on operation experience
in the Coal extraction industry. He will be largely responsible
for the design and implementation of the feasibility study to be
undertaken at the Kangala Coal Project.
Mr Hendrik Bonsma Non-Executive Director B.Proc.
Mr Bonsma is a qualified lawyer and businessman with
interests throughout South Africa, actively investing in the
South African mining industry for over a decade.
Currently Mr Bonsma is a Partner at Brink, Bonsma and de
Bruyn, a Pretoria-based law firm, a Director and shareholder
of PBD Holdings, the largest producer of Agricultural Lime
in South Africa and a Director and shareholder of Motor
Vision, a services company active in the contract mining and
Platinum industry.
In 2004, he initiated the reverse listing of Creditvision Venture
Capital to the Venture Board of the JSE and in 2005 he
initiated the reverse takeover of Verimark to list the company
on the main board of the JSE.
Between 2000 and 2007, he undertook numerous mining
transactions including sales to Nkwe Platinum and Aquarius
Platinum and the purchase of significant chrome deposits
from Samancor and their subsequent sale to Chrome
Corporation. Mr Bonsma concluded several sale and
purchase transactions of Vanadium, Iron Ore and Coal assets
in South Africa.
Mr Bonsma is largely responsible for advancing the Kangala
Coal Project as well as sourcing additional projects for the
Company on a case by case basis.
Mr Shammy Luvhengo Non-Executive Director BSc (Hons)(Geology). Grad Dip Min Eng (Mineral Economics). MBA
Mr Luvhengo is a qualified geologist and investment banker.
He started his career with Exxaro Resources before moving
into investment banking.
Mr Luvhengo worked for Investec Bank and Nedbank Capital
structuring and implementing project finance and BEE deals
within the resources industry.
In 2008, he joined Nkwe Platinum Ltd as Head of Business
Development and Investor Relations prior to joining
Universal Coal.
Mr Luvhengo holds a 10% interest in Mountain Rush, the
Company’s BEE partner at the Kangala Coal Project and is an
indirect shareholder of a 4.8% interest in Bono Lithihi. Please
refer to Section 11.5, 11.6 and 11.9 for further details relating
to Mr Luvhengo’s shareholdings.
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Mr John Hopkins Non-Executive Director LL.B. FAICD
Mr Hopkins brings more than 25 years experience as
a director of public listed resources companies with a
background as a corporate lawyer specialising in mergers
and acquisitions. He has strong market networks in Australia
and North America.
Mr Hopkins has been involved in a number of thermal coal
projects in Indonesia and brings this experience to Universal
Coal. Mr Hopkins is also the Non-Executive Chairman of
Adamus Resources Limited and Wolf Minerals Limited, both
of which are listed on the ASX.
5.2 Senior Management
Duncan Craib Chief Financial Officer
Mr Craib qualified as a Chartered Accountant in Perth,
Western Australia and has subsequently held senior financial
and management roles in both publicly listed and private
enterprises in Australia, Africa and Europe. He has extensive
international business experience which is primarily focussed
on mining and exploration activities. He has been the Chief
Financial Officer of Universal Coal Plc (previous South China
Resources plc) since June 2006.
Mr Craib is based in London and since June 2008 has also
served as Chief Financial Officer and Company Secretary
to AIM and NSX listed Kalahari Minerals Plc, a company
with a 41.15% shareholding in an ASX 200 Company and
TSX listed Extract Resources Ltd. Kalahari Minerals Plc is
a resource company with uranium, gold, copper and other
base metal interests in Namibia.
Mr Jaco Malan Chief Geologist BSc (Hons) (Geology). MSc (Exploration Geology)
Mr Malan is a qualified geologist with a Masters Degree in
Exploration Geology. He worked for Iscor Limited (Exxaro)
before moving into independent consulting with 18 years
experience in target generation and exploration for a range
of commodities including coal, platinum group metals, heavy
minerals, gold and industrial minerals.
He played a major role in identifying and acquiring the portfolio
of projects for Universal Coal.
Mr Malan will be responsible for the management of all
geological resources and is part of the project development
team. He will also be responsible for the identification and
evaluation of further coal investment opportunities.
Dr Michael Seeger Chief Project EngineerBSc Engineering (mining). MSc Engineering (Mineral Economics). PhD (Mineral Economics). Mine Managers Certificate
Dr Seeger is a qualified Mining Engineer with over 17 years
experience in the international mining industry, primarily with
Iscor Limited (Exxaro). Dr Seeger is a current holder of mine
managers certificates for both coal and metaliferous mining in
South Africa.
He will be responsible for the inception and coordination of
the feasibility studies as well as any future mining operations
that may be acquired.
5.3 Corporate Governance
The primary responsibility of the Board is to represent and advance shareholders interests and to protect the interests of all stakeholders. To fulfill this role the Board is responsible for the overall corporate governance of the Company including its strategic direction, establishing goals for management and monitoring the achievement of these goals. The responsibilities of the Board include:
a) protection and enhancement of shareholder value;
b) formulation, review and approval of the objectives and
strategic direction of the Company;
c) monitoring the financial performance of the Company by
reviewing and approving budgets and monitoring results;
d) approving all significant business transactions including
acquisitions, divestments and capital expenditure;
e) ensuring that adequate internal control systems and
procedures exist and that compliance with these systems
and procedures is maintained;
f) the identification of significant business risks and ensuring
that such risks are adequately managed;
g) the review of performance and remuneration of executive
Directors and key staff;
h) the establishment and maintenance of appropriate
ethical standards;
i) evaluating and, where appropriate, adopting with or
without modification the ASX Corporate Governance
Council’s Principles of Good Corporate Governance and
Best Practice Recommendations.
The Board recognises the need for the Company to operate
with the highest standards of behaviour and accountability.
The Company is presently considering the ASX Corporate
Governance Council’s Principles of Good Corporate
Governance and Best Practice Recommendations to
determine an appropriate system of control and accountability
to best fit its business and operations commensurate with
these guidelines.
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The Company seeks to follow the best practice
recommendations for listed companies where appropriate
for its size and operations. In cases where the Company
determines it would be inappropriate to follow the principles
because of its circumstances, the Company will provide
reasons for not doing so in its Annual Report. One such
instance is the Board presently considers the Company’s size
and scope of activities does not justify the establishment of
special or separate committees at this stage, preferring to
manage the Company through the full Board of Directors.
Appointments to Other Boards
Directors are required to take into consideration any potential
conflicts of interest when accepting appointments to
other boards.
Independent Professional Advice
The Board has determined that individual Directors have the
right in connection with their duties and responsibilities as
Directors, to seek independent professional advice at the
Company’s expense. With the exception of expenses for
legal advice in relation to Director’s rights and duties, the
engagement of an outside adviser is subject to prior approval
of the Chairman and this will not be withheld unreasonably.
Remuneration Arrangements
Subject to the UK Companies Act, the ASX Listing Rules and
Articles of Association, the aggregate annual remuneration
of non-executive Directors must not exceed £200,000. The
determination of the non-executive directors remuneration
within that maximum will be made by the Board having regard
to the inputs and value to the Company of the respective
contributions by each Director.
External Audit
The Company in general meetings is responsible for the
annual appointment and re-appointment of the external
auditors of the Company, and the Board from time to time will
review the scope, performance and fees of those
external auditors.
Identification and Management of Risk
The Board’s collective experience will enable accurate
identification of the principal risks that may affect the
Company’s business. Key operational risks and their
management will be recurring items for deliberation at
Board meetings.
Continuous Review of Corporate Governance
Directors will consider, on an ongoing basis, how
management information is presented to them and whether
such information is sufficient to enable them to discharge their
duties as Directors of the Company. Such information must
be sufficient to enable the Directors to determine appropriate
operating and financial strategies from time to time in light
of changing circumstances and economic conditions. The
Directors recognise that mineral exploration is a business with
inherent risks and that operational strategies adopted should,
notwithstanding, be directed towards improving or maintaining
the net worth of the Company.
As the Company’s activities develop in size, nature and
scope, the size of the Board and the implementation of any
formal corporate governance committees will be given
further consideration.
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The Company isaiming to achievefirst coal productionfrom the Kangala Coal
Project in early 2011ramping up to full production
by the end of 2011subject to various regulatory approvals
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6. INDEPENDENT COMPETENT PERSONS REPORTS – SUMMARYThe Company has commissioned and received Independent
Competent Persons Report on each of the projects in which
the Company has an interest.
Coffey Mining has prepared an Independent Competent
Persons Report for each of the Kangala Project, Roodekop
Project and Brakfontein Project.
Gemecs has prepared an Independent Competent Persons
Report for the Limpopo Coal Project.
The Company lodged a copy of each of the Independent
Competent Persons Reports with ASIC on 30 September
2010. The lodged Independent Competent Persons Reports
are taken to be included in this Prospectus by operation
of section 712 of the Corporations Act. The Company will
give a copy of each of the Independent Competent Persons
Reports to any person who requests a copy of it during the
Offer, free of charge.
The Competent Persons Reports will be of primary interest to
investors and their advisors seeking a detailed outline of the
geological setting of the projects in which the Company has
an interest.
Investors and their advisors who wish to review detailed
geological information about a particular project in which the
Company has an interest may obtain and read a copy of an
Independent Competent Persons Report.
A summary of each of the Independent Competent Person’s
Reports is outlined on the following pages.
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Coffey Mining (SA) Pty Ltd (2006/030152/079) VAT Number (415 023 9327)
Block D, Somerset Office Estate, 604 Kudu Street, Allen’s Nek 1737 Roodepoort, South Africa www.coffey.com/mining
Universal Coal - Witbank Coalfield Assets Abridged Independent Geologist’s Report
Prepared by Coffey Mining on behalf of
Universal Coal
INDEPENDENT COMPETENT PERSONS REPORT 1
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Coffey Mining (SA) Pty Ltd
Table of Contents
EXECUTIVE SUMMARY .... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
1 INTRODUCTION .... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2 REPORTING CODES .... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3 SOUTH AFRICAN COAL MINING INDUSTRY .... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4 REGIONAL GEOLOGY .... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 4.1 Regional Setting............................................................................................................... 5 4.2 The Witbank Coalfield ...................................................................................................... 7
5 KANGALA COAL PROJECT .... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 5.1 Introduction ...................................................................................................................... 9 5.2 Phsiogeogrqphy and Infrastructure.................................................................................. 9 5.3 Kangala - Mineral and Surface Rights ........................................................................... 10 5.4 Local Geology ................................................................................................................ 10 5.5 Exploration ..................................................................................................................... 11 5.6 Drilling Density ............................................................................................................... 12 5.7 Sampling, Analytical Procedures and Checks ............................................................... 14 5.8 Geological Modelling and Resource Estimation ............................................................ 15
5.8.1 Wolvenfontein ........................................................................................................15 5.8.2 Middelbult and Modderfontein ...............................................................................21
6 BRAKFONTEIN .... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 6.1 Introduction .................................................................................................................... 26 6.2 Physiography and Infrastructure .................................................................................... 26 6.3 Brakfontein – Mineral and Surface Rights ..................................................................... 26 6.4 Local Geology ................................................................................................................ 26 6.5 Exploration ..................................................................................................................... 27 6.6 Sampling, Analytical Procedures and Checks ............................................................... 28 6.7 Geological Modelling and Resource Estimation ............................................................ 29
7 ROODEKOP .... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 7.1 Introduction .................................................................................................................... 33 7.2 Physiography and Infrastructure .................................................................................... 33 7.3 Roodekop – Mineral and Surface Rights ....................................................................... 33 7.4 Local Geology ................................................................................................................ 33 7.5 Exploration ..................................................................................................................... 33 7.6 Sampling, Analytical Procedures and Checks ............................................................... 34 7.7 Geological Modelling and Resource Estimation ............................................................ 35
INDEPENDENT COMPETENT PERSONS REPORT 1
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List of Tables Table 5_1 – Wolvenfontein Average Relative Densities per Seam 18
Table 5_2 – Wolvenfontein Gross and Mineable In-Situ Coal Tonnages for Wolvenfontein 19
Table 5_3 – Wolvenfontein Main Resource Area - Gross and Mineable In-Situ Coal Tonnages and Raw Coal
Qualities. 19
Table 5_4 – Wolvenfontein Southern Resource Area - Gross and Mineable In-Situ Coal Tonnages and Raw Coal
Qualities. 20
Table 5_5 – Mid (No. 4) Seam Raw Coal Qualities at Middelbult. 22
Table 5_6 – Bottom (No. 2) Seam Raw Coal Qualities at Middelbult. 22
Table 5_7 – Middle Seam Raw Coal Qualities at Modderfontein 23
Table 5_8 – Middle Seam Raw Coal Qualities at Modderfontein 23
Table 5_9 – Gross In-Situ Tonnage for the Various Properties 24
Table 5_10 – Estimated Coal Resources for Middelbult and Modderfontein at the Kangala Coal project 25
Table 5_11 – Summary of Mineable In-Situ Tonnage and Qualities at Middelbult and Modderfontein 25
Table 6_1 – Brakfontein Coal Resource (2 July 2009). Tonnage - Air Dried Basis 31
Table 6_2 – Brakfontein Coal Project – Coal Quality Estimates 32
Table 7_1 – In Situ Resources and Raw Qualities of the Opencast Area 37
Table 7_2 – Coal Resources and Qualities for the Underground Areas 37
List of Figures Figure 1_1 – Schematic Representation of South African Coal Deposition 2
Figure 2_1 – SAMREC: Relationship Between Resources and Reserves and Degree of Knowledge 3
Figure 4_1 – Schematic Representation of South African Coal Deposition 5
Figure 4_2 – Stratigraphic Column of the Vryheid Formation in the Delmas Area 7
Figure 5_1 – Kangala Schematic Coal Stratigraphic Column 11
Figure 5_2 – Borehole Location Plan - Wolvenfontein 13
Figure 5_3 – Borehole Location Plan - Middelbult 14
Figure 5_5 – Typical Coal Seam Profile at Wolvenfontein 16
Figure 6_1 – Borehole Location Plan - Brakfontein Project 28
Figure 7_1 – Borehole Location Plan - Roodekop Project 34
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EXECUTIVE SUMMARY
Coffey Mining (SA) has been commissioned by Universal Coal plc to provide an abbreviated Competent Persons Report (CPR) for the Kangala Coal Project, Roodekop Coal Project and Brakfontein Coal Project. This report is an abridged version of the three CPR documents. The Kangala CPR was originally compiled in April 2008 and the Roodekop / Brakfontein reports in May 2009. These were updated in early 2010. Universal Coal has purchased 70.5% of the Kangala Project and 74% of both the Roodekop and Brakfontein Projects. The resource estimates were compiled in compliance of the JORC and SAMREC reporting codes.
All of the known coal deposits in South Africa are hosted in the sedimentary rocks of the Karroo Basin. Based on variation in sedimentation, origin and the distribution of the quality of coal, 19 coalfields have been defined although there is no general agreement on their nomenclature and boundaries. The primary economically important coal seams occur in the Vryheid Formation that rests unconformably on the fluvio-glacial deposits of the Dwyka Group. The Kangala, Roodekop and Brakfontein Coal Projects are all located within the Witbank Coalfield.
The Kangala Project consists of three properties: Wolvenfontein, Middelbult and Modderfontein. Three coal seams are present Top Seam, Mid Seam and Bottom Seam. In other parts of the Witbank Coalfield and in adjacent coalfields these are named No. 5 Seam, No. 4 Seam and No. 2 Seam respectively. Following a drilling programme conducted by Universal Coal in 2008 and 2009 on the farm Wolvenfontein, Coffey Mining was requested to update the 2008 CPR. Wolvenfontein hosts a Gross Tonnes In-situ (GTIS) Resource of 67.5 Mt. Included in this figure are Measured, Indicated and Inferred Resources from the Mid Seam with Measured and Inferred Resources from the Bottom Seam. Middelbult has sufficient information for an Inferred Resource, and at Modderfontein the resources can be classified as Reconnaissance or Inventory Coal.
The Brakfontein Project hosts the complete sequence of Witbank Coalfield seams (Nos 1,2,3,4 and 5). Data from 93 surface exploration holes was received from the Council of Geosciences (CGS). The data was found to be inconsistent and generally of poor quality for describing the washability characteristics of each coal seam. The coal has been classified as being bituminous or lean coal based on a dry ash free volatile value of 25%. The opencast potential at Brakfontein could not be quantified as the economic stripping ration could not be determined without coal quality estimates. Nevertheless, the coal deposits at Brakfontein can be classed as a multiple seam deposit type. In total a GTIS Resource tonnage of 148 Mt is present. Each seam or coal unit that has been estimated, a portion has been classified as Indicated and another as Inferred.
At the Roodekop Coal Project historical data is available from 18 boreholes that formed part of exploration programmes conducted during the 1970’s. A follow up drilling programme consisting of 25 holes was completed by Universal Coal in 2009. An updated resource estimate was compiled by Gemecs (Pty) Ltd. Based on the stripping ratio, an area was classified as being suitable for underground and another for surface mining. GTIS Resources for opencast mining amounts to 42 Mt, 32.4 Mt is classified as Measured, 17.8 Mt as Indicated and 0.84 Mt as Inferred Coal Resources. The
INDEPENDENT COMPETENT PERSONS REPORT 1
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underground area contains a GTIS Resource of 29 Mt of which 2.5 Mt is classified as Measured, 26.2 Mt as Indicated and 0.31 Mt as Inferred Coal Resources.
Access to the project areas is generally good with both the sealed and unsealed roads in reasonable condition.
Coffey Mining is an independent geological consultancy and those involved in compiling the CPR documents do not hold any equity or other interest in Universal Coal or have a direct or indirect interest in any of the projects that are described in this report.
INDEPENDENT COMPETENT PERSONS REPORT 1
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Cof
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Uni
vers
al C
oal –
Sum
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Res
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PR
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(000
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IN S
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MIN
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(000
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34,
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1 INTRODUCTION
Coffey Mining SA has been commissioned by Universal Coal plc to provide an abbreviated Competent Persons Report (CPR) for three properties:
Kangala Coal Project
Roodekop Coal Project
Brakfontein Coal Project
In April 2008 Coffey Mining was appointed by Universal Coal Plc (Universal Coal) to complete an Independent Competent person’s Report (CPR) of the Kangala Coal Project to be included in an admission document prepared in connection with the Company’s application for a listing on the Alternative Investment Market of the London Stock Exchange. Following a drilling programme in 2008 and 2009 that included thirty seven surface cored drillholes on the farm Wolvenfontein 244 IR, Universal Coal requested Coffey Mining SA to update the 2008 CPR. Through a wholly owned South African subsidiary, Universal Coal Development 1 (Pty) Ltd, Universal Coal concluded the purchase of a 70.5% share of the Kangala Coal Project from Injula Mining Operations (Pty) Ltd.
In May 2009 Coffey Mining was appointed by Universal Coal to complete a CPR on the Roodekop and Brakfontein properties. At Roodekop, Universal Coal completed a follow-up exploration programme in 2009. In January 2010 Universal Coal appointed Coffey Mining to update the CPR documents for both Roodekop and Brakfontein. Universal Coal has entered into binding agreements to acquire up to 74% of the prospecting rights for these properties.
Access to the project areas is generally good with both the sealed and unsealed roads in reasonable condition.
Coffey mining is an independent Geological Consultancy and those involved in compiling the CPR documents do not hold any equity in Universal Coal or have a direct or indirect interest in any of the projects that are described in this report.
All units are metric, unless otherwise stated i.e. tonnes are reported as metric tonnes. All tonnages are quoted on an air dry basis. This report is an abridged version of the three CPR documents. The full versions are attached as an annexure to the prospectus.
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Figure 1_1
Location of The Project Areas and Coalfields of South Africa (From Snyman,1998)
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2 REPORTING CODES
The three CPR documents were compiled in compliance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC) (December 2004). They were also compiled using the recommendations and guidelines set out in the revised 2007 SAMREC Code.
Figure 2_1 is a diagram showing the relationship between the level of geological knowledge and resource categories
Figure 2_1 SAMREC: Relationship Between Coal Resources,
Coal Reserves and Degree of Knowledge
Source: SAMREC Code
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3 SOUTH AFRICAN COAL MINING INDUSTRY
The South African coal mining industry is controlled by a few major companies, accounting for 90% of saleable coal production. Eskom ranks first as a steam-coal user and seventh as an electricity generator in the world. Internationally coal is the most widely used primary fuel accounting for about 36% of the total fuel consumption of the world’s electricity production. Coal meets about 88% of South Africa’s primary energy needs. The Department of Minerals and Energy has several policies to ensure an adequate supply of electricity generation capacity and ensure that the distribution infrastructure is maintained. Additional power stations and major power lines are being built to meet rising electricity demand. To meet this demand, Eskom will have to double its capacity to 80,000 MW by 2026 and will have to raise its coal purchases by about 44.9 Mt a year.
Sasol is the world’s larges coal to liquids producer. The remainder of South Africa’s coal production feeds various local industries.
A major demand component is the export of higher grade coal to Europe and India. There are indications that India and the Far East will be a growing market for South African lower quality coal, with the domestic production in these areas not capable of supplying a rapidly increasing demand for electrical power. The Richards Bay Coal Terminal Phase V project was commissioned at the beginning of May 2010 and has increased its export capacity to 91Mt/a. It is understood that Universal Coal has no export allocation through the Richards Bay Coal Terminal. This can only be applied for upon completion of a bankable feasibility study.
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4 REGIONAL GEOLOGY
4.1 Regional Setting
All of the known coal deposits in South Africa are hosted in sedimentary rocks of the Karoo Basin, a large retro-foreland basin which developed on the Kaapvaal Craton and filled between the Late Carboniferous and Middle Jurassic periods (Figure 4_1). The Karoo Supergroup is lithostratigraphically subdivided into the Dwyka, Ecca and Beaufort groups, succeeded by the Molteno, Elliot and Clarens Formations and the Drakensburg Formation (S.A.C.S., 1980). The coals range in age from Early Permian (Ecca Group) through to Late Triassic (Molteno Formation) and are predominantly bituminous to anthracite in rank. This is a classification in terms of metamorphism under the influence of temperature and pressure.
Figure 4_1
Schematic Representation of Coal Deposition in South Africa (after RMS Falcon, 1986)
Based on variations in sedimentation, origin, formation, distribution and quality of the coal seams, 19 coalfields are defined within the Karoo Basin (Figure 1_1). These variations are in turn attributed to specific conditions of deposition and the local tectonic history characteristic of each area.
The coal bearing Ecca Group has been divided into three sub-units: the Pietermaritzburg; Vryheid and Volksrust Formations. Within the main Karoo Basin of South Africa the primary economically important coal seams occur in the Vryheid Formation of the Ecca Group.
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The Vryheid Formation rests non-conformably on sedimentary rocks of the Dwyka Group, which are interpreted to be the products of glacial, fluvio-glacial and glacio-lacustrine depositional environments. Documenting and understanding these glacial deposits is important for understanding coal seam thicknesses and qualities, particularly for the No. 1 and No. 2 Seams. The Dwyka Group in the Witbank and Highveld Coalfield areas is mainly represented by glacially deposited diamictites and varved shales.
The deepest part of the basin with the thickest development of the Vryheid Formation is located in the north-eastern part of the preserved basin. The generalised vertical profile of the Vryheid Formation is illustrated in Figure 4_2, showing the succession of five coarsening-upward sequences.
In a complete succession, each of the five coarsening-upward sequences starts with fine grained marine facies, which grade upwards into coarser delta front and delta plain-fluvial facies. Several coal seams occur in the Vryheid Formation and these are associated predominantly with the coarser-grained fluvial facies at the top of each sequence. These coal seams can be traced laterally across the entire area of occurrence of the Vryheid Formation and as such are correlatable marker horizons.
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Figure 4_2 Stratigraphic Column for the Vryheid Formation in the Delmas Area (from Cairncross and Cadle,
1988)
The boundaries between the individual coalfields are based largely on historical and geographic considerations and not necessarily on real geological differences. Consequently there is no general agreement on the nomenclature and number of coalfields, nor their boundaries. The nomenclature used in the CPR documents is as set out in Snyman (1998) as recognising the Witbank and Highveld Coalfields as separate entities. The Brakfontein, Roodekop and Kangala Project areas are all located within the Witbank Coalfield.
4.2 The Witbank Coalfield
Coal mining began in the Witbank Coalfield in 1889 and the Witbank Coalfield is still currently one of the most important coalfields in South Africa, supplying more than 50% of South Africa’s saleable coal. It produces both metallurgical coal and A-grade to D-grade steam coal for the export and local markets and hosts most of the major coal-fired power stations in South Africa.
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In the Witbank Coalfield (Figure 1_1) five coal seams are contained within a 70m thick succession of Vryheid Formation sedimentary rocks. The distribution and attitude of the No. 1 and No. 2 Seams are primarily controlled by the pre-Karoo topography, particularly erosional glacial valleys, with the No. 4 and No. 5 Seams controlled by the present day land surface. In some areas parts or all of these seams have been eroded away.
In both the Witbank and Highveld Coalfields, five depositional sequences with associated potentially economic coal seams, are recognised, numbered from 1 at the base to 5 at the top (Figure 4_2). In the Springs-Vischkuil block, on the western edge of the Witbank Coalfield, the coal seams are inconsistently developed, and where present, closely resemble those of the South Rand Coalfield. Three seams, namely the Top, Mid and Bottom seams are recognized. The Top and Mid seams can possibly be correlated with the No. 5 and No. 4 and No. 3 seams of the Witbank Coalfield and the thicker Bottom seam appears to represent a combination of the No., 2 and No. 1 seams. These depositional sequences are dominated by sandstone and gritstone, with interbeds of finer siltstone and mudstone.
Numerous dolerite intrusions (dykes and sills) intrude the Vryheid Formation at various stratigraphic levels. These intrusions affect the quality of the coal in places.
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5 KANGALA COAL PROJECT
5.1 Introduction
The Kangala Coal Project consists of portions of three properties, referred to as Wolvenfontein, Middelbult and Modderfontein. Universal Coal Development 1 (Pty) Ltd purchased of a 70.5% share of the prospecting rights that comprise the properties of the Kangala Coal Project from Injula Mining Operations (Pty) Ltd (Injula). In April 2008 Coffey Mining was appointed by Universal Coal to complete a CPR of this Project. Geological modelling and resource estimation was completed by Mr. David van Wyk of GeoCoal Services. Following a drilling programme in 2008 and 2009 that included thirty seven surface cored drillholes on the farm Wolvenfontein 244 IR, Universal Coal requested Coffey Mining (South Africa) to update the 2008 CPR. For the Wolvenfontein property new geological modelling and resource estimates were completed Mr. Nico Denner of Gemecs. The project is located approximately 65km east of Johannesburg in the Delmas District, Mpumalanga Province. The nearest towns are Delmas, Devon and Leandra. (Figure 1_1).
5.2 Phsiogeogrqphy and Infrastructure
The topography of the various properties is typical rolling Highveld savannah grasslands with some dams, pans and small rivers. There are wetland areas that could influence the location of any opencast operations.
Wolvenfontein
The topography of the Wolvenfontein property is flat lying to gently undulating, varying from 1,560m above mean sea level (amsl) in the east to 1,590m amsl in the west and north. Two northeast flowing streams drain the farm. Marshes are associated with the streams. The land use of the portions to which this report refers is predominantly arable land (dry land).
Middelbult
The Middelbult property is flat lying, varying from 1,570m amsl in the northeast to 1,605m a.m.s.l in the southwest and drained by two northeast flowing tributaries of the Bronkhorstspruit River. The land use of the portions to which this report refers, is predominantly arable land under irrigation. A marsh is associated with the stream in the southern part of the farm. The Springs-Delmas tarred road and the Johannesburg-Witbank railway line are situated two kilometres to the north.
Modderfontein
The Modderfontein property is flat-lying, with the topography averaging 1,580m amsl. and sloping gently towards the east. No streams are present and the land use is predominantly arable.
The property is bounded by adjoining farms in the north, west and south with smallholdings in the east. A tar road traverses the farm in the southeast. A homestead and farming
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complex is located towards the southern part of the property. The N12 highway from Johannesburg to Witbank passes one kilometre to the south.
5.3 Kangala - Mineral and Surface Rights
New Order Prospecting Rights have been granted to Injula on Middelbult, Modderfontein, and part of Wolvenfontein.
The prospecting rights were granted under the terms and conditions contained in the Mineral and Petroleum Resources Development Act, 2002 (Act no. 28 of 2002) (MPRDA). This act grants the owner exclusive prospecting rights as well as the exclusive right to apply for a Mining Right, which Universal Coal applied for in May 2009. Universal has entered into agreements with most of the current surface right holders to ensure a good working relationship.
5.4 Local Geology
The characteristics of the coal seams present within the Kangala project area are detailed below (refer to Figure 5_1):
Top Seam (5 Seam): The Top seam is generally between 0.5m and 1m thick and consists of dull to bright coal with thin intercalated shale bands. The seam is located approximately 20m above the Mid Seam and irregularly distributed in the area.
Mid Seam (4 Seam): The thickness of the Mid seam varies between 0.98 m to 3.75m. The seam consists of high quality bright to dull coal with a high sulphur content. A carbonaceous shale inseam parting between 5cm and 10 cm thick, may be present. The seam can yield 65% to 75% RB1-type export thermal coal after washing.
Bottom Seam (2 Seam): The thickness of the Bottom seam is usually between 8.45m and 17.5m thick, but can attain thicknesses of up to 30m within local basement lows. The seam is located approximately 1.5m below the Mid Seam and consists of four coal plies, namely the BA, BB, BC and BD bands, separated by carbonaceous shale partings, between 35 cm and 83 cm thick:
The BA coal ply varies in thickness from 0.5m to 2.75m, averaging 1.17m. At Kangala the BA band typically consists of dull coal and is split into two units by a carbonaceous shale parting (BAP) approximately 35cm thick. The BA band (inclusive of the parting) can yield between 40% and 45% Eskom quality coal at a wash density of 1.90g/cm3.
The BB coal ply is approximately 1m thick and is separated from the BA band by approximately 30cm thick shale parting. The BB band typically consists of dull to lustrous coal. The BB coal band can yield approximately 70% Eskom quality coal at a wash density of 1.90g/cm3
The BC coal ply is on average 8.6m thick and consists of an upper (BC1) and lower (BC2) unit usually separated by a 10cm thick carbonaceous shale parting. The BC coal band is separated from the BB coal band by a 35cm thick carbonaceous shale parting. The BC1 unit is approximately 4.1m thick and consists typically of bright to dull coal capable of
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yielding between 30% and 65% 26Mj/kg CV coal at a wash density of 1.60g/cm3. The BC2 unit is on average 4.5m thick and consists of dull to lustrous coal yielding approximately 75% to 80% Eskom grade coal at a wash density of 1.90g/cm3
The BD coal ply is sporadically developed, varying in thickness from 0.5m to up to 9m within basement lows. The BD coal band typically consists of up to 5 coal units separated by carbonaceous shale partings between 10cm and 90cm thick. The coal is dull and of a poor quality.
The coal measures are underlain by Dwyka tillites between 1m and 20m thick, averaging 11.6m. The underlying basement consists of dolomite and chert of the Malmani Group and typically displays karst features.
Figure 5_1
Kangala Schematic Coal Stratigraphic Column
.
5.5 Exploration
Prospecting for coal at Kangala started in the 1980’s by the companies Southern Sphere (Pty) Ltd and Ingwe Coal Corp. Ltd. Data is available from 28 boreholes that formed part of this initial exploration programme. Universal Coal commenced follow-up exploration in 2008 and has completed 37 holes on the Wolvenfontein property. As with the historical data
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intersections are vertical and intersection widths are regarded as true thicknesses given the near horizontal nature of the seams.
The collar coordinates of the 37 holes drilled were surveyed by a qualified surveyor. One thousand seven hundred topographic points were surveyed over the Main Resource Block for the purpose of creating an accurate Digital Terrain Model (DTM) of the topography where opencast mining is planned.
For the historical data, there is no evidence of certified surveyors submitting co-ordinates and elevations. Borehole co-ordinates were recorded on most of the borehole graphic logs and these corresponded to those in the Council for Geoscience database. Where the coal is deep, no topographic control was available and the borehole collar elevations of were assigned an elevation derived from the regional digital terrain model. It will be necessary to create a more accurate DTM where opencast mining is planned.
5.6 Drilling Density
Resource classification was done according to the JORC code guidelines. Borehole spacing up to 500m was used to classify a measured resource, and up to 1000m to classify an indicated resource. Only boreholes where the relevant seam was analysed were considered as point observations to be used for resource classification.
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Figure 5_2
Borehole Location Plan and Resource Areas - Wolvenfontein
.
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Figure 5_3 Borehole Location Plan - Middelbult
.
5.7 Sampling, Analytical Procedures and Checks
Apart from the most recent drilling programme at Wolvenfontein, the rest of the drilling, sampling and logging was undertaken in the 1980s. For this historical data, the procedures for obtaining and recording the data could not be verified. The verification of the historical analyses was undertaken by examining the relationships between, inter alia, calorific value (CV), ash, density and volatile matter to confirm that they are valid for the type of coal.
The laboratories used for the historical analyses were, at the time that the samples were analysed, not SANAS accredited. They participated in coal laboratory round robin analyses that produced acceptable results. Currently these laboratories have good reputations, but remain uncertified. The laboratory procedures were not documented in any of the historical reports. .
The assumptions made in compiling the structural and quality model, based primarily on data received from Universal Coal, are that:
All data from drilling and sampling was reliable
The borehole collars had been accurately surveyed
All sampling was correctly labelled and reported against correct sample ID’s
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Core recoveries and core losses were accurately determined
The laboratory results were correctly reported
For the most recent drilling programme at Wolvenfontein, downhole wireline geophysical surveys were conducted by Geoline Servies. The laboratory used for analyses was Inspectroate M & L Coal Laboratory in Middelburg, which has an ISO 17025 accreditation. Standard laboratory quality control and quality assurance procedures were undertaken. Further checking of sample FROM and TO distances was performed and a new borehole database was created in Micromine GBIS. All the relevant borehole information was imported. Lithological descriptions were verified against the downhole geophysical logs, and coal seam correlations validated. Coal sample positions were verified against the depths of coal seams, and raw coal analyses were compared to lithological descriptions. A number of analytical tests and routines were used to validate the raw and washability data received from the laboratory. Anomalies were identified, queried and corrected were possible, otherwise flagged and removed from the final modelling dataset.
For Wolvenfontein, 42 boreholes are present in the database. Of these, 5 boreholes are historical holes, and 37 are boreholes recently drilled by Universal Coal. Eight boreholes did not intersect coal. This is primarily due to the basement topography, weathering or dolerite intersections.
5.8 Geological Modelling and Resource Estimation
5.8.1 Wolvenfontein
Geological modelling was performed using Gemcom MinexTM software. The typical coal seam profile of the Wolvenfontein area consists of two main seams, each consisting of a number of internal partings as illustrated in Figure 5_3. The two main seams were labelled as SM – Mid Seam, and SB – Bottom Seam
These two main seams were modelled on their own to determine the coal structure over the project area. The Mid Seam is subdivided into three units namely:
MT – Top coal portion
MP – inseam parting
MB – Bottom coal portion.
Similarly the Bottom coal seam is subdivided into 4 coal and 3 intra seam partings namely:
BA – Bottom seam A Unit
BP1 – Inseam parting
BB – Bottom seam B Unit
BP2 – Inseam parting
BC – Bottom seam C Unit
BP3 – Inseam parting
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BD – Bottom seam D Unit
Lastly the 4 coal units within the Bottom seam are subdivided into smaller units according to the presence of additional inseam partings.
Sections were used across the resource area to ensure all these correlations are consistent, and were verified against the lithological logging as well as downhole geophysical logs.
Structural models were created of each of these sets of units to enable detailed resource reporting of seams, seam units and detailed seam splits.
Figure 5_5 Typical Coal Seam Profile at Wolvenfontein
The surface topography (as surveyed) was used to validate the collar elevations of the boreholes. The collars were used together with the surface survey observations to construct
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a surface topography grid in Minex on a 15x15m grid, covering all of the potential coal resource areas.
The stratigraphical sequence was verified in Minex (including gaps and overlaps) before structural modelling commenced. Each coal seam, unit and partings were modelled on a grid of 25x25m, based on the average borehole spacing in the project area. Roof and floor surfaces were created in 3D for each layer, as well as a thickness grid for each seam. Coal extrapolation was limited to 125m from the last borehole which is half the average borehole spacing. The pre-Karoo topography surface was constructed using the Dwyka or basement floor intersection in each borehole. The final structural model was created by modelling the units between the topographic surface, weathering limit and basement floor.
Raw coal qualities were modelled for each seam within each unit. Qualities modelled are: RD (Relative density), CV (Calorific Value), AS (Ash), IM (Inherit Moisture), FC (Fixed carbon), VM (Volatile matter) and TS (Total Sulphur). Lateral composite values were calculated within Minex, based on the seam/unit that was selected from the Minex model. Grids for each quality variable were created on a 25mx25m grid, and used to report the raw coal qualities.
Coal product washablities were performed for a number of different coal products as follows:
Primary coal product at a wash RD of 1.60.
Primary coal product at a wash RD of 1.90.
Primary coal product at a CV of 26.0MJ/kg, and secondary product at a CV of 20.5MJ/kg.
The washability modelling was done using the washability module in Minex. Thereafter for each product, each variable were estimated using the Minex gridding system, to enable reporting of these qualities for each seam, unit and layer as defined.
Two resource areas were defined based primarily on the following cut-off parameters of the Bottom Seam:
Seam thickness <1.0m excluded
Raw ash >60% excluded
The wetland boundary in the south and the farm boundary in the west were used to terminate the resource extents
The wetland in the central area was used to separate the Main Resource Area from the Southern Resource Area.
The area to the south of the wetlands has limited borehole coverage, including a number of historical boreholes that lack analytical data. Due to the presence of some positive coal intersections, however, and its proximity to the main resource area, a southern resource block was defined. Due to the limited borehole analytical data available, no coal quality cut-offs were applied to define the resource. Based on the borehole spacing the coal in the southern area is mainly classified as an inferred resource. In addition, the remainder of the
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coal is classified as inventory coal (As defined in the Australian Guidelines for Estimating and Reporting of Inventory coal, coal resources and coal reserves 2003).
In situ coal resources were reported for each seam within the resource boundary area only. Coal with a seam thickness of less than 0.5m was excluded for both the SM and SB seams. Raw coal qualities and RD’s were applied to the coal volumes according to the modelled grids. Average relative densities per seam/unit at Wolvenfontein are summarized in Table 5_1.
Table 5_1 Kangala Coal Project
Average Relative Densities Per Seam/Unit
Seam RD Unit RD Layer RD SM 1.61 MT 1.54 MT 1.54
MP 2.19 MP 2.19 MB 1.66 MB 1.66
SB 1.77 BA 1.83 BA1 1.79 BA P 2.05 BA2 2.04 BP1 2.04 BP1 2.04 BB 1.64 BB 1.64 BP2 2.04 BP2 2.04 BC 1.64 BC1 1.63 BCP 1.83 BC2 1.63 BP3 2.03 BP3 2.03 BD 1.82 BD1 1.77 BP4 2.03 BD2 1.76 BP5 2.07 BD3 1.75 BP6 2.00 BD4 1.75 BP7 2.00 BD5 1.75
Gross in-situ resources for the Wolvenfontein area are presented in Table 5_2. Resources are reported for both the SM and SB seams, excluding a seam thickness of less than 0.5m. GTIS for the Wolvenfontein resource area amount to 67.475Mt. A geological loss of 10% for both seams is suggested in the main resource area to make provision for potential geological losses that might occur in the area. Due to increased uncertainty, as well as expected dolerite intrusions, a geological loss of 20% is suggested for the southern resource area. GTIS and MTIS for the Main Resource area are presented in Table 5_3.
Resources for the Southern resource area are presented in Table 5_4. Note that the reported inventory coal tonnes of 3.1 Mt (GTIS) cannot be classified according to JORC, and are therefore excluded from the total resources as presented in Table 5_2.
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ining (SA) Pty Ltd
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Table 5_2
Gross and M
ineable In-Situ Coal Tonnages for W
olvenfontein
Table 5_3
Gross and M
ineable In-Situ Coal Tonnages and R
aw Q
ualities (air-dried basis) for the Main R
esource area at Wolvenfontein
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Tabl
e 5_
4.
Gro
ss a
nd M
inea
ble
In-S
itu C
oal T
onna
ges
and
Raw
Qua
litie
s (a
ir-dr
ied
basi
s) fo
r the
Sou
ther
n R
esou
rce
area
at W
olve
nfon
tein
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The stripping ratio, expressed as cubic metres of overburden and partings that needs to be removed per ton of coal, was modelled. Within the Northern Resource area the stripping ratio is low and predominantly below 2:1, averaging approximately 1.6:1. The coal is typically shallow and all extractable by open-pit.
5.8.2 Middelbult and Modderfontein
The borehole data was verified by checking available hard copy geological logs against the digital database. The database consisted of the borehole name, the X & Y co-ordinates, the collar elevation, the depth to the roof and floor of each seam. From this information the widths of each seam as well as the elevations of the roof and floor of each seam were calculated. A number of check algorithms were run to check for negative seam widths and partings.
The analyses files were read into a database for verification, composting and washing simulation. Using WashProduct ®.software washing algorithms standardise wash fractions, calculate raw Relative Densities (RD) from the proportion of raw ash in the samples, as well as using standard methodologies for compositing samples using width and raw RD. The data were verified using numerous check routines. Samples were composited and the coal quality output was simulated. The mining block boundaries were set based on seam width, dolerite sill breakthroughs, coal quality and farm boundaries.
Geological modelling was performed using 3D Surfer Software ®. All roof and floor elevations were gridded using a normalised kriging algorithm. Grid sizes were determined by borehole spacing and a minimum grid size of 25 metres. Grids in areas that did not meet the minimum criteria were excluded from the coal resource area and were blanked out. (Seam width > 1m, Dry Ash Free Volatile Material (DAFVM) of 26%, CV 16MJ/kg). Volumes were then calculated for each of the coal resource blocks by subtracting the elevation floor grid from the elevation of the roof grid surface. The volume was then multiplied by the average Raw RD to calculate the Gross In-situ Tonnage (GIST).
Only the estimated geological loss factor was taken into account to determine a mineable tonnes in-situ (MTIS) resource for each resource block. This factor accounts for losses that may occur resulting from geological features that have not been identified from the current borehole spacing.
Yields and Raw Qualities for each resource block were simulated and then tabulated. The gross-in-situ volumes and raw qualities for the various coal deposits were established for seams thicknesses in excess of 1m.
Table 5_5 gives a summary of the raw coal qualities for the Mid (No. 4) Seam coal resources at Middelbult before modifying factors were applied to define the mineable coal resource.
Table 5_5
Kangala Coal Project
Mid (No. 4) Seam Raw Coal Qualities at Middelbult
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The table shows that the average raw qualities are slightly below Eskom requirements. The coal in this area has a high reactivity and with a de-stoning plant or selective mining the quality would be acceptable to Eskom for the Lethabo Power Station.
The average qualities of Bottom (No. 2) Seam at Middelbult as shown in Table 5_6 are slightly below Eskom requirements and would possibly have to be de-stoned to increase the Calorific Value to satisfy Eskom.
Table 5_6
Kangala Coal Project
Bottom (No. 2) Seam Raw Coal Qualities at Middelbult
Moisture %
Ash % Volatiles % Fixed Carbon %
DAF Vols %
Sulphur % CV (MJ/kg)
Average 3.22 39.39 15.31 42.08 26.36 1.50 17.73 Maximum 4.64 50.50 28.87 50.50 37.48 4.10 23.31 Minimum 2.64 20.43 9.80 33.80 16.25 0.77 13.42
The coal at the Northern Resource area of Middelbult is typically shallow and extractable by open-pit. The stripping ratio expressed as cubic metres of overburden and partings that need to be removed per ton of coal is predominantly below 3, whereas the South African industry uses as rule of thumb that coal available at a ratio below 7 is suitable to open cast mining.
At Modderfontein the absence of borehole data within the granted area no iso-contours could be generated for the Mid (No. 4) Seam, which is known to be present from boreholes on neighbouring properties, obtained from the Geosciences Council. Table 5_7 has estimated raw coal qualities for Mid (No. 4) Seam at Modderfontein based on the analyses of samples from the adjoining properties.
The average qualities of the Mid (No. 4) Seam at Modderfontein are slightly below Eskom requirements. The coal in this area has high sulphur content and would possibly have to be de-stoned to lower the sulphur content and increase the Calorific Value to satisfy Eskom.
Table 5_7 Kangala Coal Project
Mid (No. 4) Seam Raw Coal Qualities at Modderfontein
Moisture % Ash % Volatiles % Fixed
Carbon % DAF Vols
% Sulphur % CV (MJ/kg)
Average 3.71 32.51 21.54 42.24 33.77 2.47 19.84
Seam Statistic Moisture
% Ash %
Volatiles %
Fixed Carbon %
DAF Vols %
Sulphur %
CV (MJ/kg)
Mid (4U + 4L) Average 3.81 36.37 25.12 34.70 41.99 2.14 17.83 Mid (4U + 4L) Maximum 5.02 41.42 30.63 45.18 42.53 3.29 25.64 Mid (4U + 4L) Minimum 3.24 19.16 23.30 31.47 40.40 1.66 15.28
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Maximum 4.70 38.70 25.60 44.60 45.23 3.19 22.47 Minimum 1.80 25.50 14.90 38.47 20.50 1.48 17.49
The estimated raw coal qualities for Bottom (No.2) Seam at Modderfontein based on the analyses of samples from the adjoining properties are tabled in Table 5_8. The average raw qualities of this seam are well below Eskom requirements and selective mining and de-stoning would be required to increase the raw quality of the coal to an acceptable level.
Table 5_8 Kangala Coal Project
Bottom (No. 2) Seam Raw Coal Qualities at Modderfontein
Moisture % Ash % Volatiles % Fixed
Carbon % DAF Vols
% Sulphur % CV (MJ/kg)
Average 4.40 48.67 13.61 33.32 29.00 0.39 14.36 Maximum 5.90 67.10 20.26 40.83 75.04 1.23 19.15 Minimum 3.84 36.13 8.80 17.30 14.42 0.01 6.08
In the absence of borehole data within the granted area the stripping ratio could not be determined. However, the area shows similar seam characteristics as at Wolvenfontein and Middelbult and it can be assumed that the stripping ratio is low, allowing for extraction of the coal by open-cast methods.
A relative density value for each unit was derived from washing algorithms that derive the relative densities from the percentage raw ash in the seam if it has not been reported by the laboratory. It should be noted that the Modderfontein estimate is based purely on drill hole data extrapolated from adjoining properties and is classed as “Reconnaissance Resources”. This is not a recognised JORC/SAMREC resource category and has been excluded from the total tonnage.
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Table 5_9
Kangala Coal Project Gross Tonnes In-Situ Tonnage for the Middelbult and Modderfontein properties
Gross Tonnes In-Situ (‘000 tonnes)
Resource Area Size
(Hectares)
Average Width
(metres)
Volume (‘000 m3)
Relative Density
Total 70.5%
Attributable
Middelbult
Mid (No. 4) Seam 187 3.74 6,987 1.75 12,227 8,620
Bottom (No. 2) Seam 171 8.45 14,488 1.74 25,208 17,772
Grand Total Middelbult 37,435 26,392
Grand Total Gross Tonnes In situ Resources 37,435 26,392
Modderfontein
Top (No. 5) Seam 62 6.10 - 1.5 5,638 3,975
Mid (No. 4) Seam 62 9.38 - 1.5 8,672 6,114
Bottom (No. 2) Seam 62 10.76 - 1.5 9,949 7,701
Grand Total Modderfontein 24,259 17,103
N.B. The Resources in Italics are not JORC/SAMREC Compliant and have been excluded from the total figures.
Portions of a deposit that do not have a reasonable prospect for eventual economic extraction must not be included in the coal resource statement. Applying minimum economic parameters to the contoured seam provided coal resource outlines to which other conversions factors were applied to yield MTIS.
The following assumptions and modifying factors have been applied:-
Raw Relative Density (RD) is based on the average for each seam obtained from the available analyses for each area.
Dry ash free volatile cut off for coal resource estimation was 26% (which is the accepted value for South African Coal when unaffected by weathering or dolerite intrusions)
Minimum seam thickness of 1m
Geological losses of between 20% and 35%, depending on drilling density and coal resource classification
A mining loss of 10%
All tonnages and qualities are quoted air dry
Minimum CV of 16 (MJ/kg)
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Table 5_11 K
angala Coal Project
Summ
ary of Mineable In-Situ Tonnage and Q
ualities at Middelbult and M
odderfontein
Mineable In-Situ Tonnes (‘000 tonnes)
Average R
aw C
oal Qualities
Seam
Total 70.5%
Attributable
CV (%
) A
sh (%)
Volatiles (%)
Sulphur (%)
Middelbult
Mid (N
o. 4) Seam
Inferred
8,253 5,818
16.17 41.99
19.25 0.95
Bottom
(No. 2) S
eam
Inferred 17,016
11,996 17.73
39.39 15.31
1.50
Modderfontein not included in the total because currently the property does not host a S
AM
RE
C/JO
RC
category resource.
Table 5_10
Kangala C
oal Project Estim
ated Mineable C
oal Resources at M
iddelbult and Modderfontein
M
ineable In-Situ Tonnes (‘000 tonnes)
R
esource Area
Gross In-S
itu
Tonnes
(‘000 tonnes)
Geological
Loss (%)
Mining Loss %
Total A
ttributable to U
niversal Coal
Classification
Middelbult
Mid (N
o. 4) Seam
12,227
25 10
8,253 5,818
Inferred B
ottom (N
o. 2) Seam
25,208
25 10
17,016 11,996
Inferred G
rand Total Middelbult
37,435
25,269
17,815
Modderfontein #
Top (No. 5) S
eam
5,638 35
10 3,298
2,325 R
econnaissance M
id (No. 4) S
eam
8,672 35
10 5,073
3,576 R
econnaissance
Bottom
(No. 2) S
eam
9,949 35
10 5,820
4,103 R
econnaissance G
rand Total Modderfontein
24,259
14,191
10,004
# not included in the total because not a SA
MR
EC
/JOR
C category. Is included for inform
ation purposes only.
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6 BRAKFONTEIN
6.1 Introduction
In May 2009 Coffey Mining was appointed by Universal Coal to complete a CPR on the Roodekop and Brakfontein properties. Brakfontein 264 IR is located approximately 80km due east of Johannesburg (Figure 1_1)
6.2 Physiography and Infrastructure
The surface consists predominantly of cultivated land. The topography is relatively flat with an average elevation of 1,550m amsl. The Wilgerivier flows from west to east, approximately 1km north of the southern boundary. There are a number of dams located at the small development of Lionelton located just to the east of Brakfontein. A railway line runs north-south just outside the farm’s western boundary. There are a few buildings located in the south western portion of the farm. The main soil types are clay, loam, loam and clay and sandy loam.
6.3 Brakfontein – Mineral and Surface Rights
The prospecting right was granted under the terms and conditions contained in the MPRDA. This act grants the owner exclusive prospecting rights as well as the exclusive right to apply for a Mining Right. The prospecting right was issued and was effective from 10 July 2008. It is valid for a period of three years.
6.4 Local Geology
The property hosts the complete sequence of Witbank Coalfield coal seams, namely the Nos. 1, 2, 3, 4 and 5 Seams, although the No. 3 Seam was only intersected in one borehole. The data received from the CGS for Brakfontein includes data from 93 surface exploration drillholes.
The primary coal seams, from the base upwards are:
No. 1 Seam:
The No. 1 Seam is better developed in the Witbank Coalfield than in the Highveld Coalfield. Within the Witbank Coalfield, it is best developed in the northern part, where it is between 1.5m and 3m thick. The seam is best developed in palaeo-valleys and tend to pinch out against the paleo-highs. The seam typically consists of high quality lustrous to dull coal, with local sandstone and siltstone partings. The seam is a source of A-grade steam coal and low phosphorus metallurgical coal.
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No. 2 Seam:
Sixty nine percent (69%) of the coal resources in the Witbank Coalfield are attributed to the No. 2 Seam, which also contains some of the best quality coal. The seam averages 6.5m in thickness in the main-central part of the coalfield and thins to approximately 3m towards the west and east. The seam generally displays well-defined zoning, with up to six zones of coal of differing quality. The basal five zones are generally mined for the production of steam coal for the export market. The top zone (sixth zone), which can be up to 3m thick, is generally of inferior quality (high ash) and is only suitable for the local Eskom market. This zone has historically not been mined when the No. 2 Seam was extracted by underground mining.
No. 3 Seam:
The No. 3 Seam is only poorly developed and when present is usually less than 0.5m thick. It is often of a good quality coal, but is not generally economically extracted due to its thickness. Where it attains a thickness of approximately 0.8m, it could represent an important opencast resource.
No. 4 Seam:
Twenty sex percent (26%) of the coal resources in the Witbank Coalfield are attributed to the No. 4 Seam. It varies in thickness from approximately 2.5m in the central Witbank area to 6.5m elsewhere. In the Delmas area the seam can obtain a thickness exceeding 6m. The seam is divided into the No. 4 Lower, No. 4 Upper and No. 4A zones, separated by sandstone and siltstone/mudstone partings. The seam usually contains dull to dull lustrous coal and the mining horizon is generally restricted to the No. 4 Lower Seam, because of the poor quality of the No. 4 Upper Seam. The coal is suitable as a power station feedstock.
No. 5 Seam:
The No. 5 Seam has been extensively eroded over large areas and has an average thickness of 1.8m, varying between 0.5m and 2m thick. The seam consists of mixed, mainly bright, banded coal with thin clastic partings in some areas. The seam is generally of high quality, low phosphorus coal and is a source of blend coking coal.
6.5 Exploration
The borehole information obtained from the CGS Geode spatial coal database was derived from exploration programmes conducted by Brakfontein Navigation Steam Collieries, Ingwe Coal Corporation Ltd and African Collieries Ltd. All the physical data from the borehole logs and tables were captured into an Excel database. This included borehole names, the X and Y coordinates, the collar elevation, the depth to the roof and floor of each seam, the sample name and from to depths for each sample. From this information the thicknesses of each seam as well as the elevations of the roof and floor of each seam could be determined. Government geological maps and other data are available in the public domain.
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Figure 6_1 Borehole Location Plan - Brakfontein
6.6 Sampling, Analytical Procedures and Checks
Laboratory procedures were not documented in any of the historical reports. Only raw qualities and limited wash information is available. The analytical data were also captured in Excel. Using the Washproduct Software®, numerous check routines were run to verify the data, composite the samples as well as to simulate and report quality outputs.
The structural and quality model were based primarily on data received from Universal Coal. It was assumed that:
All data from drilling and sampling was reliable
The borehole collars had been accurately surveyed
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All sampling was correctly labelled and reported against correct sample ID’s
Core recoveries and core losses were accurately determined
The laboratory results were correctly reported
6.7 Geological Modelling and Resource Estimation
In estimating the GTIS, a minimum thickness of 0.5m and a minimum 25% dry ash free (daf) volatiles were applied. The compositing algorithms standardize wash fractions, calculate raw RDs from the proportion of raw ash in the samples as well as using standard methodologies for compositing samples using thickness and raw RD. For the purpose of resource estimation, modeling of the geometry and coal qualities were completed using Surfer Software®. The roof and floor elevations were gridded using a normalized kriging algorithm. A grid size of 50m x 50m was produced.
All the samples from a coal seam were composited within each borehole. Where there were missing RD values, densities were derived from the washing algorithms using the percentage of raw ash in the seam.
Unfortunately the type and quality of the data acquired from the CGS is not consistent. This has resulted in not being able to have a high level of confidence in the composite seam values for each seam or being able to describe the coal quality washability characteristics. Nevertheless, the variation in coal qualities allows the resources to be classified into two coal types: Bituminous coal and Lean coal, based on a dry ash free volatile value of 25%.
For the bituminous coal, the 5 Seam will yield coal suitable for the metallurgical market. The 4 Seam will need beneficiation to make an Eskom product. The 2 Seam would make a raw Eskom product and could possibly have and export fraction. 1 Seam could possibly be low in phosphorus and be suitable for the metallurgical market. The lean coal qualities are inferior to the bituminous coal and could possibly be used in the Turkish domestic market.
In plan view, due to the configuration of the farm boundaries it was necessary to separate each coal seam into a number of resource blocks.
Seam 1: 2 resource blocks
Seam 2: 4 resource blocks
Seam 4: 5 resource blocks
Seam 5: 4 resource blocks
Each seam forms a single geological unit and has been modeled as such. The volume within each seam was calculated by subtracting the elevation of the floor grid from the elevation of the roof grid. The volume was then multiplied by the average length weighted raw RD of the specific seam to calculate the GTIS. All tonnages and qualities are quoted as air dry. The resources quoted have not been adjusted for boundary pillars.
The opencast potential at Brakfontein has not been quantified as the economic stripping ratio could not be determined without coal quality estimates.
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The coal deposits at Brakfontein can be classified as a multiple seam deposit type and the drillhole density is sufficient for the resource estimate to be classified as Indicated.
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ining (SA) Pty Ltd
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Table 6_1
Brakfontein C
oal Resource (2 July 2009)
Tonnage - Air D
ried Basis
Seam
Coal Type
Density
(g/cm3)
Width (m
) Volum
e (m3)
Tonnage (GTIS)
Geological Losses (%
) Tonnage (M
TIS) C
lassification
5 Seam
West
Bitum
inous 1.5
1.32 322,361
483,542 15%
411,011
Inferred 5 S
eam E
ast B
ituminous
1.5 1.99
27,311 40,967
15%
34,822 Inferred
5 Seam
02 B
ituminous
1.5 1.40
581,278 871,917
15%
741,129 Inferred
5 Seam
03 B
ituminous
1.5 1.85
935,914 1,403,871
15%
1,193,290 Inferred
4 seam
NC
01 B
ituminous
1.68 4.90
11,829,626 19,873,772
15%
16,892,706 Indicated
4 seam N
C 01
Lean Coal
1.68 6.96
10,294,336 17,294,484
15%
14,700,312 Indicated
4 seam S
E 01
Bitum
inous 1.68
6.29 2,714,271
4,559,976 15%
3,875,980
Indicated 4 seam
SE
01 Lean C
oal 1.68
5.65 409,983
688,771 15%
585,456
Indicated 4 seam
W 01
Bitum
inous 1.68
4.48 2,527,467
4,246,144 15%
3,609,222
Indicated 4 seam
W 01
Lean Coal
1.68 4.31
3,862,637 6,489,230
15%
5,515,845 Inferred
4 seam 02
Bitum
inous 1.68
5.56 747,206
1,255,306 15%
1,067,010
Indicated 4 seam
02 Lean C
oal 1.68
3.78 2,157,643
3,624,841 15%
3,081,114
Inferred 4 seam
03 B
ituminous
1.68 8.47
4,297,053 7,219,048
15%
6,136,191 Indicated
2 seam
W 01
Bitum
inous 1.59
4.95 2,244,892
3,569,378 15%
3,033,971
Inferred 2 seam
W 01
Lean Coal
1.59 6.20
7,573,340 12,041,611
15%
10,235,369 Inferred
2 seam E
01 B
ituminous
1.59 5.01
26,633,556 42,347,355
15%
35,995,251 Indicated
2 seam E
01 Lean C
oal 1.59
6.27 972,454
1,546,202 15%
1,314,271
Indicated 2 seam
02 B
ituminous
1.59 2.83
778,437 1,237,715
15%
1,052,058 Indicated
2 seam 02
Lean Coal
1.59 5.10
2,452,994 3,900,260
15%
3,315,221 Indicated
Block 2 03
Bitum
inous 1.59
6.93 3,516,626
5,591,436 15%
4,752,721
Inferred
1 Seam
B
ituminous
1.69 1.80
5,628,018 9,511,351
15%
8,084,648 Indicated
Total
90,507,404
147,797,176
125,627,599
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Ta
ble
6_2
Bra
kfon
tein
Coa
l Pro
ject
C
oal Q
ualit
ies
(Ave
rage
Val
ue p
er S
eam
)
Seam
C
oal T
ype
Stat
istic
M
oist
ure
(%)
Ash
(%)
Vola
tiles
(%)
daf V
M%
Fi
xed
Car
bon
(%)
CV
(MJ/
kg)
5 B
itum
inou
s C
oal
Ave
rage
3.
08
16.9
8 28
.98
36.1
6 50
.96
25.6
5
5 B
itum
inou
s C
oal
Max
imum
4.
40
22.0
0 33
.80
39.6
7 54
.00
27.0
0
5 B
itum
inou
s C
oal
Min
imum
2.
00
12.8
0 25
.00
33.7
8 49
.00
24.0
0
5 Le
an C
oal
Ave
rage
2.
00
28.1
6 13
.92
19.8
8 55
.92
21.5
3
5 Le
an C
oal
Max
imum
2.
00
31.6
0 17
.70
23.6
6 64
.60
24.9
4 5
Lean
Coa
l M
inim
um
2.00
23
.20
5.30
7.
58
52.1
0 20
.00
4 B
itum
inou
s C
oal
Ave
rage
2.
73
32.1
5 22
.11
33.9
4 43
.01
18.9
6
4 B
itum
inou
s C
oal
Max
imum
4.
37
42.5
0 29
.32
39.3
2 54
.40
26.0
5
4 B
itum
inou
s C
oal
Min
imum
2.
00
15.0
1 16
.90
25.5
8 33
.71
14.9
4
4 Le
an C
oal
Ave
rage
2.
86
41.9
2 10
.49
18.7
8 44
.74
15.6
4 4
Lean
Coa
l M
axim
um
4.65
70
.60
15.4
5 24
.38
65.5
0 22
.50
4 Le
an C
oal
Min
imum
1.
50
25.6
0 4.
00
10.1
5 22
.40
5.00
2 B
itum
inou
s C
oal
Ave
rage
2.
87
25.8
6 23
.61
33.1
7 47
.65
21.8
7
2 B
itum
inou
s C
oal
Max
imum
4.
80
45.5
9 33
.30
51.7
8 59
.76
28.0
0
2 B
itum
inou
s C
oal
Min
imum
2.
00
14.1
5 15
.37
25.1
6 27
.08
15.0
0 2
Lean
Coa
l A
vera
ge
3.07
33
.44
10.2
2 15
.76
53.2
7 17
.94
2 Le
an C
oal
Max
imum
5.
48
45.5
0 16
.05
24.3
7 69
.50
24.9
6
2 Le
an C
oal
Min
imum
1.
10
18.9
0 5.
61
10.1
9 42
.60
10.0
0
1 B
itum
inou
s C
oal
Ave
rage
3.
21
36.2
3 19
.47
32.4
2 41
.09
17.2
6
1 B
itum
inou
s C
oal
Max
imum
4.
20
56.8
0 33
.30
42.1
0 51
.50
24.0
8 1
Bitu
min
ous
Coa
l M
inim
um
2.00
18
.90
14.0
0 22
.36
24.4
0 10
.00
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7 ROODEKOP
7.1 Introduction
In January 2010 Coffey Mining was appointed by Universal Coal to complete an updated Independent CPR on the Roodekop property. The property under consideration is the entire farm Roodekop 63 IS. It is located approximately 120km due east of the centre of Johannesburg. (Figure 1_1).
7.2 Physiography and Infrastructure
The project area consists primarily of cultivated land. The topography slopes from the east. The Steenkool Spruit forms the western boundary of the project area and the Rietspruit dam is located approximately 2.3km further to the west. A number of farm buildings are located in the centre of the property and a newly commissioned shaft of the New Clydesdale Colliery is located approximately 1.5km to the northwest of the property.
7.3 Roodekop – Mineral and Surface Rights
The prospecting rights were granted under the terms and conditions contained in the Mineral MPRDA. This act grants the owner exclusive prospecting rights as well as the exclusive right to apply for a Mining Right. The prospecting right expires on 20 April 2012.
7.4 Local Geology
The Roodekop Project is underlain by the sandstone, shale and coal of the Ecca Group and tillite of the Dwyka Group. The underlying rock is pre-Karoo basement and consists predominantly of rhyolites and interbedded mudstone and sandstone of the Rooiberg Group, Transvaal Supergroup. As at Brakfontein, the Roodekop property hosts the complete sequence of Witbank Coalfield coal seams, namely the Nos. 1, 2, 3, 4 and 5 Seams and can be classified as a multiple seam deposit type. Seams No. 4, No. 2 and No. 1 are of economic interest.
7.5 Exploration
Since prospecting first began at Roodekop in the 1970’s: Ingwe Coal Corporation Limited, Anglo American Corporation of South Africa Limited, Iscor Limited and Anglo Transvaal Collieries Limited have been involve. Data is available from 18 boreholes that formed part of these initial exploration programmes. After the examination of all available data it is reasonable to assume that all past drilling was diamond drilling using conventional equipment and TNW core size. This is borne out by the mass of coal sample reported which corresponds to standard TNW core. Coal measures in the Witbank - Springs coalfield are normally drilled either by HQ wireline or TNW diamond drilling. All intersections are vertical and given the near horizontal nature of the seams intersection widths will be very close to true thicknesses. Universal Coal commenced follow-up exploration in 2009 and has drilled 25 holes. All drilling is diamond drilling using conventional equipment and TNW core size.
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Based on the JORC requirements, recent drilling at Roodekop has resulted in there being sufficient data for the coal resources to be classified primarily as Indicated and Measured Coal Resources..
Figure 7_1 Borehole Location Plan - Roodekop
7.6 Sampling, Analytical Procedures and Checks
The data received from the CGS for Roodekop included data for the following coal seams: 1 Lower, 1 Upper, 2 Lower, 2 Upper, 2A, 2LU, 4 Upper and 4 Lower. The historical data included borehole names with collar coordinates, lithological descriptions, from and to distances within each borehole and proximate analyses. The lithological data consisted of only the position of the coal seams within each borehole with no lithological description. The historical assay data included raw assay values and those washed at a density of 1.6t/m3.
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Although the presentation of the logs was poor, the data is considered accurate and reliable. The core is considered to have been logged by competent geologists. The historical data is considered to be of a sufficient standard for coal resource estimation.
For the historical data, the procedures used for gathering and recording the data could not be accurately verified. At the time that these samples were analysed, laboratories were not SANAS accredited. Verification of the historical analyses was carried out by testing the relationships between, inter alia, Calorific Value (CV), ash, density and volatile matter to confirm that they were valid for the type of coal. At that time the coal laboratories utilized had excellent reputations for coal analyses and are therefore considered to have provided reliable analyses. The 2009 Universal Coal drilling programme included twinned holes. The new information has verified the historical logs and this has increased the confidence in the historical data.
For the 2009 drilling at Roodekop, the core was logged and sampled by an independent geologist with suitable experience of the coal deposits in the area and contracted from Geosphere Drilling cc. The laboratory used for analyses was Inspectorate M&L Coal Laboratory in Middelburg, which has an ISO 17025 accreditation from SANAS. Inspectorate M&L Laboratory undertook standard laboratory quality control and quality assurance procedures.
All the relevant borehole information was imported into GBIS borehole database. Lithological descriptions were verified against the downhole geophysical logs, and coal seam correlations validated. Coal seam intersection depths were adjusted according to the downhole geophysical data where necessary. Coal sample positions were verified against coal seam occurrences, and raw coal analyses were compared to lithological descriptions.
A number of analytical tests and routines were used to validate all the raw and washability data as received from the laboratory. Anomalies were identified, queried and corrected where possible or otherwise flagged and removed from the final modelling dataset.
Non sampled partings that could possibly be included in combined seam selections were identified, and dummy raw values were added based on the lithology. To ensure proper washability estimation, and to estimate the total product yield of each seam, dummy washability curves were generated within GBIS at relevant float fractions. All the coal samples were normalised in GBIS to produce cumulative washability curves on a sample basis that was used in the modelling of the different coal products.
7.7 Geological Modelling and Resource Estimation
Forty three boreholes are present in the database. Of these 18 are historical holes, with no analytical data and limited detail lithological information. The remaining 25 boreholes were recently drilled by Universal Coal, with acceptable samples, detailed geological descriptions and geophysical data.
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The stripping ratio increases from less than 2 (cubic metres of waste) : 1 (ton of coal) in the northwest to greater than 7:1 in the east. The area up to a stripping ratio cut-off of 5:1 was designated as having the potential for opencast mining and the remainder for underground mining. All resource estimations and coal quality calculations were classified using these criteria.
Geological modelling was performed using Gemcom MinexTM software. Although all the coal seams and plies were intersected in some boreholes, only the units named S4, S2, S2A, S1 and S1A are continuous across the area and have economic potential.
Sections were used across the resource area to ensure all these correlations are consistent, and were verified against the lithological and geophysical logs.
Structural models were created for each seam as well as the relevant sub units and selections where applicable. Using the borehole collar coordinates and model of the surface topography was created, and verified with topography maps. In each borehole the limit of softs, weathering as well as potential free dig depth was recorded, enabling the modelling of these layers across the resource area. Raw coal qualities were modelled for each seam within each unit. The washability modelling was done using the washability module in Minex. Thereafter for each product, each variable were estimated using the Minex gridding system, to enable reporting of these qualities for each seam, unit and layer within the resource boundary.
Coal resources are reported for S4UA, S4U, S2, S2A, S1 and S1A seams where the thickness exceeds 0.50m. Gross in situ coal resources for the Roodekop resource area amount to 78.235 Mt of which 26.09 Mt are classified as Measured, 50.54 Mt as Indicated and 1.59 Mt as Inferred. A geological loss of 10% has been used to make provision for potential geological losses that might occur in the area. In situ tonnes after geological loss amount to 70.411 Mt.
The No. 2 (S2), No. 1 (S1) and No. 1A (S1A) seams are the most prominent and consistently developed seams in the area and represents 86% of the coal resources at Roodekop.
Table 7_1 summarizes the coal resources for the opencast area. The opencast area hosts a gross in situ resource of 42 Mt of which 23.4 Mt is classified as Measured, 17.8 Mt as Indicated and 0.84 Mt as Inferred. Coal resources for the underground area, per seam/split (and excluding the No. 4 seam tonnages) are reported in Table 7_2. The underground area contains a gross in situ resource of 29 Mt of which 2.5 Mt is classified as Measured, 26.2 Mt as Indicated and 0.31 Mt as Inferred. In situ resource tonnages after a 10% geological have been taken into consideration are also included in these tables.
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Table 7_1 Roodekop
In Situ Resources and Raw Qualities of the Opencast Area
Table 7_2 Roodekop
In Situ Resources and Raw Qualities per Seam/Units in the Underground Area
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It was not possible to estimate potential mining losses for the resource area. A number of unknown factors are still present for both opencast and underground mining that will have a material impact on the resource tonnages.
Coal washability tests were performed for four different prime products as well as secondary products. Acceptable yields and qualities are being achieved for the different seams as follows:
Within the opencast area the No. 2 Select and No. 1A seams are typically of a good quality:
The No 2 Select seam yields approximately 43.5% primary product with a calorific value of 26.5 MJ/kg (on an air-dried basis) and 28.3% secondary product with a calorific value of 20.5 MJ/kg.
The No 1A seam yields approximately 69% primary product with a calorific value of 26.5 MJ/kg (on an air-dried basis) and 13.8% secondary product with a calorific value of 20.5 MJ/kg. Alternatively the seam yields approximately 52% primary product with a calorific value of 27.5 MJ/kg (on an air-dried basis) and 37% secondary product with a calorific value of 20.6 MJ/kg.
The volatile content of the washed export coal is typically >25%, the ash content <16%, the inherent moisture <3.0% and the sulphur content <0.7%. The volatile matter, ash, inherent moisture and sulphur show only slight variations over the opencast area.
The coal of the No. 2 Upper (M2R) and the No. 1 (S1) seams in the opencast area are of a poorer quality, yielding 72.5% primary product at a R.D. of 1.90, with a calorific value of 21.7MJ/kg suitable for the Eskom market. Within the underground area the No. 2 and No. 1 seams are typically of a lower quality.
The No 2 Lower seam yields only between 13% and 17% primary product with a calorific value of 26.5 MJ/kg (on an air-dried basis) and between 36.5% and 42.3% secondary product with a calorific value of 20.5 MJ/kg.
The No 1 and No. 1A seams yield between 26% and 38% primary product with a calorific value of 26.5 MJ/kg (on an air-dried basis) and between 30% and 65% secondary product with a calorific value of 20.5 MJ/kg.
The volatile content of the washed export coal is typically >23%, the ash content <16%, the inherent moisture <3.3% and the sulphur content <0.6%. The volatile matter, ash, inherent moisture and sulphur show only slight variations over the underground area.
In summary: The geological model and resource estimate confirmed a JORC compliant gross in situ resource of 78 Mt of coal of which 98% is classified as Indicated and Measured. The bulk of the coal resource is hosted in the No. 2 and No. 1 (including the No. 1A) seams.
The coal is extractable by both opencast and underground means and yield bituminous coal suitable for both the export and domestic steam coal markets.
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Report Prepared for
Universal Coal plc
Prepared by
GEMECS (Pty) Ltd
Project Number GMXP10028 24 May 2010
Universal Coal Limpopo Coalfield Assets Independent Geological Report
Abbreviated CPR
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Universal Coal Limpopo Coalfield Assets Independent Geological Report
Abbreviated CPR
Universal Coal plc
Project Number: GMXP10028
Gemecs (Pty) Ltd
Visiomed Office Park Unit 16, Building 5
269 Beyers Naude Drive Blackheath, Randburg
Republic of South Africa www.gemecs.co.za
24 May 2010
Compiled by: __________________ ___________________ NJ Denner TJ Fox Project Consultant Project Consultant Pr. Sci. Nat. 400060/98 Pr. Sci. Nat. 402050/83
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NOTE ON AUTHORSHIP: Gemecs (Pty) Ltd (“Gemecs”) is a medium-size geological company which renders geological consulting services to the mining industry. Its consultants have the required experience in preparing competent persons', technical advisors' and evaluation reports for mining and exploration companies. Input is provided in terms of the South African Minerals and Petroleum Resources Development Act of 2002 (ACT No. 28 of 2002), the JORC (Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, 2004 edition) and supported by the Australian Guidelines for Estimating and Reporting of Inventory Coal, Coal Resources and Coal Reserves, 2003 Edition. Independence is assured by the fact that, neither the Competent Persons, nor any of the Competent Person’s staff and associates involved in this report, holds any equity in the “Client” or its subsidiary or associated companies. Nor do these parties have a direct or indirect interest in any project that is the subject of this report. This permits Gemecs to provide its clients with conflict-free and objective recommendations on crucial judgement issues. Fees for the preparation of this report are being charged at standard rates with expenses reimbursed at cost. Payment of fees and expenses is in no way contingent upon the conclusions drawn in this report.
Disclaimer:
This document has been prepared for the exclusive use of UNIVERSAL COAL (“Client”) on the basis of instructions, information and data supplied by them. No warranty or guarantee, whether express or implied, is made by GEMECS (Pty) Limited with respect to the completeness or accuracy of any aspect of this document and no party, other than the Client, is authorised to or should place any reliance whatsoever on the whole or any part or parts of the document. GEMECS does not undertake or accept any responsibility or liability in any way whatsoever to any person or entity in respect of the whole or any part or parts of this document, or any errors in or omissions from it, whether arising from negligence or any other basis in law whatsoever.
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TABLE OF CONTENTS:
LIST OF FIGURES, TABLES & ANNEXURES vi EXECUTIVE SUMMARY p1 1. INTRODUCTION p2 2. PROPERTY DESCRIPTIONS AND LOCATIONS p3
2.1 Soutpansberg block p5 2.2 Tuli block p6
3. GENERAL GEOLOGICAL SETTINGS p7
3.1 Soutpansberg coalfield p7 3.2 Limpopo Coalfield p11
4. BOREHOLE AND COAL QUALITY SUMMARY p17 4.1 Soutpansberg Resource area p17 4.2 Tuli Resource area p22
5. COAL RESOURCE AND COAL RESERVE ESTIMATES p27 5.1 Resource reporting code and categorization p27 5.2 Key estimation assumptions and parameters p27 5.3 Quantity and quality of coal resources p28 5.4 External influences on Resources p33 5.5 Operational influences on Resources p33
6. INTERPRETATION AND CONCLUSIONS p33 7. REFERENCES p36 ANNEXURE A p37
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LIST OF FIGURES, TABLES AND ANNEXURES:
FIGURES: FIGURE 1: MAP SHOWING THE LOCATION OF THE LIMPOPO PROVINCE IN SOUTH AFRICA. FIGURE 2: LOCALITY PLAN FOR THE TULI (LIMPOPO) AND SOUTPANSBERG PROPERTIES. FIGURE 3: LOCALITY OF THE SOUTPANSBERG BLOCK PROPERTIES. FIGURE 4: LOCALITY OF THE TULI (LIMPOPO) BLOCK PROPERTIES. FIGURE 5: LOCATION OF THE SOUTPANSBERG COALFIELD IN SOUTH AFRICA. FIGURE 6: SHOWING THE VARIOUS SECTORS OF THE SOUTPANSBERG & VENDA-PAFURI COALFIELDS. FIGURE 7: GENERALISED STRATIGRAPHIC COLUMN FOR THE SOUTPANSBERG COALFIELD SHOWING COAL ZONE NOMENCLATURE. FIGURE 8: GEOLOGICAL MAP SHOWING THE OUTLINE OF THE SOUTPANSBERG BLOCK PROPERTIES. FIGURE 9: LOCATION OF THE LIMPOPO (TULI) COALFIELD IN SOUTH AFRICA. FIGURE 10: TYPICAL BOREHOLE STRATIGRAPHIC COLUMN AND COAL ZONE PROFILE FOR THE SOMERVILLE PROPERTY. FIGURE 11: ZONATION OF COAL ZONES IN LIMPOPO COALFIELD. FIGURE 12: GEOLOGICAL MAP SHOWING THE OUTLINE OF THE TULI BLOCK (LIMPOPO) PROPERTIES. FIGURE 13: LOCATION OF THE TULI BLOCK PROPERTIES IN RELATION TO PARKS AND GAME RESERVES OF THE AREA. FIGURE 14: GEOLOGICAL MAP SHOWING THE OUTLINE OF THE SOUTPANSBERG BLOCK PROPERTIES AND BOREHOLE POSITIONS. FIGURE 15: TYPICAL PROFILE FOR THE COAL MEASURES IN THIS AREA SHOWING COAL ZONE NOMENCLATURE. FIGURE 16: GEOLOGICAL MAP SHOWING THE OUTLINE OF THE TULI BLOCK PROPERTIES AND BOREHOLE POSITIONS. FIGURE 17: GENERAL RELATIONSHIP BETWEEN EXPLORATION RESULTS, MINERAL RESOURCES AND ORE RESERVES.
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TABLES: TABLE 1: “COAL ZONE” DESIGNATION CODES APPLIED IN BOREHOLES DRILLED ON CYGNUS 549MS & CELINE 547MS. TABLE 2: BOREHOLE COLLAR ELEVATIONS, DEPTH & THICKNESSOF ‘COAL ZONES’ & ‘FLOOR’ ELEVATIONS, FOR BOREHOLE INTERSECTIONS ON CYGNUS 549MS & CELINE 547MS. TABLE 3: AVERAGE RATIO OF COAL TO NON-COAL “PLYS” WITHIN THE COAL ZONE ON CYGNUS 549MS. TABLE 4: SUMMARY OF COMPOSITE RAW COAL ANALYTICAL DATA FOR SAMPLED COMPONENTS OF THE “COAL ZONES” ON CYGNUS 549MS. TABLE 5: COMPOSITE WASHED COAL ANALYTICAL DATA FOR THE 1.40RD FLOAT FRACTION FOR THE SAMPLED SECTIONS OF ‘COAL ZONES’ FROM BOREHOLE INTERSECTIONS ON CYGNUS 549MS. TABLE 6: BOREHOLE COLLAR ELEVATIONS, DEPTH & THICKNESSOF ‘COAL ZONE’ & ‘FLOOR’ ELEVATIONS, FOR BOREHOLE INTERSECTIONS ON SOMERVILLE 9MS. TABLE 7: INTERPRETED DETAILS OF COAL ZONE UNITS ON SOMERVILLE 9MS. TABLE 8: SUMMARY OF ANALYTICAL DATA FOR INDIVIDUAL SUB-ZONES OF THE TOTAL“COAL ZONE” ON SOMERVILLE 9MS. TABLE 9: COMPOSITE ANALYTICAL DATA – ASH CONTENT (RAW COAL) FOR THE INDIVIDUAL UNITS OF THE COAL ZONE FROM BOREHOLES ON SOMERVILLE 9MS. TABLE 10: RATIO OF COAL TO NON-COAL “PLYS” WITHIN THE COAL ZONE ON SOMERVILLE 9MS. TABLE 11: RESOURCE CLASSIFICATION ACCORDING TO BOREHOLE DENSITY. TABLE 12: INSITU COAL RESOURCES FOR THE SOUTPANSBERG AREA. TABLE 13: INSITU COAL RESOURCES FOR THE TULI AREA. TABLE 14: RAW COAL QUALITIES FOR SAMPLED PORTIONS ONLY. TABLE 15: COAL POTENTIAL (AFTER INFERRED RESOURCES) ON NEIGHBOURING FARMS – SOUTPANSBERG AND TULI AREAS. ANNEXURES: ANNEXURE A: LISTING OF THE BONO LITHIHI PROPERTIES.
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EXECUTIVE SUMMARY:
The potential of certain properties (Bono Lithihi holdings) in the Limpopo and Soutpansberg Coalfields in South Africa was investigated. Two blocks of ground, the Soutpansberg Block (Mopane sector, Soutpansberg Coalfield) and Tuli block (in the NW part of the Limpopo Coalfield) were investigated in detail. This report describes each block in terms of general geological considerations and available historical exploration data. Limited pertinent exploration data for these areas was available which is considered inadequate for a proper evaluation of the areas concerned. The coal deposits of these areas are contained within a coal zone, consisting of layers (‘ply’s’) of good quality coal, intercalated with non-coal material (mudstones). The coal portion of these zones is generally of good quality but often comprises only a relative small portion of the total thickness. Three coal zones are present in the area of the Soutpansberg block and have potential for production of metallurgical coal low density fractions and a steam coal “middling’s” product. The lowermost of these zones is indicated as containing the highest proportions of Coal to mudstone, although indicated yields are somewhat disappointing. The middle zone is indicated as of perhaps the most potential in terms of yields of high grade products, although it appears to be of somewhat variable thickness. In the Tuli Block the Bottom part of the Coal zone appears to contain the better proportion of coal to mudstone, but indicated washed coal yields are anticipated to be low. The remoteness of the Limpopo Coalfield (Tuli Block properties), together with the inferred absence of any significant areas which may be amenable to opencast exploitation, tends to limit the potential of this area. This is however based on very limited information, and does not rule out the possibility of potential opencast and/or underground resources on the unexplored properties. It may be concluded that the Soutpansberg Block properties to the North-west of Waterpoort, are likely to present better opportunities for identification of potentially exploitable Coal deposits as compared to the Tuli Block properties. The attractiveness of the Soutpansberg Coalfield properties is enhanced by the indication of certain areas that could be amenable to opencast exploitation, as well as areas that would be suitable for exploitation by incline shafts, to access the deeper coal deposits. The indicated metallurgical (coking) potential of the lower density coal fractions generated from the coal deposits of this area is a positive factor in favour of further exploration. Gross in situ coal resources (excluding major mudstone partings) for the Soutpansberg area amounts to 122.0 million tonnes and for the Tuli area it’s estimated at 274.2 million tonnes. In situ tonnes after geological loss amount to 73.2 million tonnes for the Soutpansberg area and 192.0 million tonnes for the Tuli area. Resources for both areas are classified as Inferred Coal Resources as defined by the JORC code. The stated resources are for properties with historic drillhole information only and substantial additional upside remains in untested areas.
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1. INTRODUCTION: GEMECS were commissioned by Universal Coal plc to compile a CPR on the geological aspects of coal deposits which may underlie a number of properties in the Soutpansberg Coalfield and the Limpopo Coalfield. This report is the abridged version and the full CPR is available from Universal Coal Plc. These 2 coalfields have seen relatively little development to date and present a potential for future exploitation, particularly in view of the relatively high-value of the coking coal fractions commonly contained within the coal zones of these localities. A portfolio of coal Prospecting Rights in the Limpopo Province of South Africa, held by the Bono Lithihi Investments Group, covering a total of 25 properties (farms), forms the basis of this CPR evaluation.
The Soutpansberg Block properties are located to the North of the Soutpansberg Mountain Range in the Limpopo Province of South Africa. A number of the properties are located outside of the known limits of the coalfield and others are located in areas which are anticipated as being unfavourable for location of exploitable coal deposits. A group of properties situated in the Brak River valley area, straddling the anticipated limit of coal-bearing strata of the Soutpansberg Coalfield (Mopane sector) are identified as of possible potential for coal development.
The Tuli Block properties are located approximately 45km North of the town of Alldays, 90km west of Musina (formerly Messina) and stretch South from the Limpopo River in the Limpopo Province of South Africa. The properties are located within the Limpopo Coalfield. Gemecs have reviewed, processed, evaluated and summarised the available geological borehole data pertaining to the properties and investigated other matters related to the potential for mining in the areas concerned. Borehole data were only available for the eastern part of the Soutpansberg block (Celine 547MS) and include borehole and analytical data for an adjoining property (Cygnus 549MS). Borehole and coal sampling/analytical data was available for only 1 farm of the Tuli Block properties (Somerville 9MS), located at the southern end of the ‘block’.
Indications are that the Soutpansberg Coalfield is, in general, likely to present better opportunities for coal exploration as compared to the Tuli Block areas, in terms of the ability to identify potentially exploitable Coal Resources. The anticipated relatively deep occurrence of much of the coal in the Tuli Block, together with its remoteness from infrastructure, mitigate against the latter area.
In view of the above, Gemecs are satisfied that the Tuli and Soutpansberg areas under consideration are prospective and warrant further investigation.
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2. PROPERTY DESCRIPTIONS AND LOCATIONS: The relevant properties are located in the Limpopo Province of South Africa.
FIGURE 1: MAP SHOWING THE LOCATION OF THE LIMPOPO PROVINCE IN SOUTH AFRICA The province is served by a number of tarred roads, including the N1 highway from Pretoria and Johannesburg to Zimbabwe via Polokwane (formerly Pietersburg) and Musina (formerly Messina). More remote areas are served by a network of gravel surface roads. The properties, to which this report refers, may be described as follows: SOUTPANSBERG PROPERTIES
These properties are situated in 3 areas from a geographical and geological viewpoint: • NORTH-WEST OF WATERPOORT – Soutpansberg Coalfield (Mopane
sector), 6 original farms in a contiguous ‘block’ (Longford 354, Matsuri 358, Doorvaard 355, Gezelschap 395, Celine 547, and Berenice 548), located along a ‘strip’, some 15km in length, and orientated roughly SW-NE and 3 to 5km wide. Prospective for coal deposits.
• WEST OF WATERPOORT - Soutpansberg Coalfield (Mabelebele Sector) , 9 properties, 5 of which are co-located with Karoo deposits and the
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remaining 4 are peripheral to the indicated limits of the coal-bearing area (farms: Doncaster 414, Duinen 419, Wintersveld 427, Trekpad 455, Troy 458, Smithfield 456, Vriendschap 460, Scot 465, & Secrabje 470). Prospective for coal but anticipated low potential.
• NORTH-WEST OF MOPANE – 2 properties (Twyfelfontein 483 & Hastings 485), outside of limits of Karoo Formations – No coal potential.
LIMPOPO/TULI BLOCK PROPERTIES Limpopo Coalfield area, 6 original farms (farms: Ratho 1, Montrow 6, Pontdrift 12, Parma 40, Somerville 9 & Princess Royal 10) in a semi-contiguous area, located near to the northern border of South Africa with Botswana. These properties are considered to be prospective for coal deposits. Another property, further to the South-east within the Limpopo Coalfield (Patricia 65), does not include Coal Rights and is therefore not considered further herein. The remaining property (Monmouth 294) is located near Alldays, outside of limits of Karoo formations and therefore has no coal potential. A listing of the Bono Lithihi properties is appended (Annexure A) to this report. The regional locality of the properties is indicated on the following Key Plan (Figure 2).
FIGURE 2: LOCALITY PLAN FOR THE TULI (LIMPOPO) AND SOUTPANSBERG PROPERTIES (Block North-west of Waterpoort).
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2.1. Soutpansberg ‘Block’ The ‘Soutpansberg Block’ properties lie to the North of the Soutpansberg Mountain Range, within a relatively large area and represent isolated farms as well as ‘blocks’ of ground (groups of contiguous farms).
The principal properties which may have coal potential are located some 20-25km North-west of the town of Waterpoort and 25-35km to the West of Mopane in the western part of the Mopane Sector of the Soutpansberg Coalfield (Figure 3). The nearest larger town is Makhado (formerly Louis Trichard) located 50km to the South-east. These properties are located in the Brak River valley, in an area which is accessed from several all-weather secondary (D17, 506, 854) and farm access roads branching off northwards from the R523 road, which passes to the South of the area running roughly East-West. This road links to the N1 highway in the east and the R521 Polokwane-Alldays road in the West.
The railway line from Musina to Makhado runs in a North-Easterly to South-Westerly direction, between the towns of Mopane and Waterpoort. The nearest sidings are at Baobab and Waterpoort, ±25km to the South-east. The settlements of Vetfontein and Bandur are located in this area. Vetfontein lies a short distance to the West of the properties concerned.
Other properties which may be underlain by coal are located in an area to the West of Waterpoort and comprise 5 isolated farms and a block of ground made up of 4 farms. These properties fall within the Western and central parts of the Mabelebele Sector of the coalfield which is known for relatively thin and impersistent coal developments and the occurrence of the coal generally at great depths. This area is one of generally unfavourable geology in terms of the likelihood of discovering exploitable coal deposits.
The properties located North-west of Waterpoort are shown on the following locality map (Figure 3).
Coal rights for significant portions of the remainder of the relevant parts of the Limpopo and Soutpansberg Coalfields are held by a number of competitors, in particular Rio Tinto and Coal of Africa Ltd.
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FIGURE 3: LOCALITY OF THE SOUTPANSBERG BLOCK PROPERTIES (North-West of Waterpoort)
2.2. Tuli ‘Block’: The ‘Tuli Block’ properties, located within the Limpopo Coalfield, are west of the town of Musina and North of Alldays. The R521 (P94-2) road from Alldays, northwards towards the Zimbabwe border at Pontdrift, crosses this area. These properties are situated some 40-50km North of Alldays, 85-95km West of Musina/Beit Bridge and up to 15km South from the Limpopo River (Figure 2). The properties are accessed from the R521 road and by a relatively sparse network of all-weather secondary roads (D2 &854) as well as farm tracks, which branch off the R521 from Alldays. The nearest settlement of significance is Bridgewater, about 15km to the South. The properties form an area of adjoining Rights (5 are contiguous and the 6th is adjacent, with a common join point to the other 5). The ‘block’ is located mainly West of the R521 and partially adjoins the Limpopo River (Botswana border) in the North (3 farms). The Pontdrift-Alldays road crosses the North-eastern corner of the ‘block’. It would appear that some of these properties are located within the area proclaimed as the “Vhembe Game Reserve”, which, it is understood, is an area frequented by certain endangered species (e.g. Wild dogs). This could have serious implications in terms of potential for mining in this area. The location of known parks and reserves, in relation to the Tuli block properties, is shown in figure 13 (see page 16). A further property (Patricia 65MS) to the East of the Alldays road, does not include Coal Rights and is therefore excluded from this study. These properties are shown on the following locality map (Figure 4).
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FIGURE 4: LOCALITY OF THE TULI (LIMPOPO) BLOCK PROPERTIES. 3. GENERAL GEOLOGICAL SETTINGS:
3.1. Soutpansberg coalfield: The Soutpansberg Coalfield is situated North of the Soutpansberg Mountain Range in the Limpopo Province (Figure 5).
FIGURE 5: LOCATION OF THE SOUTPANSBERG COALFIELD IN SOUTH AFRICA.
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The coal occurrences in the Soutpansberg and Venda-Pafuri Coalfields arc regionally across the Northern part of South Africa. Coal-bearing strata are inconsistently developed within this area with the coal occurrences being typically bright coal/carbonaceous mudstone associations, forming composite coal ‘zones’. The coalfield is characterised by intensive faulting with the result that the original depositional basin has been ‘sliced up’ into a number of discrete structural “blocks”. Dislocation of the “coal measures” both parallel to strike and at a high angle thereto is thus common. Syn-depositional faulting has to some degree controlled the size of individual coal “blocks” and has affected coal distribution significantly. The result is the tendency for coal quality and thickness to vary markedly from place to place, due to varying local depositional environments. The thickest coal zone in this region is to be found some distance to the East of Waterpoort, comprising up to nine composite seams separated by carbonaceous mudstone, over a stratigraphic interval of about 40m. Over the entire region, but particularly in the Waterpoort area, the coal-bearing sequences are severely affected by faulting. A progressive rank increase eastwards across the coalfield is indicated. The greater Soutpansberg Coal Province, comprising the Soutpansberg and Venda-Pafuri Coalfields may be divided into a number of sectors, as follows:
• Mabelebele Sector (West of Waterpoort) ; • Mopane Sector (between the towns of Mopane and Waterpoort); • Tshipise Sector (located East from Mopane in the area of the town of
Tshipise); • Pafuri Sector (East of the Tshipse sector, terminating at the boundary of the
Kruger National Park in the East). These are illustrated in the figure below (Figure 6).
FIGURE 6 – SHOWING THE VARIOUS SECTORS OF THE SOUTPANSBERG & VENDA-PAFURI COALFIELDS.
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A Generalised stratigraphy for this coalfield is illustrated in Figure 7, below. The coal-measures are preserved within down-faulted (graben-type) structures, along the North-eastern edge of the Kaapvaal Craton. The Karoo Sequence rocks, in the Soutpansberg Coalfield overlie Soutpansberg-age rocks and dip at 3°-20° northwards, terminating against East-West trending strike faults forming the northern margins of the coalfield. The region is severely faulted with displacements of 60m-200m. The coal deposits therefore occur in a series of ‘horst and graben’ structures. Additional subordinate faults sets at right angles to those mentioned above, sub-divide the eastern portion of the coalfield into numerous irregular-sized blocks. The nature of the coal deposits ranges from, in the West, multi-seam coal-mudstone associations (coal zones), some 40m thick, with seven discrete Coal Zones (i.e. Mabelebele Sector & Waterpoort area), to 2 separate seams in the East (Pafuri Sector, Tshikondeni area), where an upper seam some 3m thick and a lower seam about 2m thick occur separated by approximately 100m of sediments. Where developed, the coal component of the seams/zones is generally high in vitrinite content and the coal rank (carbon/energy content) steadily increases towards the East as well as to a more limited extent with depth.
FIGURE 7: GENERALISED STRATIGRAPHIC COLUMN FOR THE SOUTPANSBERG COALFIELD SHOWING COAL ZONE NOMENCLATURE.
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The Soutpansberg properties, super-imposed on the regional geological map of the area, are illustrated below in figure 8.
FIGURE 8: GEOLOGICAL MAP SHOWING THE OUTLINE OF THE SOUTPANSBERG BLOCK PROPERTIES. By reference to the geological map of this area (above) it is clear that the farm Gezelschap 395MS is unlikely to have potential for coal deposits (located outside of the defined boundary of the coal-bearing strata). The geological structure is not well defined due to a lack of borehole data. Based on regional geological mapping, a number of mainly East-West to North-East – South-West trending faults are indicated. Some transverse cross-faults (SE-NW) may also occur. It is envisaged that a series of longitudinal “Horst” & “Graben”-type structures, orientated mostly WSW-ENE, divide the coal-bearing area into a series of sub-blocks at differing elevations. The coal-bearing area is fault-bounded toward the North-west. Attempts to elucidate the structure did not meet with success due to paucity of data and there are several possible permutations which could apply. A number of potential fault structures were identified and the trends of these are indicated (in dark blue) on Figure 8 above. The potential for open-castable coal is likely to be restricted to the Southern section of the coal-bearing area, should suitable “horst”-type structures exist in this vicinity. Most of any exploitable resources are expected to only be amenable to underground mining, however.
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A number of dykes have been mapped on the Farm Longford 354MS and it may be anticipated that some devolatilization of the coal will be encountered concerning coal deposits underlying that property. These dykes appear to have an arced form and may represent a section of a “ring dyke” structure. On the adjoining property Cygnus 549MS, potentially open-castable coal is indicated by certain boreholes located along the boundary with Berenice548MS. The latter farm is therefore considered as a good ‘target’ to search for shallow coal occurrences. The geological structure needs to be investigated by drilling so as to determine which areas might be more favourable for the development of shallower coal occurrences. No known surface cultural or cadastral features (e.g. Game reserves, etc.), which could influence coal exploitation, are noted with respect to these properties. In the light of current geological knowledge, these properties appear to offer significant potential for the establishment of coal resources which may become economically exploitable in the foreseeable future.
3.2. Limpopo coalfield: The Limpopo Coalfield is situated in the northernmost extremity of the Limpopo Province of South Africa, West of the town of Musina (Messina) (Figure 9). The coal is contained in a basinal structure of Karoo rocks (the Limpopo Basin Coal Province) which straddles the boundaries of the RSA, Botswana and Zimbabwe.
FIGURE 9: LOCATION OF THE LIMPOPO (TULI) COALFIELD IN SOUTH AFRICA.
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The Limpopo Coalfield, which is also referred to as the Mapungubwe Coalfield, occurs in a rather arid and sparsely inhabited territory remote from any industrial activity. The coalfield topography is rather flat to gently undulating with a gentle northward slope towards the broad Limpopo valley. The coal-bearing formations of the Limpopo Basin were first described by Trevor and Mellor (1908) following Geological reconnaissance of the region in 1907, but the presence of coal remained undetected for many years. The coal seams tend to sub-outcrop under a thick layer of superficial deposits and the presence of coal was first detected in water boreholes The coal zone is estimated to be up to 15m thick, consisting of up to 22 thin coal bands alternating with mudstone, to form composite ‘seams’. The coal is not exposed and has not been exploited to date. In South Africa the deposits have an overall dip of 1 to 3° to the North-west, due in part to tectonic dip of the strata (1 to 2°), and in part to downthrow along faults, which tend to parallel the long axis of the basin. In common with the smaller Limnic Karoo basins located outside of the main Karoo basin to the South, this basin is fault-controlled, the deposition of the Karoo sediments seemingly having occurred concurrently with the movement on the pre-existing faults. This has resulted in a truncated lithological sequence which is substantially different to that in the main Karoo Basin. The coal seams are developed within coal/mudstone ‘zones’ and are overlain by strong, compact, mudstones with minor sandstone beds. Weathering of the mudstones reaches to depths of 20 to 30m. The extent of the basin of Karoo rocks south of the Limpopo River is defined by an erosional boundary. From this limit, both the pre-Karoo surface and the Karoo strata dip at a shallow angle of up to 2º towards the North and North-west, however, some of the apparent dip could be due to minor faulting. No evidence of major faulting is indicated by the available exploration results. A number of significant dykes, up to 20m wide, strike East-West across the area and are usually manifested on surface by low ridges of indurated sandstone. Several smaller dykes, with similar orientation, are indicated by magnetometric work. The orientation of the Bottom coal zone is expected to reflect the pre-Karoo Basement topography to a large extent, since the base of this coal zone occurs mainly within 5 to 15m of the basement surface. The Coal-bearing Zone is located at depths of less than 50 m along the southern margin of the basin, but increases to over 300 m deep towards the Limpopo River valley. The Coal Zone is present throughout the Karoo basinal trough south of the Limpopo River, but shows more restricted development in the extreme west and along it’s extension into Botswana. The area where indicated exploitable coal seams occur is generally considered to be restricted to the South-eastern part of the Ecca Group sediments within the Karoo trough.
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The Coal –bearing zone in the latter area, occurs at depths ranging from 20m in the South to 200m or more in the North the average depth of the coal being about 110 m. The Coal Zone is approximately 10m thick, consisting of interbedded coal and carbonaceous shale/mudstones, typical of the Volksrust Formation coal deposits as encountered elsewhere in the region. In the potentially exploitable coal zone area, three stratigraphic units can be recognised in the Middle Ecca Formation, known as Top, Middle and Bottom Coal Units (‘seams’). A typical borehole stratigraphic column and Coal Zone profile (showing identified “ply’s” or units) is shown in Figure 10.
FIGURE 10: TYPICAL BOREHOLE STRATIGRAPHIC COLUMN AND COAL ZONE PROFILE FOR THE SOMERVILLE PROPERTY.
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The coal-bearing units within this coalfield are, in general, comprised as follows: • Top: 2m to 3m thick, containing 55% to 65% coal, but rather variable and
impersistent in nature; • Middle: 3m to 5.5m thick, containing 20% to 45% coal; • Bottom: 1.5m to 3.5m thick, containing 65% to 80% coal. This Zonation is illustrated in the figure below (Figure 11): Two exploitable coal ‘sections’ between 1 & 3m thick are contained within the 10m wide ‘coal zone’. These ‘sections’ are contained in the Basal unit and the Upper unit of the Coal zone, the Middle Unit being mostly of shale/mudstone. The relatively flat-lying seams are conducive to exploitation by opencast and underground mining methods.
FIGURE 11: ZONATION OF COAL ZONES IN LIMPOPO COALFIELD. The principal coal development of economic importance is contained in the Basal Section. In a few cases the entire Basal Unit is mineable but usually only a portion forms the “Mineable selection” and is referred to as the ‘Basal Seam’, located mostly at the very bottom of the Basal Unit. It has an average thickness of 1.6m and consists of thinly banded, mixed, bright and dull coal with numerous thin mudstone partings. The partings are generally lensoidal, erratic and laterally impersistent. The ‘Upper Seam’ or potentially workable portion of the Upper Unit/section is confined to the central part of the anticipated potentially mineable area. The physical characteristics of the seam, including the roof conditions, resemble those of the Basal Seam except that the selection width is somewhat narrower with an average of just 1.2m.
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Since the coal is interbedded with thin mudstone/shale bands it can be separated by washing at a high relative density. The coal has to be crushed to a small size to liberate the vitrinite from the finely disseminated mineral matter. Beneficiation and coking tests have confirmed that the clean coal is of high quality and has potential for producing a reasonable quality coke product. Certain areas in the southern and North-eastern parts of the Coalfield have been investigated of late in terms of definition of potential open-castable deposits. No coal mining has, as far as is known, been done to date in this coalfield. Coal of Africa Ltd have recently been awarded a Mining Right for the Overvlakte-Semple area, adjoining the Limpopo River in the North-eastern part of the coalfield and mining is planned to start during 2010. The Tuli Block properties, super-imposed on the regional geological map of the area, are illustrated in figure 12, below.
FIGURE 12: GEOLOGICAL MAP SHOWING THE OUTLINE OF THE TULI BLOCK (LIMPOPO) PROPERTIES. It may be envisaged that at the northern-eastern edge of the Tuli Block properties (e.g. Farm Pontdrift 12MS) the depth to the Coal zone may be of the order of 350m (assuming an average dip of 1.5º) and therefore the southern portion (and possibly also the western margins e.g. Farm Ratho 1MS) of this ‘block’ are envisaged as
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having the greater potential for potentially exploitable coal. This view is borne out by reference to the Geological map of the area, which indicates the presence of Stormberg series (K4) strata as bedrock in some places towards the boundary between RSA & Botswana in the North. This is presumably why no known prospecting has previously been undertaken further to the North and North-west of Somerville farm. It is clear from the foregoing, that the potential for open-castable coal in this area is likely to be very limited (current indications suggest that this would be restricted to a zone in the South-western corner of the Somerville property). The remainder of any mineable coal deposits are thus likely only be amenable to underground exploitation. Underground recovery of coal from the Limpopo coalfield-type deposits is likely to be difficult and expensive and would not be able to compete with opencast-type operations. In view of the uncertainty as to coal depth along the Western part of the Tuli block properties, (where areas of more recent geological ‘cover’ obscure parts of the bedrock geology) due to lack of detailed structural knowledge, the possibility of locating other areas of relatively shallow coal cannot be excluded. In this regard prospecting at selected sites on the farms Ratho 1MS & Montrow 8MS will be necessary to investigate this issue. It would appear that some of these properties are located within an area proclaimed as the “Vhembe Game Reserve”. This could have serious implications in terms of potential for mining in this area. A map showing the parks and reserves of the area and the Tuli Block properties is shown below (Figure 13).
FIGURE 13: LOCATION OF THE TULI BLOCK PROPERTIES IN RELATION TO PARKS AND GAME RESERVES OF THE AREA.
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In the light of available geological data and with reference to known and inferred geological trends, the Tuli block properties do not appear particularly attractive for exploitation. This situation is exasperated by the infrastructural and other constraints applicable to this area. However, since it is unclear as to what extent the available geological data and information reflect the actual geological conditions in the block as a whole, this area warrants further attention. 4. BOREHOLE AND COAL QUALITY SUMMARY
4.1. Soutpansberg Resource area In the Soutpansberg area a total of 8 boreholes were available for geological modelling. One borehole, SC47001, is located south of the properties under investigation, and did not intersect any coal, so was discarded from the modelling process. Refer to figure 14 for borehole positions relative to the farm portions and geological map. Borehole CN54902 did not intersect coal, and W128 had no supporting detail to enable coal zone correlation and was therefore excluded from the modelling process. Raw and washability analyses are available for the CN borehole series only. The coal zones were however only partially sampled, and therefore accurate estimations on coal quality and detailed washability modelling are not possible at this stage. Furthermore these holes are on the property boundary and located on adjacent properties, further adding to low levels of accurate estimations for properties under investigation. They do however give a good indication on expected coal quality in the local Soutpansberg area.
FIGURE 14 GEOLOGICAL MAP SHOWING THE OUTLINE OF THE SOUTPANSBERG BLOCK PROPERTIES AND BOREHOLE POSITIONS.
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Available borehole data pertaining to these Soutpansberg properties and hence, local geological data, is restricted to 2-boreholes within the block of ground concerned (the farms Longford 354, Matsuri 358, Doorvaard 355, Celine 547, Berenice 548 & Gezelschap 395). The Soutpansberg coal deposits are classified as a ‘thick interbedded coal seam’-type deposit [SAMREC Code (2007) and SANS10320:2004]. Gemecs have compiled, processed, summarised and modelled all available geological information for these properties. Detailed borehole data pertaining to drilling on the farm Cygnus 549MS, which adjoins the eastern end of the ‘block’, located to the South of farm Berenice 548MS, is available and was utilised as an indication of the nature of the coal deposits which may be anticipated in this general area. Various terminologies concerning coal “zone” nomenclature have been used in this area. These include (in descending order of occurrence):
• Coal 1, Coal 2, Coal 3, Coal 4 (e.g. B/H CN549/01 & B/H CN54904); • Zone C, Zone B (with splits B-Upper, B-Middle, B-Lower), Zone A (e.g. B/H
CN54903A & CN54905); The revised correlation of the coal zones in the boreholes on Cygnus 549MS & Celine 547MS to comply with the standard nomenclature for the Mopane sector of this coalfield, with the “coal zones” numbered in descending order as S3, S2, S1, is shown in Table 1 below and on the following figure (Figure 15): TABLE 1: “COAL ZONE” DESIGNATION CODES APPLIED IN BOREHOLES DRILLED ON CYGNUS 549MS & CELINE 547MS
B/H # FROM TO ZONE THICK Remarks: CN54901 41.60 50.40 S2 8.80 Coal zones include internal waste partings
CN54901 58.62 62.77 S1 4.15
CN54902 NO COAL /behind sub-outcrop
CN54903 161.64 167.37 S3 5.73 Unit coal plies only Data from re-drill CN54903A
CN54903 173.83 186.58 S2 12.75 Data refers to re-drill hole CN54903A
CN54903 192.84 193.60 S1 0.76 Data refers to re-drill hole CN54903A
CN54904 20.53 22.55 S3 2.02
CN54904 34.05 37.60 S2 3.55
CN54904 62.94 64.33 S1 1.39 Correlation of ‘Zone’ uncertain (?local seam lower in sequence)
CN54905 133.76 137.15 S3 3.39
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CN54905 146.76 154.17 S2 7.41
CN54905 160.68 166.55 S1 5.87
Y127 109.29 110.15 S3 0.86
Y127 115.86 116.69 S2 0.83
Y127 121.99 122.00 S1 0.01
W128 173.45 175.76 ?? 2.31 Correlation uncertain (?S2 Zone)
W128 202.99 203.65 ?? 0.66 Correlation uncertain (?local seam) A typical borehole stratigraphic column and Coal Zone profile (showing identified “Coal Zones’) is shown in Figure 15. Correlation of the various coal horizons and zones intersected in the boreholes in this locality is still relatively uncertain. The use of the designators S3, S2, S1 must be considered as provisional until addition information becomes available and has been utilised merely in order to establish general correlation between the coal zones encountered in the boreholes.
FIGURE 15: TYPICAL PROFILE FOR THE COAL MEASURES IN THIS AREA SHOWING COAL ZONE NOMENCLATURE (based on drilling on the adjoining property Cygnus 549).
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Tables below summarize some of the major properties of the coal zones as observed in the borehole data. Table 3 indicates that the Lower coal zone (Zone S1) comprises mostly “coal’, whilst the Middle coal zone (Zone S2) is rather variable in lithological composition. Insufficient intersections are available to pass comment on the Upper coal zone (Zone S3). TABLE 2: BOREHOLE COLLAR ELEVATIONS, DEPTH & THICKNESS OF ‘COAL ZONES’ & ‘FLOOR’ ELEVATIONS, FOR BOREHOLE INTERSECTIONS ON CYGNUS 549MS & CELINE 547MS.
Borehole #
Collar Elevation
(m) (amsl)
Depth to/ Thickness of “Coal
Zone” S3 (m)
Parting
(m)
Depth to/ Thickness of “Coal
Zone” S2 (m)
Parting
(m)
Depth to/ Thickness of “Coal
Zone” S1 (m)
Elevation of base of “Coal
Zone” S2 (m)
Remarks
CN54901 713.8 - - 41.6/8.80 8.2 58.6/4.15 663 S3-Zone not present
CN54902 718.1 NO COAL ZONES Behind sub-outcrop
CN54903A 705.6 161.6/5.73 6.5 173.8/12.75 6.2 192.8/0.76 519
CN54904 688.6 20.5/2.02 11.6 34.1/3.55 25.2 62.9/1.39 651
Potential opencast/ S1-Zone
correlation uncertain.
CN54905 704.4 133.8/3.39 9.6 146.8/7.41 6.5 160.7/5.87 550
Y127 810.4 109.3/0.86 5.7 115.9/0.83 5.3 122.0/0.00 694
W128 706.0 - - 173.5/2.31 27.2 203.0/0.66 530 Correlation uncertain.
TABLE 3: AVERAGE RATIO OF COAL TO NON-COAL “PLYS” WITHIN THE COAL ZONE ON CYGNUS 549MS (in terms of intersection thickness).
Coal Zone S3:
Coal Zone S2:
Coal Zone S1
Remarks:
Borehole Number: Total
(m) Coal (m)
% Coal
Total (m)
Coal (m)
% Coal
Total (m)
Coal (m)
% Coal
CN54901 - - - 8.80 3.35 38% 4.15 4.15 100%
CN54902 No Coal Behind sub-outcrop.
CN54903A 5.73 3.25 57% 12.75 5.72 45% 0.76 0.76 100%
CN54904 2.02 1.89 94% 3.55 1.26 35% 1.39 1.39 100%
CN54905 3.39 1.93 57% 7.41 5.23 71% 5.87 4.51 77%
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TABLE 4: SUMMARY OF COMPOSITE RAW COAL ANALYTICAL DATA FOR SAMPLED COMPONENTS OF THE “COAL ZONES” ON CYGNUS 549MS (Raw coal air-dry Analyses).
COAL ZONE
Average Sampled thickness
(m)
No. of
Intersects
CV
(MJ/kg)
ASH (%)
INHERENT MOISTURE
(%)
VOLATILES
(%)
Total
SULPHUR (%)
Remarks:
S3 2.01 3 13.2 55.1 1.7 19.3 - Incomplete TS data
S2 1.21 4 15.8 48.3 1.5 21.3 1.83
S1 3.87 4 15.2 49.7 1.4 21.1 - Incomplete TS data
ALL 8.36 11 14.5 51.6 1.5 20.4 -
It may be observed from the above tables that the overall quality of the raw coal from the sampled portions of the Coal zones is relatively poor, with the Top Coal (S3) zone being particularly inferior in quality. Washabilty analyses were conducted on samples from the Cygnus borehole intersections. Composite data for the coal zones was generated and is shown on the following tables (Table 5). TABLE 5: COMPOSITE WASHED COAL ANALYTICAL DATA FOR THE 1.40RD FLOAT FRACTION FOR THE SAMPLED SECTIONS OF ‘COAL ZONES’ FROM BOREHOLE INTERSECTIONS ON CYGNUS 549MS (Raw coal air-dry Analyses).
COAL ZONE
Total Sampled thickness
(m)
Yield (%)
CV
(MJ/kg)
ASH (%)
INHERENT MOISTURE
(%)
VOLATILES
(%)
Total
SULPHUR (%)
Swelling
Index Number
S3 2.04 14.7 30.6 11.8 1.6 34.6 0.93 6-8
S2 1.21 18.9 30.9 13.2 1.7 35.1 0.83 7-8
S1 2.31 9.4 30.6 11.8 1.6 35.1 0.62 6-9
Average - 13.4 30.7 12.2 1.6 34.9 0.81 -
It can be seen from the above tabulation (Table 5) that Swelling characteristics of the coal are favourable in terms of indicated coking propensity, albeit at a relatively low product yield. It is also noted that the ranges of yields between the individual borehole intersections is quite significant. It is to be noted that some coking properties are also evidenced by the higher density fractions. Certain of the borehole samples were tested for coking properties at RD 1.75 rather than RD 1.40 as was done for the majority of the coal “ply’ intersections. Based on the limited available analytical data (4 individual samples washed at RD 1.75, 2 each from boreholes CN54901 & CN54903A) the swelling index of this fraction may be of the order of 4-6, however, due to the limited data, no conclusions can be drawn as to the coking properties of higher density fractions for the coal zones as a whole. Assuming that this indicated coking ability for the low density fractions of the coal zones applies also to the adjoining and nearby Soutpansberg block properties (where
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no actual borehole sample data are available), these properties are likely to be of interest for further evaluation in terms of metallurgical coal potential. The low yields of a potential metallurgical coal fraction would almost certainly require that a secondary product also be produced (e.g. Steam coal “middling’s” fraction”) in order to make economic extraction feasible. In view of the limited nature of data available, the nature of this data and time constraints for delivery of this report, the investigation of secondary products is precluded. However, indications are that a low-grade product, suitable for power generation, could be obtained once a coking fraction has been removed.
4.2. Tuli Resource area The Tuli Resource area had a total of 6 boreholes available for modelling. The borehole positions relative to the farm portions and geological map are indicated in Figure 16
FIGURE 16: GEOLOGICAL MAP SHOWING THE OUTLINE OF THE TULI BLOCK PROPERTIES AND BOREHOLE POSITIONS. All these boreholes except AA145 intersected coal. These coal units were correlated and roof, floor and thickness models were created for each coal zone. With a single exception only raw coal values for CV and ash were available and quality models were created for each of these values. Based on the available information it would appear that a single “Main Coal Zone” is developed in the boreholes on the Somerville property. This probably represents a close association of the Top, Middle and Bottom Zones, as encountered elsewhere in the vicinity. The “coal zone” ranges from 3.8 to 11.0m in the borehole intersections (5-intersections). One borehole did not intersect coal, but is believed either to be too
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shallow or to have intersected basement rock due to local uplift or a palæo-“high” feature (lithological description is indecisive). The presence of coal underlying the Somerville property may thus be considered as having been demonstrated by drilling, however, insufficient analytical data (lack of washed coal analyses) precludes the evaluation of the potential of the deposit for exploitation. Interpretation based on the data available suggests an overall dip of the strata from South-west towards the North-east across the farm Somerville, which tends to conform to the anticipated local strike direction, but is non-concordant with the coalfield regional trend of South-east to North-west. The picture may well be complicated by faulting however. There would appear to be a general decrease in the “coal zone” thickness down-dip on the property (this conclusion could be influenced by the nature of the available data). A summary of the borehole data pertaining to drilling on the farm Somerville 9MS is provided in the following tables: TABLE 6: BOREHOLE COLLAR ELEVATIONS, DEPTH & THICKNESS OF ‘COAL ZONE’ & ‘FLOOR’ ELEVATIONS, FOR BOREHOLE INTERSECTIONS ON SOMERVILLE 9MS.
Borehole
#
Collar Elevation (m) (amsl)
Depth to top of “Coal Zone”
(m)
Coal Zone thickness
(m)
Depth to base of “Coal
Zone” (m)
Elevation of base of
“Coal Zone” (m)
Remarks
AA133 588.7 97.8 9.21 107.0 482
AA135 599.0 29.1 9.98 39.0 560 Potential opencast.
AA136 578.2 77.6 8.99 86.6 492
AA141 600.0 195.8 3.76 199.6 400
AA144 544.6 114.2 10.97 125.2 419
AA145 580.0 - - - - No coal /?too shallow
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A simplified summary of the principal Coal Zone units is indicated in the following table (Table 7): TABLE 7: INTERPRETED DETAILS OF COAL ZONE UNITS ON SOMERVILLE 9MS.
Borehole
#
TOTAL ‘COAL ZONE’
THICKNESS (m)
TOP MUDSTONE
UNIT (m)
TOP ‘COAL’ UNIT (m)
UPPER PARTING
UNIT (m)
MIDDLE ‘COAL’ UNIT (m)
LOWER PARTING
UNIT (m)
BOTTOM ‘COAL’ UNIT (m)
BOTTOM MUDSTONE
UNIT (m)
AA133 9.21 1.86 0.69 0.44 0.85 2.40 0.81 2.16
AA135 9.98 2.25 0.43 0.81 0.41 3.25 2.42 (1) 0.41
AA136 8.99 1.47 0.62 0.52 0.61 1.75 3.00 (2) 1.02
AA141 3.76 (3) ?? (4) 0.64 2.28 0.08 0.20 0.56 0.00
AA144 10.97 0.19 1.51 2.41 0.67 2.79 1.03 2.37 (1) Split Coal unit - Includes 1.03m “parting” material. (2) Split Coal unit -Includes 0.99m “parting” material. (3) Correlation of Units questionable. (4) Dolerite in “roof” of seam, upper part of Coal measures burnt. TABLE 8: SUMMARY OF ANALYTICAL DATA FOR INDIVIDUAL SUB-ZONES OF THE TOTAL“COAL ZONE” ON SOMERVILLE 9MS (Raw coal air-dry Analyses).
Borehole Number
COAL ZONE
ASH (%)
CV (MJ/kg).
REMARKS
TS 71.9 6.0 MS 70.9 6.7 Incomplete CV data
AA133 BS 53.4 13.8 Incomplete CV data TS 78.4 3.6 MS 76.3 4.4
AA135 BS 59.1 11.2 Incomplete CV data TS 69.4 7.2 MS 76.4 4.3
AA136 BS 53.3 13.8 Incomplete CV data TS 70.1 6.6 MS 78.7 3.5
AA141 BS 80.0 3.0
Heat affected coal due to dolerite intrusion.
TS 78.1 3.7 MS 75.4 4.9
AA144 BS 54.7 13.2 Data
points
15
15
Minimum 53.3 3.0 Average 68.9 7.4
SUMMARY
(TOTAL ‘COAL ZONE’) Maximum 80.0 13.8
Codes: TS = TOP ‘COAL’ ZONE; MS = MIDDLE ‘COAL’ ZONE; BS = BOTTOM ‘COAL’ ZONE
Nb. Available analytical data for the above boreholes are restricted to Raw Coal values as scheduled on a spreadsheet obtained from Council for Geosciences. This schedule is somewhat unusual in that the lower quality “ply’s’ generally have full proximate analyses, whilst some of the indicated better quality “ply’s” only have Ash content values. This leads the possibility that washed coal analyses may have been undertaken on the coal “ply’s’ but not reported. It is clear from table 8 above, that the total coal zone is of a very low quality. It would appear that the best quality material is located in the ‘Bottom Coal Zone’, which observation is consistent with the known situation in this general area. Excluding the borehole intersection which is heat-affected, the average ash content of the bottom
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“Coal” Zone (inclusive of mudstone partings) is 55%, with a heat value of 13MJ/kg compared to the Total “Coal Zone” averages of 69% Ash & 7.4MJ/kg CV. The ‘target’ horizon for investigation is therefore the ‘Bottom Coal Zone’. TABLE 9: COMPOSITE ANALYTICAL DATA – ASH CONTENT (RAW COAL) FOR THE INDIVIDUAL UNITS OF THE COAL ZONE FROM BOREHOLES ON SOMERVILLE 9MS.
Coal unit Average
Total Sampled thickness
(m)
B/H:
AA133 Ash (%)
B/H:
AA135 Ash (%)
B/H:
AA136 Ash (%)
B/H:
AA141 Ash (%)
B/H:
AA144 Ash (%)
Average Total Ash
Content (%)
TSU 1.86 75.4 80.0 80.0 ** ** 78.5 TSS 0.51 63.0 70.1 44.4 70.1 63.0 62.1 MSU 1.29 80.0 80.0 80.0 80.0 77.4 79.5 MSS 0.52 40.7 39.7 63.0 39.7 49.7 46.6 MSL 2.08 80.0 80.0 80.0 80.0 80.0 80.0 BSU 1.08 80.0 68.1 80.0 ** ** 76.0 BSS 1.12 38.5 37.0 41.7 80.0 42.3 47.9 BSL 1.27 ** 80.0 52.6 ** 60.6 64.4 ** = Unit not recorded in borehole intersection. EXPLANATION OF CODES: TSU = TOP MUDSTONE UNIT TSS = TOP ‘COAL’ UNIT MSU = UPPER PARTING MSS = MIDDLE ‘COAL’ UNIT MSL = LOWER PARTING BSU = BOTTOM ’COAL’ UNIT (Upper Split) BSS = BOTTOM ’COAL’ UNIT (Lower split) BSL = BOTTOM MUDSTONE UNIT Nb. Due to missing analytical data for some samples, composites for other analytical values (e.g. CV, Volatiles, etc.), could not be generated. 80% ash content ascribed to not sampled mudstone units. TABLE 10: RATIO OF COAL TO NON-COAL “PLYS” WITHIN THE COAL ZONE ON SOMERVILLE 9MS (in terms of intersection thickness).
Borehole #
Total Coal Zone thickness
(m)
Thickness of Coal “Ply’s” in
Zone (m)
Thickness of Non-Coal “ply’s”
in Zone (m)
Proportion of Coal thickness in Coal
Zone AA133 9.21 2.35 6.86 26% AA135 9.98 2.23 7.75 22% AA136 8.99 3.24 5.75 36% AA141 3.76 1.28 2.48 34% AA144 10.97 3.21 7.76 29%
From the above tabulation (Table 10), based on the available geological sample descriptions, it may be concluded that the percentage of coal within the coal zone is likely to range between 20 & 35%, on a thickness of intersection basis. This equates to an estimated average volumetric relationship of the order of 1 part coal to 3 parts mudstone.
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Estimated mass relationships between coal and non-coal “ply’s” are indicated as being of the following order (% coal within sub-zone interval):
• TOP COAL SUB-ZONE – 8-18% • MIDDLE COAL SUB ZONE – 7-15% • BOTTOM COAL SUB-ZONE – 20-46%
It must be emphasised that care should be exercised in utilising these indicated figures, since they are based on somewhat subjective lithological interpretations of third-party data and unconfirmed assumed densities for the coal and non-coal “ply’s’. Information from historical exploration a short distance to the South-east of the Tuli Block properties, has indicated average yield of the order of 24% at wash RD 1.42 for the bottom section of the coal zone (Bottom Coal unit), with a heat value of 30MJ/kg, indicating that the coking coal yield may be variable in the area or that the Somerville property coal may be somewhat inferior to that of the area as a whole. Since this conclusion is based on scant evidence however, it would require verification by future drilling with proper sampling and full washability analyses. The presence of dolerite in one borehole intersection (B/H AA141-total 15m of dolerite above coal zone) indicates that dolerite intrusives may have affected the coal deposits in some parts of the area. Available information suggests that this occurrence may indicate that this borehole is located close to a dolerite dyke. Since the envisaged level of dolerite activity in this area is anticipated to be of relatively low intensity, this has been interpreted as a localised effect, however, areas of heat-affected coal within the ‘block’ cannot be discounted. In the absence of specific data to the contrary, it may be assumed that a similar distribution of coal deposits to that detected on Somerville could be present throughout the Tuli Block properties. The general trend is of increasing depth to the coal horizons as one moves north-eastwards across this part of the coalfield, due mainly to the regional dip into the depositional basin. The shallowest coal is anticipated along the southern boundary of the block (as evidenced by boreholes on farm Somerville 9MS – (e.g. BH AA135 = 29m to top of coal zone). The depth to the coal in this particular locality is less than may be envisaged based on the general geology and anticipated trends for the area. It is possible that the Somerville deposit is located in an up-faulted area, which could enhance the possibility for potentially opencast or shallow underground exploitation.
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5. COAL RESOURCE ESTIMATES:
5.1. Resource reporting code and categorization Coal quantity and quality estimates are reported in compliance with the JORC code, as well as the Australian guidelines for Estimating and Reporting of Inventory Coal, Coal Resources and Coal Reserves. The personnel responsible for these estimations qualify as Competent Persons in terms of the JORC Code.
FIGURE 17. GENERAL RELATIONSHIP BETWEEN EXPLORATION RESULTS, MINERAL RESOURCES AND ORE RESERVES
5.2. Key estimation assumptions and parameters. In addition to the JORC guidelines, the Australian Guidelines for Estimating and Reporting of Inventory Coal, Coal Resources and Reserves 2003 Edition were used to classify and report coal resources. Resource classes based on borehole spacing is illustrated below in Table 11. Inferred resources are classified up to a drill grid of 4000m between points with sampling information TABLE 11: RESOURCE CLASSIFICATION ACCORDING TO BOREHOLE DENSITY
DRILL GRID (m)
AREA (ha)
DRILLHOLES PER 100ha
RESOURCE CLASS
500 x 500 25 4 Measured 1000 x 1000 100 1 Indicated 4000 x 4000 1600 0.06 Inferred
Due to limited borehole and sampling information, only part of the drilled properties could be classified as inferred resources. The remainder of the farm portions have coal potential, but drilling is needed to confirm the presence of coal seams and related coal qualities. No accurate tonnage estimation and resource classification can be made without borehole or other point observations. In situ coal resources were reported for each coal zone including and excluding the mudstone partings. No minimum coal thickness or quality cut offs were applied at this stage, as more detailed correlation and associated sampling has to be done in order to define resource selections. Geological losses are applied as follow for the two project areas.
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Soutpansberg Area • Inferred Resources 40% • Coal potential 50%
Tuli Area • Inferred Resources 30% • Coal Potential 40%
Higher losses are applied to the Soutpansberg area, due to the known presence of faulting and geological structures within the resource area.
5.3. Quantity and quality of coal resources Gross In-situ resources for the Soutpansberg and Tuli areas are summarised below in tables 12 & 13. Resources are reported for coal zones both excluding and including mudstone partings. Coal resources are only reported for farms and areas covered by exploration drilling. Gross in situ coal resources (excluding major mudstone partings) for the Soutpansberg resource area amounts to 122.0 million tonnes. Gross in situ coal resources (excluding major mudstone partings) for the Tuli resource area amounts to 274.2 million tonnes. In situ tonnes after geological loss amount to 73.2 million tonnes for the Soutpansberg area and 192.0 million tonnes for the Tuli area. Raw coal qualities for the relevant resource areas are presented in table 14. The coal qualities reported are for the sampled coal zones only, and exclude the major mudstone and non sampled partings. Due to limited availability of coal washability data, no modelling was done on coal products and yields.
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TAB
LE 12: IN
SITU
CO
AL R
ES
OU
RC
ES
FOR
THE
SO
UTP
AN
SB
ER
G A
RE
A
SO
UTP
AN
SB
ER
G C
OA
L ZON
ES
ON
LY
FARM
TOTA
L AREA
CLA
SS AREA
CO
AL
COVER
AGE
AVERA
GE SEA
M
THICKN
ESS ESTIM
ATED
RD
GEO
LOGICA
L GRO
SS TO
NNES
TOTA
L TO
NNES
(ha)
(ha) %
S3 S2
S1 S3
S2 S1
LOSS
IN SITU
IN SITU
BEREN
ICE 548 MS
1165 918
96%
2.02 2.38
0.85 1.82
1.76 1.83
40%
83 023 000 49 814 000
CELINE 547 M
S 1681
412 100%
0.73
0.88 0.73
1.82 1.71
1.74 40%
16 907 000
10 144 000
DOORVAARD 355 M
S 1252
225 100%
0.16
2.46 2.97
1.82 1.70
1.80 40%
22 093 000
13 256 000
122 023 000
73 214 000 S
OU
TPA
NS
BE
RG
CO
AL ZO
NE
S IN
CLU
DIN
G M
UD
STO
NE
PA
RTIN
GS
FARM
TOTA
L AREA
CLA
SS AREA
CO
AL
COVERA
GE
AVERA
GE SEA
M
THICKN
ESS ESTIM
ATED
RD
GEO
LOGICA
L GRO
SS TO
NNES
TOTA
L TO
NNES
(ha)
(ha) %
S3 S2
S1 S3
S2 S1
LOSS
IN SITU
IN SITU
BEREN
ICE 548 MS
1165 918
96%
2.78 5.92
0.85 1.96
2.10 1.83
40%
171 288 000 102 773 000
CELINE 547 M
S 1681
412 100%
0.73
2.08 0.73
1.96 2.09
1.73 40%
29 009 000
17 405 000 DOORVAARD 355 M
S 1252
225 100%
0.16
6.67 2.97
1.96 2.09
1.80 40%
44 100 000
26 460 000
244 397 000
146 638 000
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Inde
pend
ent G
eolo
gica
l Rep
ort –
Lim
popo
Coa
lfiel
d A
sset
s
24
May
201
0
30
TAB
LE 1
3: IN
SIT
U C
OA
L R
ES
OU
RC
ES
FO
R T
HE
TU
LI A
RE
A
TULI
CO
AL
ZON
ES
ON
LY
FARM
TO
TAL
ARE
A
CLASS
ARE
A
COAL
COVER
AGE
AVER
AGE SEAM
THICKN
ESS
ESTIMATED RD
GEO
LOGICAL
GROSS
TONNES
TOTA
L TO
NNES
(ha)
(ha)
%
TS
MS
BS
TS
MS
BS
LOSS
IN SITU
IN SITU
PRINCE
SS ROYA
L 10
MS
1579
11
71
100%
0.35
0.84
2.05
2.09
1.89
1.90
30
%
72 767
000
50
937
000
SOMER
VILLE 9 M
S 33
19
2994
10
0%
0.70
0.61
2.26
2.01
1.87
1.85
30
%
201 45
7 00
0 14
1 02
0 00
0
274 22
4 00
0 19
1 95
7 00
0 TU
LI C
OA
L ZO
NE
S IN
CLU
DIN
G M
UD
STO
NE
PA
RTI
NG
S
FARM
TO
TAL
ARE
A
CLASS
ARE
A
COAL
COVER
AGE
AVER
AGE SEAM
THICKN
ESS
ESTIMATED RD
GEO
LOGICAL
GROSS
TONNES
TOTA
L TO
NNES
(ha)
(ha)
%
TS
MS
BS
TS
MS
BS
LOSS
IN SITU
IN SITU
PRINCE
SS ROYA
L 10
MS
1579
11
71
100%
1.22
4.59
2.20
2.23
2.26
2.09
30
%
207 17
3 00
0 14
5 02
1 00
0
SOMER
VILLE 9 M
S 33
19
2994
10
0%
1.94
3.63
2.86
2.20
2.25
2.01
30
%
544 43
2 00
0 38
1 10
2 00
0
751 60
5 00
0 52
6 12
4 00
0
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TABLE 14: RAW COAL QUALITIES FOR SAMPLED PORTIONS ONLY SOUTPANSBERG S3 SEAM
FARM RAW COAL QUALITY
S3 AS CV VM IM FC TS
BERENICE 548 MS 55.1 13.2 19.3 1.7 23.9 -‐
CELINE 547 MS 55.1 13.2 19.3 1.7 23.9 -‐ DOORVAARD 355 MS 55.1 13.2 19.3 1.7 23.9 -‐
SOUTPANSBERG S2 SEAM
FARM RAW COAL QUALITY
S2 AS CV VM IM FC TS
BERENICE 548 MS 43.5 17.7 24.1 1.4 31.0 2.98 CELINE 547 MS 40.1 19.0 25.2 1.7 33.0 1.89
DOORVAARD 355 MS 38.5 19.6 25.6 1.8 34.1 1.87 SOUTPANSBERG S1 SEAM
FARM RAW COAL QUALITY
S1 AS CV VM IM FC TS
BERENICE 548 MS 47.4 16.2 21.7 1.4 29.5 1.47
CELINE 547 MS 40.8 18.6 24.2 1.6 33.4 1.67 DOORVAARD 355 MS 45.4 16.8 22.7 1.4 30.5 1.38
TULI FARMS TOP, MIDDLE AND BOTTOM SEAMS
FARM RAW COAL QUALITY
TS MS BS AS CV AS CV AS CV
PRINCESS ROYAL 10 MS 66.2 8.1 52.3 13.9 53.6 13.6 SOMERVILLE 9 MS 60.3 10.6 50.3 14.5 49.5 15.3
All qualities are reported on an air dried basis. AS – Ash (%) CV – Calorific Value (MJ/kg) VM – Volatile Matter (%) IM – Inherit Moisture (%) FC – Fixed Carbon (%) TS – Total Sulphur (%)
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Based on the average values for the estimated properties, together with the indications of similar coal bearing formations as presented on the geological plan, estimation is made for coal potential (coal excluding mudstone partings and after geological loss) on the neighbouring farms (see Table 15 for detail). These estimations are indicative only, and not based on actual observed point values. For the Tuli area the coal potential amounts to 253.5 million tonnes and at Soutpansberg to an additional 144.0 million Total In situ tonnes. TABLE 15: COAL POTENTIAL FOR COAL ZONES ONLY, (AFTER INFERRED RESOURCES) ON NEIGHBOURING FARMS – SOUTPANSBERG AND TULI AREAS SOUTPANSBERG FARMS (AFTER 50% GEOLOGICAL LOSS)
FARM TOTAL AREA
CLASS AREA
COAL COVERAGE
TOTAL TONNES
(ha) (ha) % IN SITU
BERENICE 548 MS 1165 247 60% 6 981 000
CELINE 547 MS 1681 1269 86% 22 392 000 DOORVAARD 355 MS 1252 1027 99% 49 917 000
GEZELSCHAP 395 MS 803 803 7% 2 224 000 LONGFORD 354 MS 1391 1391 86% 47 327 000
MATSURI 358 MS 1466 1466 41% 23 779 000 152 621 000
TULI FARMS (AFTER 40% GEOLOGICAL LOSS)
FARM TOTAL AREA
CLASS AREA
COAL COVERAGE
TOTAL TONNES
(ha) (ha) % IN SITU
RATHO 1 MS 2012 2012 80% 63 837 000 PARMA 40 MS 2165 2165 80% 68 691 000
PONT DRIFT 12 MS 1251 1251 80% 39 692 000
PRINCESS ROYAL 10 MS 1579 408 100% 15 212 000 MONTROW 6 MS 2563 2563 80% 81 319 000
SOMERVILLE 9 MS 3319 325 90% 11 809 000 280 559 000
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5.4. External influences on Resources In the case of the Tuli block properties, co-location of the surface for some of these properties with a Game Reserve is a potential limiting factor.
5.5. Operational influences on Resources Major challenges affecting the potential of the Limpopo Coalfield, from an exploitation viewpoint, include:
• Potential water shortages; • Presently insufficiently developed infrastructure and industry; • Generally fragile environmental factors; • Challenging mining conditions due to mode of coal occurrence and complex
geological factors. Similar challenges present themselves in the case of the Soutpansberg Coalfield, but to a somewhat lesser degree due to better infrastructure development, less remote setting, and less fragile environmental factors. 6. INTERPRETATION AND CONCLUSIONS The coal deposits of the Tuli (Limpopo Coalfield) Block, South of Limpopo River, and the Soutpansberg (Mopane sector of Soutpansberg Coalfield) Block, NW of Waterpoort, are contained within a coal zone or zones, consisting of layers (‘ply’s’) of good quality coal, intercalated with non-coal material (mudstones). The coal portion of these zones is generally of good quality but often comprises only a relative small portion of the total thickness. Available borehole data are insufficient for a proper evaluation of the potential of all these properties, but available borehole data were used to summarise and report Inferred coal resources where possible. Three coal zones are present in the area of the Soutpansberg block and have potential for production of metallurgical coal low density fractions and a steam coal “middling’s” product. The lowermost of these zones is indicated as containing the highest proportions of Coal to mudstone, although indicated yields (based on the limited historical information) are somewhat disappointing. The middle zone is indicated as of perhaps the most potential in terms of yields of high grade products, although it appears to be of somewhat variable thickness. The attractiveness of the Soutpansberg Coalfield properties is enhanced by the indication of certain areas that could be amenable to opencast exploitation, as well as areas that would be suitable for exploitation by incline shafts, to access the deeper coal deposits. The indicated metallurgical (coking) potential of the lower density coal fractions generated from the coal deposits of this area is a positive factor in favour of further exploration. It should be
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noted that no phosphorus content information (which constituent influences the usefulness of metallurgical coal for coking purposes), is presently available, however. In the Tuli Block a single thick coal zone is developed. Within this zone, a series of lithological units and coal sub-zones can be identified. Three specific coal sub-zones occur, containing “ply’s’ of coal, these being separated by variable thicknesses of mudstone. The Bottom part of the Coal zone appears to contain the better proportion of coal to mudstone, but indicated washed coal yields are anticipated to be low. The remoteness of the Limpopo Coalfield, together with the inferred absence of any presently indicated significant areas which may be amenable to opencast exploitation, limits the attractiveness for coal mining development in the area concerned. In order to effect a proper assessment of the Tuli block area, exploratory drilling will be required. An exploration programme to investigate the nature of occurrence for the coal deposits to the North-west of Somerville farm and to obtain the necessary analytical data to determine viability of exploitation from a point of view of coking propensity (for the lower density coal fractions) and possible “middling’s” steam-raising fractions is necessary. It is concluded that, based on the information and data currently available, the Soutpansberg Block properties to the North-west of Waterpoort, are likely to present better opportunities for identification of potentially exploitable Coal deposits as compared to the Tuli Block properties. This conclusion needs to be verified, however, by further exploration of the areas concerned. Exploratory drilling is required to further investigate these properties and to confirm the preliminary indications as to coal distribution, coal quality and deposit quantities as outlined herein. Full metallurgical coal tests will be required on samples from any future drilling. The future development of the Soutpansberg Coalfield depends on some capital and infrastructure development and is characterized by complex structural geology. The fact that the Tshikondeni Mine is actively exploiting high quality coals, under similar geological conditions, in the Pafuri Coalfield, using underground methods, demonstrates that these challenges can be overcome, if the resource is of sufficient size and quality. In the developing environment of higher prices and relative scarcity of coals with reasonable coking properties, the Soutpansberg Coalfield offers coal producers an opportunity for exploitation in spite of the applicable logistical problems. Any coal producer in the Tuli Block and Soutpansberg coalfield would necessarily require substantial base-load off-take agreements for markets in relatively close proximity to the coal resource, before the more distant markets could be economically supplied.
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South Africa's current electrical power situation and developing demand, together with the increasing global demand for metallurgical quality coal, requires serious strategic re-assessment of coalfields that were previously considered uneconomic for exploitation due to being too remote. In the current South African context, competing with producers in the Witbank, Highveld and Mpumalanga coalfields, is impeded on the basis of transport costs, for both the domestic industrial market and the export market. However, should a regional demand for such coal be created by power generation and/or industrial (e.g. Cement-making, steel-manufacture, ferrochrome, brewing, etc.) applications, this coalfield could be seriously considered as feedstock source for such coal. In the light of The South African Government's infrastructure development plans, which included substantial foreseen investment in road and rail infrastructure in the Limpopo Province, with the aim of spurring economic development in the region, the Limpopo (Tuli) and Soutpansberg properties under consideration, warrant further investigation. The relative attractiveness of the Soutpansberg area properties as compared to those in the Tuli suggests that exploration efforts would best be focussed on the Soutpansberg properties.
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7. REFERENCES BARKER, O, 1999. “A Techno-economic and historical review of the South African Coal Industry”. CADLE, A B, 1982. “Late Palæozoic Coal bearing depositional Systems of the Karroo Basin” - unpublished lecture notes, Univ. Witwatersrand, Johannesburg. DIX, O R, 1984. “Limpopo Coal – Mapping and drilling results” - unpublished report, Southern Sphere Mining & Development Co. Ltd, Johannesburg. DE JAGER, F S J, 1976. “Coal” - in Mineral Resources of the Republic of Southern Africa, Department of Mines, Geological Survey, Government Printer, Pretoria (ISBN 0 621 03464 9), p289-353. DE JAGER, F S J, 1986. “Coal Occurrences of the Central, North-western, Northern and Eastern Transvaal – in Mineral Deposits of Southern Africa, Geological Society of Southern Africa, Johannesburg (p2047-2055). DUGUID, K B, 1980-82. “Coal and Coal exploration in Zimbabwe”, Chamber of Mines Journal, Zimbabwe. LOXTON, HUNTING & ASSOCIATES, “Report on the Coalfields of South Africa” – unpublished report, Southern Sphere Mining & Development Co. Ltd, Johannesburg. ORTLEPP, G J, 1986. “Limpopo Coalfield” – in Mineral Deposits of Southern Africa, Geological Society of Southern Africa, Johannesburg (p2057-2061). PETRICK, A, 1975.‘Report of the Commission of Inquiry into the Coal Resources of the Republic of South Africa’, Government Printer, Pretoria (ISBN 0 621 02439 2). SNYMAN, C P, 1998, “Coal” - in The Mineral Resources of South Africa, Geological Survey, Government Printer, Pretoria (ISBN 1 875 061 52 5), p136-205. WYBERG, W J, 1928. “The Coal Resources of the Union of South Africa”, Memoir #19 Vol.III, Geological Survey, Department of Mines & Industries, Government Printing & Stationery Office, Pretoria.
INDEPENDENT COMPETENT PERSONS REPORT 2
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6
ANNEXURE A:
LISTING OF THE BONO LITHIHI PROPERTIES.
(COAL RIGHTS)
FARM NAME & NUMBER AREA (Hectares)
1) BERENICE 548 MS 1164,8184 2) CELINE 547 MS 1681,6593 3) DONCASTER 414 MS 1065,7985 4) DOORVAARD 355 MS 1252,2898 5) DUINEN 419 MS 891,7519 6) GEZELSCHAP 395 MS 803,5505 7) HASTINGS 485 MS 2962,6271 8) LONGFORD 354 MS 1391,2464 9) MATSURI 358 MS 1466,6355 10) MONMOUTH 294 MS 1409,8327 11) SCOT 465 MS 3314,4471 12) SECRABJE 470 MS 627,04 13) SMITHFIELD 456 MS 1117,0776 14) TREKPAD 455 MS 1124,6422 15) TROY 458 MS 479,5137 16) TWFELFONTEIN 483 MS 2938,1917 17) VRIENDSCHAP 460 MS 545,7000 18) WINTERSVELD 427 MS 1077,9241 19) RATHO 1 MS 2012,5561 20) PARMA 40 MS (? 5MS) 2165,6744 21) PONT DRIFT 12 MS 1251,1577 22) PRINCESS ROYAL 10 MS 1579,5778 23) MONTROW 6 MS 2563,0178 24) SOMERVILLE 9 MS 3319,4883
[To Accompany Geological CPR on the Coal deposits of the Tuli (Limpopo) & Soutpansberg
blocks, prepared for Universal Coal PLC by GEMECS (Pty) LTD March 2010]
INDEPENDENT COMPETENT PERSONS REPORT 2
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The Witbank projectsare all amenable toopen pit mining with a low strip ratioand coal located closeto the surface
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7. FINANCIAL INFORMATIONThe principal effect of the Offer will be to:
• increase cash reserves by approximately $18,059,627
immediately after completion of the Issue and estimated
expenses of the Issue; and
• increase the number of Shares on issue from
118,999,432 Shares as at the date of this Prospectus,
by 76,923,077 Shares to a total issued share
capital of 195,922,509.
Set out below is:
• an unaudited consolidated statement of financial position
of the Company as at 31 March 2010; and
• an unaudited pro-forma consolidated statement of
financial position of the Company as at 31 March 2010
incorporating the effect of the Offer.
Pro forma historical statement of financial position at 31 March 2010
31 March 2010
£ Sterling
31 March 2010
$ Au
Pro forma Adjustments
$ Au
31 March 2010
$ Au
2(a) 2(b) 2(c) 2(d)
Current assets
Cash and cash equivalents 1,001,645 1,642,397 1,359,892 20,000,000 (1,940,373) 21,061,916
Trade & other receivables 105,373 172,780 - - 172,780
Total current assets 1,107,018 1,815,177 1,359,892 20,000,000 (1,940,373) 21,234,696
Non Current assets
Intangible assets 2,960,351 4,854,088 - - - 4,854,088
Property, plant & equipment 6,791 11,135 - - - 11,135
Investment in associates 781,141 1,280,837 - - - 1,280,837
Total non-current assets 3,748,283 6,146,060 - - - 6,146,060
Total assets 4,855,301 7,961,237 1,359,892 20,000,000 (1,940,373) 27,380,756
Current Liabilities
Trade & other payables (115,477) (189,348) - (189,348)
Total liabilities (115,477) (189,348) - (189,348)
Net assets 4,739,824 7,771,889 1,359,892 20,000,000 (1,940,373) 27,191,408
Equity
Share holder equity – parent 4,832,947 7,924,583 1,359,892 20,000,000 (1,940,373) 27,344,102
Non controlling interest (93,123) (152,694) - - (152,694)
Total equity 4,739,824 7,771,889 1,359,892 20,000,000 (1,940,373) 27,191,408
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Notes in relation to pro forma historical statement of financial position
1. Basis of preparation of pro forma historical statement of financial position
The pro forma historical statement of financial position
and notes has been prepared in accordance with
the recognition and measurement requirements of
Australian Accounting Standards and Accounting
Interpretations issued by the Australian Accounting
Standards Board.
The pro forma historical statement of financial position
is presented in a condensed form and does not
contain all the disclosures that are usually provided in
accordance with the Australian Accounting Standards
and the Corporations Act 2001.
2. Pro forma adjustments
a) Conversion from Pound Sterling to Australian Dollars
The Pound Sterling statement of financial position was
converted to Australian dollars in accordance with the
requirements of AASB 121 ‘The effects of changes
in foreign exchange rates’ where the presentation
currency is different to the functional currency.
b) Proceeds from pre-IPO capital raising
The Company completed a pre-IPO capital raising
of 6,537,942 shares at $0.208 a share, raising
$1,359,892, to fund operational and capital raising
costs.
c) Proceeds from IPO
The Company will issue up to 76,923,077 CDI’s
(Chess Depository Interests) for shares at an issue
price of $0.26 each to raise up to $20,000,000.
d) Capital raising cost
The transaction costs of an equity transaction are
accounted for as a deduction from the equity raised
in accordance with Australian Accounting Standards.
The capital raising costs represent registration and
other regulatory fees, legal, accounting and other
professional fees and stamp duties. The capital
raising cost to raise 76,923,077 CDI’s for shares is
$1,940,373.
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8. INVESTIGATING ACCOUNTANT’S REPORT
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INVESTIGATING ACCOUNTANT’S REPORT
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INVESTIGATING ACCOUNTANT’S REPORT
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Unive
rsal Coa
l PLC
Pro form
a historical statemen
t of finan
cial position at 31 March
201
0
31
March
20
10
£ Sterlin
g
31 M
arch
20
10
$ Au
Pro form
a Adjus
tmen
ts
$ Au
31 M
arch
20
10
$ Au
2(a)
2(
b)
2(c)
2(
d)
Curren
t assets
Cash
and
cas
h eq
uiva
lent
s 1,
001,
645
1,
642,
397
1,35
9,89
2 20
,000
,000
(1
,940
,373
) 21
,061
,916
Tr
ade
& o
ther
rec
eiva
bles
10
5,37
3 17
2,78
0
-‐ -‐
172,
780
Total current assets
1,10
7,01
8 1,
815,
177
1,35
9,89
2 20
,000
,000
(1
,940
,373
) 21
,234
,696
Non
Current assets
Inta
ngib
le a
sset
s 2,
960,
351
4,85
4,08
8 -‐
-‐ -‐
4,85
4,08
8 Pr
oper
ty, p
lant
& e
quip
men
t 6,
791
11,1
35
-‐ -‐
-‐ 11
,135
In
vest
men
t in
asso
ciat
es
781,
141
1,28
0,83
7 -‐
-‐ -‐
1,28
0,83
7 To
tal n
on-‐current assets
3,74
8,28
3 6,
146,
060
-‐ -‐
-‐ 6,
146,
060
Total a
ssets
4,85
5,30
1 7,
961,
237
1,35
9,89
2 20
,000
,000
(1
,940
,373
) 27
,380
,756
Curren
t Liab
ilities
Trad
e &
oth
er p
ayab
les
(115
,477
) (1
89,3
48)
-‐
(1
89,3
48)
Total liabilities
(115
,477
) (1
89,3
48)
-‐
(1
89,3
48)
Net assets
4,73
9,82
4 7,77
1,88
9 1,35
9,89
2 20
,000
,000
(1,940
,373
) 27
,191
,408
Equity
Shar
e ho
lder
equ
ity
– pa
rent
4,
832,
947
7,92
4,58
3 1,
359,
892
20,0
00,0
00
(1,9
40,3
73)
27,3
44,1
02
Non
con
trol
ling
inte
rest
(9
3,12
3)
(152
,694
)
-‐ -‐
(152
,694
)
Total e
quity
4,73
9,82
4 7,77
1,88
9 1,35
9,89
2 20
,000
,000
(1,940
,373
) 27
,191
,408
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Notes in relation to pro forma historical statement of financial position
1. Basis of preparation of pro forma historical statement of financial position
The pro forma historical statement of financial position and notes has been prepared in accordance with the recognition and measurement requirements of Australian Accounting Standards and
Accounting Interpretations issued by the Australian Accounting Standards Board.
The pro forma historical statement of financial position is presented in a condensed form and does not contain all the disclosures that are usually provided in accordance with the Australian Accounting Standards and the Corporations Act 2001.
2. Pro forma adjustments
(a) Conversion from Pound Sterling to Australian Dollars
The Pound Sterling statement of financial position was converted to Australian dollars in
accordance with the requirements of AASB 121 ‘The effects of changes in foreign exchange rates’ where the presentation currency is different to the functional currency.
(b) Proceeds from pre-‐IPO capital raising The Company completed a pre-‐IPO capital raising of 6,537,942 shares at $0.208 a share, raising $1,359,892, to fund operational and capital raising costs.
(c) Proceeds from IPO
The Company will issue up to 76,923,077 CDI’s (Chess Depository Interests) for shares at an
issue price of $0.26 each to raise up to $20,000,000.
(d) Capital raising cost The transaction costs of an equity transaction are accounted for as a deduction from the equity raised in accordance with Australian Accounting Standards. The capital raising costs represent registration and other regulatory fees, legal, accounting and other professional
fees and stamp duties. The capital raising cost to raise 76,923,077 CDI’s for shares is $1,940,373.
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The Witbank coalfield
in South Africasupplies more than50% of South Africa’ssaleable export and
domestic coal
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2903619_6
Senior Partner: DM Lancaster Partners: RB Africa NG Alp B Aronoff BA Baillie WR Beech JM Bellew DHL Booysen AR Bowley PG Bradshaw JL Buckland MS Burger-van der Walt A Christie RS Coelho KM Colman CD Coquelle KE Coster K Couzyn Z Dasoo JH Davies BT de Lange JHB de Lange BEC Dickinson DA Dingley HJ du Preez CP du Toit SK Edmundson JC Els MJR Evans GA Fichardt LC Fitton JB Forman CP Gaul CL Giliomee CI Gouws JP Gouws PD Grealy SN Gumede VW Harrison MH Hathorn JS Henning WA Hiepner NA Hlatshwayo XNC Hlatshwayo S Hockey CM Holfeld PM Holloway MGH Honiball SJ Hutton AR James ME Jarvis S Jooste N Joubert M Kennedy A Keyser JE King R Kruger J Lamb PSG Leon DB le Roux L Marais S McCafferty MC McIntosh SI Meltzer CS Meyer AJ Mills JA Milner D Milo A Milovanovic L Morphet NN Moshesh VM Movshovich MM Mtshali MB Nzimande N Paige AS Parry GR Penfold SE Phajane MER Phooko NJA Robb DC Rudman DR Scholtz JW Scholtz KE Shepherd DH Short GM Sibanda AJ Simpson J Simpson MP Spalding L Stein PS Stein LJ Swaine ER Swanepoel A Toefy D Vallabh PZ Vanda GJ van der Linde JP van der Poel ED van der Vyver JG van der Vyver M van der Walt D Venter B Versfeld MG Versfeld TA Versfeld JWL Westgate P Williams RH Wilson M Yudaken Chief Operating Officer: WMH Thompson
Johannesburg • Cape Town • London
10 Fricker Road, Illovo Boulevard
Johannesburg, South Africa, 2196
P O Box 61771, Marshalltown
South Africa, 2107
Docex 26 Johannesburg
Tel +27 (0) 11 530 5000
Fax +27 (0) 11 530 5111
www.webberwentzel.com
The Directors Universal Coal Plc Princes House 38 Jermyn Street London SW1Y 6DN
Date
28 September 2010
Dear Sirs
Legal Opinion regarding the South African Mineral Title held by the South African Subsidiaries of Universal Coal Plc
1. Introduction
1.1 Webber Wentzel Attorneys, in its capacity as South African legal counsel to Universal Coal Plc ("Universal Coal"), has been requested to prepare and issue an opinion regarding the South African mineral title held and in the process of being acquired by the South African subsidiaries of Universal Coal ("Title Opinion"), being Universal Coal and Energy Holdings South Africa (Proprietary) Limited ("UCEHSA"), Universal Coal Development I (Proprietary) Limited ("UCD I"), Universal Coal Development II (Proprietary) Limited ("UCD II"), Universal Coal Development III (Proprietary) Limited ("UCD III") Universal Coal Development IV (Proprietary) Limited ("UCD IV") and Twin Cities Trading 374 (Proprietary) Limited ("Twin Cities").
1.2 This Title Opinion is prepared pursuant to Universal Coal's proposed listing of its shares on the Australian Securities Exchange by way of an initial public offering.
1.3 This Title Opinion will provide a brief legislative background to prospecting and mining rights in terms of South African law and sets out the rights held by the South African subsidiaries of Universal Coal against this background.
1.4 For purposes of rendering this Title Opinion, we examined the documents which were made available to Webber Wentzel Attorneys by UCEHSA, UCD I, UCD II, UCD III, UCD IV and Twin Cities relating to the mineral title held and in the process of being acquired by the respective South African subsidiaries of Universal Coal (the "Documents").
9. Mining Title Opinion
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1.5 Please refer to Annexe A of this Title Opinion for a summary of the mineral title held by the South African subsidiaries of Universal Coal as at the date of this Title Opinion, which summary is to be read with paragraphs 4 - 11 hereof.
1.6 Except for the Documents and information obtained from the South African Deeds Office's electronic records, we have not, for purposes of this Title Opinion, made any other enquiries or searches, save where explicitly noted, concerning UCEHSA, UCD I, UCD II, UCD III, UCD IV and Twin Cities or considered any commercial transactions or arrangements pertaining to the respective South African subsidiaries of Universal Coal.
2. Assumptions
In rendering this Title Opinion, we have assumed:
2.1 the genuineness of all stamps and seals on, and authenticity of all Documents, whether as originals or as copies (whether certified, copied, faxed, electronic or otherwise);
2.2 that all copies (whether certified, photocopied, faxed, electronic or otherwise) of the Documents are true and correct copies of the authentic original of which it is a copy and that both the original and the copies are complete;
2.3 that each of the parties to the respective Documents has the requisite capacity, power and authority and is lawfully able to enter into, to exercise its rights and to perform its obligations under each of the Documents to which it is a party;
2.4 that UCEHSA, UCD I, UCD II, UCD III, UCD IV and Twin Cities have been duly incorporated and registered in the Republic of South Africa in terms of the South African Companies Act, No. 61 of 1973 (the "Companies Act 1973") and are in good standing;
2.5 that the Documents are comprehensive and complete and constitute all of the documentation which is available and necessary to consider to render this Title Opinion;
2.6 that all signatures on the Documents are authentic and each signatory was duly authorised and appointed to properly and validly sign such Document in his or her stated capacity;
2.7 that none of the parties to the Documents are or have been subject to or responsible for any duress or undue influence, misrepresentation, mistake, corruption, collusion or any other circumstances that in law (whether in the Republic of South Africa or elsewhere) would or may render any of the Documents void and/or unenforceable;
2.8 that the conclusion and entry into of any of the Documents is not and would not be deemed to be a fraudulent preference and that all such Documents were entered into in good faith;
2.9 as regards the legality, validity, binding effect and enforceability in the Republic of South Africa of obligations, agreements, Documents, matters or things referred to hereunder, that same are not illegal, invalid, non-binding or unenforceable under
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or by virtue of any applicable laws of any jurisdiction other than the Republic of South Africa;
2.10 the accuracy of any and all representations expressed in or implied by any of the Documents and submitted to Webber Wentzel Attorneys for purposes of rendering this Title Opinion;
2.11 that no review applications or proceedings have been instituted for the review or setting aside of any of the Documents reviewed;
2.12 that no proceedings have been instituted and no other steps have been taken for the winding-up, provisional or final liquidation of or for the appointment of an administrator, judicial manager or liquidator in respect of or in relation to UCEHSA, UCD I, UCD II, UCD III, UCD IV and/or Twin Cities; and
2.13 that no order has been made or issued by a court of any other similar competent authority in relation to the winding-up, liquidation, administration or judicial management of UCEHSA, UCD I, UCD II, UCD III, UCD IV and/or Twin Cities.
3. Qualifications
3.1 This Title Opinion is subject to the following qualifications:
3.1.1 this Title Opinion is given only –
3.1.1.1 with respect to South African law in force as at the date of this Title Opinion, as applied by the South African courts; and
3.1.1.2 in the context of practices and standards developed under South African law which have been applied and observed in light of Webber Wentzel Attorneys' experience as attorneys practising in the Republic of South Africa;
3.1.2 no opinion is expressed or implied as to the laws of any jurisdiction other than the Republic of South Africa and Webber Wentzel Attorneys does not hold itself to be an expert on, or even generally familiar with, any laws other than the laws of the Republic of South Africa;
3.1.3 no opinion is expressed or implied on any legal matters other than the entitlement of UCEHSA, UCD I, UCD II, UCD III, UCD IV and/or Twin Cities to conduct prospecting and/or mining operations in the Republic of South Africa under South African law;
3.1.4 no opinion is expressed or implied on the legal compliance by UCEHSA, UCD I, UCD II, UCD III, UCD IV and/or Twin Cities with their respective memorandum and articles of association, any matters relating thereto and/or their obligations in terms of the Companies Act 1973 and/or the effect of the Companies Act, No. 71 of 2008 when said Act takes effect;
3.1.5 no opinion is expressed or implied as to the possible commercial, technical, financial or tax consequences of any particular arrangement and/or agreement;
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3.1.6 although Webber Wentzel Attorneys will review, comment and report on material permits licences, consents, approvals, authorisations, certificates, applications, registrations and declarations required to be issued to or made in respect of the operation of the entities under review in connection with their respective businesses, Webber Wentzel Attorneys cannot confirm that all requisite permits, licences, consents, approvals, authorisations, certificates, applications, registrations and declarations have been issued to or obtained by such entities;
3.1.7 Webber Wentzel Attorneys shall not be liable for any inaccuracies in the Title Opinion arising from the actions and/or omissions and/or wilful statements or representations on the part of UCEHSA, UCD I, UCD II, UCD III, UCD IV and/or Twin Cities and/or any of their officers, representatives or agents which may take place or which may be made in connection with the preparation and/or rendering of this Title Opinion;
3.1.8 any views which are expressed in respect of, or on the basis of, any law, statute, regulation or similar rules, are expressed in respect of the relevant law, statute, regulation or similar rules as it was in force, and on the basis of the provisions hereof, at the date of this Title Opinion; and
3.1.9 equitable remedies such as interdicts or orders for specific performance are discretionary and will not be granted automatically by a South African court and such remedies will only be granted if certain requirements are satisfied. Nothing in this Title Opinion is to be taken as indicating that such remedy would be available in respect of the obligations of any party under the Documents.
3.2 Webber Wentzel Attorneys will have no liability of any nature, whether in contract, delict or otherwise, for any losses, damages, costs or expenses ("losses") whatsoever and howsoever caused arising from or in any way connected with the Title Opinion, except where such losses are caused by Webber Wentzel Attorneys' gross negligence or wilful default.
3.3 Webber Wentzel Attorneys' liability to Universal Coal and any other person or entity entitled to rely and relying on the contents of this Title Opinion for any reason or purpose in any manner, for any claim whatsoever arising out of, or as a result of, or in connection with the Title Opinion, shall be limited to and shall not exceed an aggregate amount (inclusive of costs) equal to the amount recoverable, and actually recovered, under Webber Wentzel Attorneys' professional indemnity cover, which is at present limited to ZAR1 000 million.
3.4 This Title Opinion is given solely in connection with the Documents relating to the mineral title of the South African subsidiaries of Universal Coal for the benefit and information of Universal Coal in connection with Universal Coal's fund raising and initial public offering of its shares on the Australian Securities Exchange.
3.5 This Title Opinion and the opinions expressed herein (in whole of in part) may accordingly not –
3.5.1 be transmitted or disclosed to or be used or relied upon by any other person or entity whatsoever for any purposes whatsoever; or
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3.5.2 be quoted or referred to or made public or filed with any third party for any purpose whatsoever, with Webber Wentzel Attorneys' written consent, except that reference may be made to this Title Opinion in documentation reasonably required for purposes of the proposed fund raising and initial public offering of Universal Coal's shares on the Australian Securities Exchange.
4. Legislative Background
This paragraph is intended as background information in relation to paragraphs 5 - 10 of this Title Opinion. As such, it is only a summary of the more pertinent provisions of the Mineral and Petroleum Resources Development Act, No. 28 of 2002 (the "MPRDA") and not comprehensive and/or complete. The MPRDA is the principal legislation regulating the grant of rights to conduct prospecting and mining operations in the Republic of South Africa. The MPRDA took effect on 1 May 2004 and repealed the previous mineral legislation, ie the South African Minerals Act, No. 50 of 1991. The MPRDA provides that:
4.1 The mineral and petroleum resources are the common heritage of all the people of South Africa and the State is the custodian thereof for the benefit of all South Africans. As custodian, the State, acting through the Minister of Mineral Resources (the "Minister") may grant, issue, refuse, control, administer and manage any prospecting right or mining right.
4.2 A prospecting right and a mining right granted in terms of the MPRDA are limited real rights in respect of the mineral and the land to which such right relates.
4.3 Subject to the provisions of the MPRDA, the holder of a prospecting right or a mining right, as the case may be, may –
4.3.1 enter the land to which such right relates together with his or her employees and bring onto that land any plant, machinery or equipment and build, construct or lay down any surface or underground infrastructure which may be required for the purposes of prospecting or mining, as the case may be;
4.3.2 prospect or mine, as the case may be, for his or her own account on or under that land for the mineral for which such right has been granted;
4.3.3 remove and dispose of any such mineral found during the course of prospecting or mining, as the case may be;
4.3.4 subject to the National Water Act, No. 36 of 1998 use water from any natural spring, lake, river or stream, situated on, or flowing through, such land or from any excavation previously made and used for prospecting or mining purposes, or sink a well or borehole required for use relating to prospecting or mining on such land; and
4.3.5 carry out any other activity incidental to prospecting or mining, which activity does not contravene the provisions of the MPRDA.
4.4 No person may conduct prospecting or mining operations or commence with any work incidental thereto on any area without –
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4.4.1 an approved environmental management plan (in the case of a prospecting right) or an approved environmental management programme (in the case of a mining right);
4.4.2 a prospecting or a mining right, as the case may be; and
4.4.3 notifying and consulting with the landowner or lawful occupier of the land in question.
4.5 With regards to the requirements to be granted a prospecting right in terms of section 17(1) of the MPRDA, the Minister must grant a prospecting right if –
4.5.1 the applicant has access to financial resources and has the technical ability to conduct the proposed prospecting operation optimally in accordance with the prospecting work programme;
4.5.2 the estimated expenditure is compatible with the proposed prospecting operation and duration of the prospecting work programme;
4.5.3 the prospecting will not result in unacceptable pollution, ecological degradation or damage to the environment;
4.5.4 the applicant has the ability to comply with the relevant provisions of the Mine Health and Safety Act, No. 29 of 1996; and
4.5.5 the applicant is not in contravention of any relevant provision of the MPRDA.
4.6 Section 17(4) of the MPRDA provides that the Minister may, having regard to the type of mineral concerned and the extent of the proposed prospecting project, request the applicant to give effect to the object referred to in section 2(d) of the MPRDA. Please refer to our discussion on the MPRDA empowerment provisions at paragraph 11.1 below.
4.7 The holder of a prospecting right has –
4.7.1 the exclusive right to apply for and be granted a renewal of the prospecting right in respect of the mineral and prospecting area in question once for a period not exceeding three years;
4.7.2 the exclusive right to apply for and be granted a mining right in respect of the mineral and prospecting area in question; and
4.7.3 subject to obtaining the requisite consent in terms of section 20 of the MPRDA, the exclusive right to remove and dispose of any mineral to which such right relates and which is found during the course of prospecting.
4.8 With regards to the requirements to be granted a mining right in terms of section 23(1) of the MPRDA, the Minister must grant a mining right if –
4.8.1 the mineral can be mined optimally in accordance with the mining work programme;
4.8.2 the applicant has access to financial resources and has the technical ability to conduct the proposed mining operation optimally;
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4.8.3 the financing plan is compatible with the intended mining operation and the duration thereof;
4.8.4 the mining will not result in unacceptable pollution, ecological degradation or damage to the environment;
4.8.5 the applicant has provided financially and otherwise for the prescribed social and labour plan;
4.8.6 the applicant has the ability to comply with the relevant provisions of the Mine Health and Safety Act, No. 29 of 1996;
4.8.7 the applicant is not in contravention of any provision of the MPRDA; and
4.8.8 the granting of such right will further the objects referred to in sections 2(d) and (f) and in accordance with the charter contemplated in section 100 and the prescribed social and labour plan.1
4.9 The holder of a mining right has the exclusive right to apply for and be granted a renewal of the mining right for periods which may not exceed 30 years at a time in respect of the mineral and mining area in question subject to meeting the requirements of the MPRDA.
4.10 With regards to the transferability and/or encumbrance of prospecting and mining rights, section 11(1) of the MPRDA provides that a prospecting right or a mining right or an interest in any such right, or a controlling interest in a company or close corporation, may not be ceded, transferred, let, sublet, assigned, alienated or otherwise disposed of without the written consent of the Minister, except in the case of a change of a controlling interest in listed companies. Section 11(2) of the MPRDA provides that the consent to the transfer of a prospecting or a mining right must be granted if the cessionary, transferee, lessee, sublessee, assignee or the person to whom the right will be alienated or disposed of –
4.10.1 is capable of carrying out and complying with the obligations and the terms and conditions of the right in question; and
4.10.2 satisfies the requirements contemplated in section 17 (requirements for the grant of a prospecting right) or 23 (requirements for the grant of a mining right) of the MPRDA, as the case may be.
4.11 With regards to the cancellation or suspension of a right granted in terms of the MPRDA, the MPRDA provides as follows:
4.11.1 Section 47(1) of the MPRDA provides that, subject to sections 47(2), (3) and (4), the Minister may cancel or suspend any prospecting right or mining right if the holder thereof:
1 Sections 2(d) and (f) of the MPRDA provide that the objects of the MPRDA are inter alia, to substantially and
meaningfully expand opportunities for historically disadvantaged persons, including women, to enter the mineral and petroleum industries and to benefit from the exploitation of the nation's mineral and petroleum resources; and to promote employment and advance the social and economic welfare of all South Africans.
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(a) is conducting any reconnaissance, prospecting or mining operation in contravention of the MPRDA;
(b) breaches any material term or condition of such right;
(c) is contravening the approved environmental management programme; or
(d) has submitted inaccurate, incorrect or misleading information in connection with any matter required to be submitted under the MPRDA.
4.11.2 Section 47(2) of the MPRDA provides that, before acting under section 47(1), the Minister must:
(a) give written notice to the holder indicating the intention to suspend or cancel the right;
(b) set out the reasons why she is considering suspending or cancelling the right;
(c) afford the holder a reasonable opportunity to show why the right should not be suspended or cancelled; and
(d) notify the mortgagor, if any, of the prospecting right or mining right concerned of his or her intention to suspend or cancel the right or permit.
4.11.3 Section 47(3) of the MPRDA provides that the Minister must direct the holder to take specified measures to remedy any contravention, breach or failure.
4.11.4 Section 47(4) of the MPRDA provides that if the holder does not comply with the direction given under section 47(3), the Minister may act under section 47(1) against the holder after having:
(a) given the holder a reasonable opportunity to make representations; and
(b) considered any such representations.
4.11.5 Section 47(5) of the MPRDA provides that the Minister may by written notice to the holder lift a suspension if the holder:
(a) complies with a directive contemplated in section 47(3); or
(b) furnishes compelling reasons for the lifting of the suspension.
5. Rights held by UCEHSA
As at the date of this Title Opinion, UCEHSA is not the holder of any rights granted in terms of the MPRDA.
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6. Rights held by UCD I
6.1 prospecting rights
6.1.1 Prospecting Right 588/2006 PR
6.1.1.1 UCD I is the holder of a prospecting right, notarially executed on 7 November 2006 and registered in South African Mineral and Petroleum Titles Registration Office (the "MPTRO") on 17 November 2006 under registration number 588/2006 PR ("588/2006 PR"), which prospecting right grants UCD I the sole and exclusive right to prospect for coal in, on and under Portions 40 and 82 of the farm Middelbult No. 235 IR, Magisterial District Delmas, measuring 942,1852 hectares, for a period of five years commencing on 7 November 2006 and ending on 6 November 2011.
6.1.1.2 588/2006 PR was applied for by and granted to Injula Mining Operations (Proprietary) Limited. 588/2006 PR was sold by Injula Mining Operations (Proprietary) Limited to UCD I in terms of an acquisition agreement entered into between Injula Mining Operation (Proprietary) Limited and UCD I, dated 1 May 2008 (the "Acquisition Agreement"), and ceded to UCD I in terms of a notarial deed of cession on 2 July 2009, which notarial deed of cession was registered in the MPTRO on 22 September 2009 under registration number MPT 26/2009, pursuant to the Minister's consent in terms of section 11(2) of the MPRDA, dated 22 January 2009.
6.1.1.3 As at the date of this Title Opinion, Webber Wentzel Attorneys was not provided with copies of any written notices addressed to UCD I and was advised by UCD I that no such notices have been received in terms of section 47(2) of the MPRDA regarding the suspension or cancellation of 588/2006 PR as a result of any possible breach by UCD I of section 47(1) of the MPRDA.
6.1.2 Prospecting Right 654/2006 PR
6.1.2.1 UCD I is the holder of a prospecting right, notarially executed on 7 November 2006 and registered in the MPTRO on 6 December 2006 under registration number 654/2006 PR ("654/2006 PR"), which prospecting right grants UCD I the sole and exclusive right to prospect for coal in, on and under Portion 1 and the Remaining Extent of Portion 2 of the farm Wolvenfontein No. 244 IR, Magisterial District Delmas, measuring 951,1174 hectares, for a period of five years commencing on 7 November 2006 and ending on 6 November 2011.
6.1.2.2 654/2006 PR was applied for by and granted to Injula Mining Operations (Proprietary) Limited. 654/2006 PR was sold by Injula Mining Operations (Proprietary) Limited to UCD I in terms of the Acquisition Agreement and ceded to UCD I in terms of a notarial deed of cession on 2 July 2009, which notarial deed of cession was registered in the MPTRO on 22 September 2009 under registration number MPT 26/2009, pursuant to the Minister's consent in terms of section 11(2) of the MPRDA, dated 22 January 2009.
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6.1.2.3 As at the date of this Title Opinion, Webber Wentzel Attorneys was not provided with copies of any written notices addressed to UCD I and was advised by UCD I that no such notices have been received in terms of section 47(2) of the MPRDA regarding the suspension or cancellation of 654/2006 PR as a result of any possible breach by UCD I of section 47(1) of the MPRDA.
6.1.3 Prospecting Right 93/2007 PR
6.1.3.1 UCD I is the holder of a prospecting right, notarially executed on 7 November 2006 and registered in the MPTRO on 17 January 2007 under registration number 93/2007 PR ("93/2007 PR"), which prospecting right grants UCD I the sole and exclusive right to prospect for coal in, on and under Portion 1 of the farm Modderfontein No. 236 IR, Magisterial District Delmas, measuring 127,5878 hectares, for a period of five years commencing on 7 November 2006 and ending on 6 November 2011.
6.1.3.2 93/2007 PR was applied for by and granted to Injula Mining Operations (Proprietary) Limited. 93/2007 PR was sold by Injula Mining Operations (Proprietary) Limited to UCD I in terms of the Acquisition Agreement and ceded to UCD I in terms of a notarial deed of cession on 2 July 2009, which notarial deed of cession was registered in the MPTRO on 22 September 2009 under registration number MPT 26/2009, pursuant to the Minister's consent in terms of section 11(2) of the MPRDA, dated 22 January 2009.
6.1.3.3 As at the date of this Title Opinion, Webber Wentzel Attorneys was not provided with copies of any written notices addressed to UCD I and was advised by UCD I that no such notices have been received in terms of section 47(2) of the MPRDA regarding the suspension or cancellation of 93/2007 PR as a result of any possible breach by UCD I of section 47(1) of the MPRDA.
6.2 mining rights
6.2.1 As noted at paragraph 4.7.2 above, section 19(1)(b) of the MPRDA provides that the holder of a prospecting right has the exclusive right to apply for and be granted a mining right in respect of the mineral and prospecting area in question.
6.2.2 Pursuant to it being the holder of 654/2006 PR, UCD I submitted an application for a mining right on 15 May 2009 under reference number MP 30/5/1/2/429 MR, to mine for coal for a period of 20 years, in, on and under Portion 1 and the Remaining Extent of Portion 2 of the farm Wolvenfontein No. 244 IR (the "429 MR Application").
6.2.3 The Director-General of the Department of Mineral Resources advised UCD I in writing on 27 September 2010 that the 429 MR Application was granted and that the Regional Manager will approve the environmental management programme and sign the mining right. Section 23(5) of the MPRDA provides that a mining right granted in terms of section 23(1) of the MPRDA comes into effect on the date on which the environmental management programme is approved in terms of section 39(4) of the MPRDA. UCD I is required to
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make arrangements for the notarial execution of the mining right granted pursuant to the 429 MR Application and provide the Department of Mineral Resources with financial provision for the rehabilitation and management of negative environmental impacts in the amount of R8 091 456.
6.2.4 As at the date of this Title Opinion, the mining right granted pursuant to the 429 MR Application has not yet been notarially executed and not yet come into effect. UCD I will be required to commence with mining operations within one year from the date on which the mining right becomes effective or such extended period as the Minister may authorise. Until such time as the mining right has been notarially executed, we are unable to confirm the salient terms and conditions of the mining right granted pursuant to the 429 MR Application.
7. Rights held by UCD II
7.1 prospecting rights
7.1.1 UCD II, UCEHSA and Bono Lithihi Investments Group (Proprietary) Limited entered into an acquisition and option agreement, dated 5 February 2010, a first addendum to the acquisition and option agreement, dated 16 April 2010 and a second addendum and reinstatement of the acquisition and option agreement, dated 20 July 2010 in terms of which UCD II may acquire from Bono Lithihi Investments Group (Proprietary) Limited a prospecting right granted to Bono Lithihi Investments Group (Proprietary) Limited, notarially executed on 4 June 2008 and registered in the MPTRO on 21 October 2009 under registration number MPT 342/2009 PR ("342/2009 PR"), which prospecting right grants Bono Lithihi Investments Group (Proprietary) Limited the sole and exclusive right to prospect for diamonds, coal and "unspecified minerals" in, on and under:
7.1.1.1 the farm Berenice No. 548 MS;
7.1.1.2 the farm Celine No. 547 MS;
7.1.1.3 the farm Doncaster No. 414 MS;
7.1.1.4 the farm Doorvaart No. 355 MS;
7.1.1.5 the farm Duinen No. 419 MS;
7.1.1.6 the farm Gezelschap No. 395 MS;
7.1.1.7 the farm Hastings No. 485 MS;
7.1.1.8 the farm Longford No. 354 MS (excluding diamonds);
7.1.1.9 the farm Matsuri No. 358 MS;
7.1.1.10 the farm Monmouth No. 294 MS (excluding diamonds and copper);
7.1.1.11 the farm Scot No. 465 MS;
7.1.1.12 the farm Secrabje No. 470 MS;
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7.1.1.13 the farm Smithfield No. 456 MS;
7.1.1.14 the farm Trekpad No. 455 MS;
7.1.1.15 the farm Troy No. 458 MS;
7.1.1.16 the farm Twyfelfontein No. 483 MS;
7.1.1.17 the farm Vriendschap No. 460 MS;
7.1.1.18 the farm Wintersveld No. 427 MS;
7.1.1.19 the farm Ratho No. 1 MS;
7.1.1.20 the farm Parma No. 40 MS;
7.1.1.21 the farm Pont Drift No. 12 MS;
7.1.1.22 the farm Princess Royal No. 10 MS;
7.1.1.23 the farm Montrow No. 6 MS;
7.1.1.24 the farm Somerville No. 9 MS; and
7.1.1.25 the farm Patricia No. 65 MS (excluding coal),
situated in Soutpansberg, measuring 39 484,2894 hectares for a period of three years commencing on 25 July 2008 and ending on 24 July 2011. We are of the view that it is not competent to grant a prospecting right in respect of "unspecified minerals" and recommend that 342/2009 PR be amended in terms of section 102 of the MPRDA to correctly reflect "all minerals" as applied for by Bono Lithihi Investments Group (Proprietary) Limited.
7.1.2 As a result of a failure by Bono Lithihi Investments Group (Proprietary) Limited to comply with certain terms and conditions, listed below, of 342/2009 PR, the Minister may, subject to the provisions of section 47 of the MPRDA, cancel or suspend 342/2009 PR. Webber Wentzel Attorneys was not provided with copies of any written notices addressed to Bono Lithihi Investments Group (Proprietary) Limited in terms of section 47(2) of the MPRDA regarding the suspension or cancellation of 93/2007 PR as a result of a breach by Bono Lithihi Investments Group (Proprietary) Limited of section 47(1) of the MPRDA; however, we cannot exclude the possibility that the Minister may issue same. We set out below the terms and conditions of 342/2009 PR which Bono Lithihi Investments Group (Proprietary) Limited has not complied with as at the date of this Title Opinion and which may, subject to the provisions of section 47 of the MPRDA as set out in paragraph 4.11 above, result in the cancellation or suspension of 342/2009 PR:
7.1.2.1 Bono Lithihi Investments Group (Proprietary) Limited did not commence prospecting operations within 120 days of the effective date of 342/2009 PR and has not since the grant of 342/2009 PR conducted any prospecting operations; and
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7.1.2.2 Bono Lithihi Investments Group (Proprietary) Limited did not submit annual progress reports in respect of the prospecting operations (or failure to commence therewith) to the Regional Manager which progress report was due on or before 24 August 2009 and 24 August 2010.
7.1.3 The sale of 342/2009 PR is subject to Ministerial consent in terms of section 11 of the MPRDA. An application for Ministerial consent in terms of section 11 to the transfer of 342/2009 PR from Bono Lithihi Investments Group (Proprietary) Limited to UCD II was submitted on 25 August 2010 for consideration by the Minister. In our experience, obtaining such consent can take between 6 to 18 months.
7.1.4 As at the date of this Title Opinion, UCD II is not the holder of any prospecting rights granted in terms of the MPRDA.
7.2 mining rights
As at the date of this Title Opinion, UCD II is not the holder of any mining rights granted in terms of the MPRDA.
8. Rights held by UCD III
8.1 prospecting rights
8.1.1 UCD III, UCEHSA and Unity Rocks Mining (Proprietary) Limited entered into an acquisition and option agreement, dated 17 April 2009, in terms of which UCD III agreed to acquire a prospecting right granted to Unity Rocks Mining (Proprietary) Limited, notarially executed on 10 July 2008 and registered in the MPTRO on 29 August 2008 under registration number 245/2008 ("245/2008 PR"), which prospecting right grants Unity Rocks Mining (Proprietary) Limited the sole and exclusive right to prospect for coal in, on and under:
8.1.1.1 Portion 6 of the farm Brakfontein No. 264 IR;
8.1.1.2 Portion 8 of the farm Brakfontein No. 264 IR;
8.1.1.3 Portion 9 of the farm Brakfontein No. 264 IR;
8.1.1.4 Portion 10 of the farm Brakfontein No. 264 IR;
8.1.1.5 Portion 20 of the farm Brakfontein No. 264 IR;
8.1.1.6 Portion 26 of the farm Brakfontein No. 264 IR;
8.1.1.7 Portion 30 of the farm Brakfontein No. 264 IR; and
8.1.1.8 Remaining Extent of the farm Brakfontein No. 264 IR,
in the Magisterial District of Delmas in the Mpumalanga Province, measuring 878,9033 hectares, for a period of three years commencing on 10 July 2008 and ending on 9 July 2011.
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8.1.2 Ministerial consent in terms of section 11 of the MPRDA to the transfer of 245/2008 PR was granted to Unity Rocks Mining (Proprietary) Limited on 6 May 2010 (the "Unity Rocks Section 11 Approval"), which consent records that UCD III is the holder of 245/2008 PR from the date of signature of the Unity Rocks Section 11 Approval (ie 6 May 2010).
8.1.3 Notwithstanding the Unity Rocks Section 11 Approval, UCD III will only be the holder of 245/2008 PR upon the execution of a notarial deed of cession ceding 245/2008 PR from Unity Rocks Mining (Proprietary) Limited to UCD III and the registration of such notarial deed of cession in the MPTRO. On notarial execution of the deed of cession, merely personal rights flow, including the right to procure registration of the notarial deed of cession. UCD III will be the holder of 245/2008 PR upon registration of the notarial deed of cession in the MPTRO.
8.1.4 As at the date of this Title Opinion, UCD III is not yet the holder of 245/2008 PR.
8.1.5 As at the date of this Title Opinion, Webber Wentzel Attorneys was not provided with copies of any written notices addressed to UCD III and/or Unity Rocks Mining (Proprietary) Limited in terms of section 47(2) of the MPRDA regarding the suspension or cancellation of 245/2008 PR as a result of any possible breach in terms of section 47(1) of the MPRDA.
8.2 mining rights
As at the date of this Title Opinion, UCD III is not the holder of any mining rights granted in terms of the MPRDA.
9. Rights held by UCD IV
9.1 prospecting rights
9.1.1 UCD IV, UCEHSA and Xakwa Investments (Proprietary) Limited entered into an acquisition and option agreement, dated 13 March 2009, in terms of which UCD IV agreed to acquire a prospecting right granted to Xakwa Investments (Proprietary) Limited, notarially executed on 21 April 2009 and registered in the MPTRO on 15 June 2009 under registration number MPT 191/2009 ("191/2009 PR"), which prospecting right grants Xakwa Investments (Proprietary) Limited the sole and exclusive right to prospect for coal in, on and under the farm Roodekop No. 63 IS, Magisterial District Kriel, Mpumalanga Province, measuring 860,0000 hectares, for a period of three years commencing on 21 April 2009 and ending on 20 April 2012.
9.1.2 Ministerial consent in terms of section 11 of the MPRDA to the transfer of 191/2009 PR was granted to Xakwa Investments (Proprietary) Limited on 6 May 2010 (the "Xakwa Section 11 Approval"), which consent records that UCD IV is the holder of 191/2009 PR from the date of signature of the Xakwa Section 11 Approval (ie 6 May 2010).
9.1.3 Notwithstanding the Xakwa Section 11 Approval, UCD IV will only be the holder of 191/2009 PR upon the execution of a notarial deed of cession ceding 191/2009 PR from Xakwa Investments (Proprietary) Limited to UCD IV and the registration of such notarial deed of cession in the MPTRO.
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On notarial execution of the deed of cession, merely personal rights flow, including the right to procure registration of the notarial deed of cession. UCD IV will be the holder of 191/2009 PR upon registration of the notarial deed of cession in the MPTRO.
9.1.4 As at the date of this Title Opinion, UCD IV is not yet the holder of 191/2009 PR.
9.1.5 We were provided with a copy of a cancellation agreement, dated 22 February 2010, which agreement purports to cancel the agreement referred to in clause 16 of 191/2009 PR. An agreement referred to in clause 16 of a prospecting right constitutes compliance with black economic empowerment requirements of the MPRDA and forms part of the right. A failure to comply with the terms thereof may, subject to the provisions of section 47, result in the cancellation or suspension of the prospecting right. Section 102 of the MPRDA provides that a prospecting right may not be amended or varied without the written consent of the Minister. The cancellation of the agreement referred to in clause 16 of 191/2009 PR will result in an amendment of 191/2009 PR and requires that Ministerial consent be obtained in terms of section 102 of the MPRDA.
9.1.6 As at the date of this Title Opinion, Webber Wentzel Attorneys was not provided with copies of any written notices addressed to UCD IV and/or Xakwa Investments (Proprietary) Limited in terms of section 47(2) of the MPRDA regarding the suspension or cancellation of 191/2009 PR as a result of any possible breach in terms of section 47(1) of the MPRDA.
9.2 mining rights
As at the date of this Title Opinion, UCD IV is not the holder of any mining rights granted in terms of the MPRDA.
10. Rights held by Twin Cities
10.1 prospecting rights
10.1.1 Twin Cities submitted an application in terms of section 16 of the MPRDA for:
10.1.1.1 a prospecting right to prospect for coal in, on and under the farm Darwina Louw No. 254 IR, Local Municipality of Delmas, Mpumalanga, measuring 693,4066 hectares, which application was accepted by the Regional Manager of the Department of Mineral Resources on 18 April 2010; and
10.1.1.2 a prospecting right to prospect for coal in, on and under Remaining Extent of Portion 3, Portion 6, Portion 8, Portion 9, Portion 12, Portion 13 and Remaining Extent of the farm Strehla No. 261 IR, Local Municipality of Delmas, Mpumalanga Province, measuring 1 337,1728 hectares, which application was accepted by the Regional Manager of the Department of Mineral Resources on 18 April 2010.
10.1.2 The acceptance of an application for a prospecting right in terms of section 16 of the MPRDA confirms that the applicant complied with the
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provisions of section 16(2) of the MPRDA; however, does not imply that the prospecting rights as applied for by Twin Cities will be granted.
10.1.3 As at the date of this Title Opinion, Twin Cities is not the holder of any prospecting rights granted in terms of the MPRDA.
10.2 mining rights
As at the date of this Title Opinion, Twin Cities is not the holder of any mining rights granted in terms of the MPRDA.
11. Other salient aspects of general application
11.1 MPRDA Empowerment Requirements
This paragraph is intended as background information in relation to the empowerment requirements in terms of the MPRDA. As such, it is only a summary of the more pertinent empowerment provisions and not comprehensive and/or complete.
11.1.1 The MPRDA has provisions and requirements relating to black economic empowerment ("BEE") and social upliftment (collectively referred to as "Empowerment Requirements").
11.1.2 Sections 2(d) and (f) of the MPRDA provide that the objects of the MPRDA are to:
"(d) substantially and meaningfully expand opportunities for historically disadvantaged persons, including women, to enter the mineral and petroleum industries and to benefit from the exploitation of the nation's mineral and petroleum resources;" and
"(f) promote employment and advance the social and economic welfare of all South Africans".
11.1.3 Section 100 of the MPRDA requires the Minister to develop a Broad-Based Socio-Economic Empowerment Charter for the South African Mining Industry that will set the framework, targets and timetable for effecting the entry of historically disadvantaged South Africans into the mining industry and allowing such South Africans to benefit from the exploitation of mining and mineral resources. The Minister developed the Broad-Based Socio-Economic Empowerment Charter for the South African Mining Industry, which was published on 13 August 2004 (the "2004 Charter"). The 2004 Charter defines Historically Disadvantaged South Africans ("HDSAs") as "any person, category of persons or community, disadvantaged by unfair discrimination before the Constitution of the Republic of South Africa, 1993 came into operation". The 2004 Charter further defines HDSA Companies as "those companies that are owned or controlled by Historically Disadvantaged South Africans".
11.1.4 Subsequent to the publication of the 2004 Charter, the Minister published a scorecard (the "2004 Scorecard") pursuant to section 100(2)(a) of the MPRDA under Government Gazette No. 26661 of 13 August 2004. The
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2004 Charter and the 2004 Scorecard deal with nine elements of BEE, namely:
11.1.4.1 human resource development;
11.1.4.2 employment equity;
11.1.4.3 migrant labour;
11.1.4.4 mine community and rural development;
11.1.4.5 housing and living conditions;
11.1.4.6 procurement;
11.1.4.7 ownership and joint ventures;
11.1.4.8 beneficiation; and
11.1.4.9 reporting.
11.1.5 In respect of the ownership and joint venture elements of black economic empowerment, the 2004 Charter distinguishes between:
11.1.5.1 active involvement, in the form of:
11.1.5.1.1 HDSA controlled companies (50% plus one vote), which includes management control;
11.1.5.1.2 strategic joint ventures and partnerships (25% plus one vote), which would include a management agreement that provides for joint management control and dispute resolution; and
11.1.5.1.3 collective investment through employee share option schemes and mining dedicated unit trusts. The majority of these would need to be HDSA based. Such empowerment vehicles will allow the HDSA participants to vote collectively; and
11.1.5.2 passive involvement: between 0% and 100% ownership with no management involvement.
11.1.6 The 2004 Charter states that, in order to measure progress on the broad transformation front, the following indicators are important:
11.1.6.1 the currency of measures of transformation and ownership could, inter alia, be market share as measured by attributable units of South African production controlled by HDSAs;
11.1.6.2 that there would be capacity for offsets which would entail credits/offsets to allow for flexibility; and
11.1.6.3 the continuing consequences of all previous deals would be included in calculating such credits/offsets in terms of market share as measured by attributable units of production.
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11.1.7 The 2004 Charter reflects that, in order to increase participation and ownership by HDSAs in the mining industry, mining companies agree:
11.1.7.1 to achieve 26% HDSA ownership of the mining industry assets in 10 years by each mining company;
11.1.7.2 that, where a company has achieved HDSA participation in excess of any set target in a particular operation, such excess may be utilised to offset any shortfall in its other operations. Stakeholders agree to meet after five years to review the progress and to determine what further steps, if any, need to be made to achieve the 26% target.
11.1.8 The 2004 Scorecard states that it gives effect to the provisions contained in the 2004 Charter and facilitates the application of the 2004 Charter for conversion of all old order rights into new order rights. The 2004 Scorecard, however, does not indicate how compliance with the 2004 Charter will be measured. It is merely a "tick-list" in respect of each of the elements of the 2004 Charter. In respect of the ownership and joint ventures elements contained in the 2004 Charter, the 2004 Scorecard asks the question "Has the mining company achieved HDSA participation in terms of ownership or equity or attributable units of production of 15% in HDSA hands within five years and 26% in 10 years?".
11.1.9 On 13 September 2010, the Minister announced the release of the reviewed and amended 2004 Charter (the "2010 Charter"). The 2010 Charter and the "2010 Scorecard" deal with nine elements of BEE, namely:
11.1.9.1 reporting;
11.1.9.2 ownership;
11.1.9.3 housing and living conditions;
11.1.9.4 procurement and enterprise development;
11.1.9.5 employment equity;
11.1.9.6 human resource development;
11.1.9.7 mine community development;
11.1.9.8 sustainable development and growth; and
11.1.9.9 beneficiation.
11.1.10 With regards to ownership, the 2010 Charter requires, inter alia, that a minimum of 26% "meaningful economic participation" is achieved by 2014 and defines "meaningful economic participation" to include, inter alia, the following key attributes:
11.1.10.1 BEE transactions must be concluded with identifiable beneficiaries in the form of BEE entrepreneurs, workers (including employee share options schemes) and communities (the "BEE Partner");
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11.1.10.2 barring any unfavourable market conditions, some of the cash flow should flow to the BEE Partner throughout the term of the investment, and for this purpose, stakeholders will engage the financing entities in order to structure the BEE financing in a manner where a percentage of the cash flow is used to service the funding of the structure, while the remaining amount is paid to the BEE Partner;
11.1.10.3 the BEE Partner shall have full shareholder rights such as being entitled to full participation at annual general meetings and exercising of voting rights; and
11.1.10.4 ownership (measured with reference to the rights held by natural persons of any category of black people in a measured enterprise) shall vest within the timeframes agreed with the BEE Partner, taking into account market conditions.
11.1.11 With regards to procurement, the 2010 Charter requires that:
11.1.11.1 a minimum of 40% of capital goods are procured from one or more entities of which a minimum of 25% + 1 vote of share capital is directly owned by HDSAs (when measuring the rights of ownership held by natural persons of any category of black people in a measured enterprise, that is to say on a "flow-through principle") (BEE Entities);
11.1.11.2 the mining industry must ensure that multinational suppliers of capital goods annually contribute a minimum of 0.5% of annual income generated from local mining companies towards socio-economic development of local communities into a social development fund from 2010; and
11.1.11.3 70% of services and 50% of consumer goods are procured from BEE Entities by 2014.
11.1.12 In order to ensure HDSA participation at all decision-making levels, every mining company must achieve a minimum of 40% HDSA demographic by 2014 at executive management (board) level, senior management, core and critical skills, middle management level and junior management level.
11.1.13 With regards to human resource development, the 2010 Charter requires that the mining industry must invest a percentage of annual payroll (as per relevant legislation) in essential skills development activities reflective of the demographics, but excluding the mandatory skills levy, including support for South African based research and development initiatives intended to develop solutions in exploration, mining, processing, technology efficiency (energy and water use in mining), beneficiation as well as environmental conservation and rehabilitation in accordance with the following targets:
Year Target
2010 3%
2011 3.5%
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Year Target
2012 4%
2013 4.5%
2014 5%
11.1.14 The 2010 Charter sets further targets in respect of contribution towards mine community development, measures to improve housing and living conditions and the implementation of the Stakeholders' Declaration on Strategy for the sustainable growth and meaningful transformation of South Africa's Mining Industry, dated 30 June 2010.
11.1.15 The 2010 Charter provides that non-compliance with the provisions of the 2010 Charter shall render the mining company in breach of the MPRDA and vulnerable to suspension or cancellation of its mining and/or prospecting rights in terms of the MPRDA.
11.1.16 Section 100(1) of the MPRDA provides that the Minister must, within five years from the date on which the MPRDA took effect and after consultation with the Minister of Housing, develop a housing and living conditions standard for the minerals industry and develop a code of good practice for the minerals industry in South Africa, which documents were gazetted on 29 April 2009 (the "Mining Codes"). The purpose of the Mining Codes is stated therein to:
11.1.16.1 set out administrative principles in order to facilitate the effective implementation of the minerals and mining legislation;
11.1.16.2 enhance the implementation of the Broad-Based Socio-Economic Empowerment Charter for the South African Mining Industry ; and
11.1.16.3 give effect to the object of developing a code of good practice for the minerals industry in South Africa.
11.1.17 The elements of the Mining Codes include ownership, management control, employment equity, human resource development, preferential procurement, mine community and rural development, beneficiation and housing and living conditions standards. The general principles for measuring the ownership element in terms of the Mining Codes are as follows:
11.1.17.1 Ownership participation by HDSAs in the minerals industry is measured by using an ownership scored posing the questions whether the mining company has achieved HDSA participation of 15% within five years and 26% within 10 years in respect of voting rights, economic interest and net value. Ownership is measured as voting rights (defined as the control of the enterprise, through the exercise of voting rights at a shareholder meeting), economic interest (defined as a claim against an entity representing a return on ownership of the entity similar in nature to a dividend right, measuring using the flow-through, and where applicable, the modified flow-through principles) and net value (defined
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as the value of the equity instruments held by HDSAs determined on the date of measurement less the carrying value of any acquisition debts of the relevant HDSA participants on the date of measurement expressed as a percentage of the value of the measured entity on the date of measurement). Net value will only be applicable two years after the date of the agreement.
11.1.17.2 The owner of the voting rights must be able to exercise his/her voting rights. Such voting rights exercisable directly in the measured entity are expressed as a percentage of the voting rights held by HDSAs in relation to all the votes within the measured entity.
11.1.17.3 Economic interest in the measured business is expressed as a percentage held by HDSAs in relation to all the economic interest within the measured entity. The Minister must guard against the dilution of ownership in the hands of HDSAs by exercising the powers vested in her in terms of section 11 of the MPRDA, which section makes the transfer and encumbrance of rights subject to the receipt of Ministerial consent.
11.1.18 The Mining Codes make it clear that the ownership element can be measured by using (i) general principles; (ii) the flow-through principle or (iii) the modified flow-through principle.
11.1.18.1 General principles
11.1.18.1.1 A measured entity receives percentage points for participation by HDSAs in its rights of ownership (which is a collective term for the right to economic interest and the right to exercisable voting rights).
11.1.18.1.2 HDSAs may hold their rights of ownership in the measured entity as direct participants.
11.1.18.1.3 Only ownership rights in the hands of HDSAs are measured.
11.1.18.2 Flow-through principle
11.1.18.2.1 If the rights of ownership of HDSAs pass through a juristic person, the rights of ownership of HDSAs in that juristic person are measured using this principle of measurement.
11.1.18.2.2 This principle applies across every tier of ownership in a multi-tiered chain of ownership until that chain ends with an HDSA holding rights of ownership.
11.1.18.3 Modified flow-through principle
11.1.18.3.1 This principle applies to any HDSA-owned or HDSA-controlled company in the ownership of the measured entity. An HDSA-controlled company is a company that is controlled by HDSAs.
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11.1.18.3.2 An effective flow-through interest in excess of 50% may be treated as a 100% black shareholding only once in a chain of ownership in calculating exercisable voting rights and economic interest.
11.1.18.3.3 The principle allows for the participation of non-HDSA funders at one tier of ownership. A measured entity can elect to apply the modified flow-through principle at any time in a chain of ownership, but limited to one tier only.
11.1.19 In order to ensure continued compliance with the HDSA ownership requirement, section 25(2)(h) of the MPRDA requires the holder of a mining right to submit the prescribed annual report, detailing the extent of the holder's compliance with sections 2(d) and (f) of the Broad-Based Socio-Economic Empowerment Charter for the South African Mining Industry and the social and labour plan. In terms of section 47(1) of the MPRDA, the Minister may cancel or suspend any mining right if the holder thereof is in contravention of the MPRDA, breaches a material term or condition of the right, contravenes the approved environmental management programme or has submitted inaccurate, incorrect or misleading information in connection with any matter required to be submitted under the MPRDA and if the holder failed to comply with a notice to remedy the non-compliance. Continued compliance with the HDSA ownership requirements is therefore a requirement to retain a mining right.
11.1.20 The social upliftment component of the Empowerment Requirements is only relevant to mining rights whereas the BEE requirements may be relevant to both prospecting and mining rights. As stated at paragraph 4.6 above, the Minister may, having regard to the type of mineral concerned and the extent of the proposed prospecting project, request the applicant for a prospecting right to give effect to the object referred to in section 2(d) of the MPRDA.
11.1.21 In summary, the holder of a right granted in terms of the MPRDA is required to comply with the BEE requirements stipulated in the Broad-Based Socio-Economic Empowerment Charter for the South African Mining Industry, together with the scorecard published in terms thereof, and the Mining Codes as well as the rights.
11.1.22 In applying the above to the South African subsidiaries of Universal Coal holding prospecting rights, UCD I, UCD III and UCD IV, must show that it was at least 15% meaningful economic participation by HDSAs as at 1 May 2009 and 26% meaningful economic participation by HDSAs by 1 May 2014.
11.1.23 The fact that the Department of Mineral Resources consented to:
11.1.23.1 the transfer of 588/2006 PR, 654/2006 PR and 93/2007 PR from Injula Mining Operations (Proprietary) Limited to UCD I;
11.1.23.2 the transfer of 245/2008 PR from Unity Rocks Mining (Proprietary) Limited to UCD III; and
11.1.23.3 the transfer of 191/2009 PR from Xakwa Investments (Proprietary) Limited to UCD IV,
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in terms of section 11 of the MPRDA, is indicative of the fact that their compliance with the BEE requirements in relation to at least those South African subsidiaries of Universal Coal appear to have been approved by and met with the satisfaction of the Department of Mineral Resources.
11.1.24 The ownership component of the BEE requirements pursuant to the transfer of prospecting rights as referred to in paragraph 11.1.23 above of:
11.1.24.1 UCD I was satisfied by virtue of a shareholders agreement in respect of UCD I entered into amongst UCEHSA, Mountain Rush Trading 6 (Proprietary) Limited and UCD I, dated 1 May 2008 (the "UCD I Shareholders Agreement"), which UCD I Shareholders Agreement was submitted to the Department of Mineral Resources in support of the application for Ministerial consent in terms of section 11 for the MPRDA for the transfer of 588/2006 PR, 654/2006 PR and 93/2007 PR from Injula Mining Operations (Proprietary) Limited to UCD I and the 429 MR Application. The UCD I Shareholders Agreement provides for the introduction of Mountain Rush Trading 6 (Proprietary) Limited as a 29.5% shareholder in UCD I and UCEHSA holding the remaining 70.5% of the issued ordinary share capital of UCD I. As at the date of this Title Opinion, UCEHSA is the holder of 70.5% of the issued ordinary share capital of UCD I and Mountain Rush Trading 6 (Proprietary) Limited is the holder of 29.5% of the issued ordinary share capital of UCD I. We were not provided with information on the HDSA/BEE Status of Mountain Rush Trading 6 (Proprietary) Limited and Webber Wentzel Attorneys is not a BEE verification agent, we are therefore not in a position to comment on or verify Mountain Rush Trading 6 (Proprietary) Limited's HDSA/BEE status; however, on the assumption the Mountain Rush Trading 6 (Proprietary) Limited is owned and controlled by HDSAs as defined and contemplated in the 2010 Charter, we are of the view that UCD I complies with and currently exceeds the ownership requirements imposed by the 2004 Charter and the 2010 Charter;
11.1.24.2 UCD III was satisfied by virtue of a shareholders agreement in respect of UCD III entered into amongst UCEHSA, Unity Rocks Mining (Proprietary) Limited and UCD III (undated) during 2009 (the "UCD III Shareholders Agreement"), which UCD III Shareholders Agreement was submitted to the Department of Mineral Resources in support of the application for Ministerial consent in terms of section 11 of the MPRDA for the transfer of 245/2008 PR from Unity Rocks Mining (Proprietary) Limited to UCD III. The UCD III Shareholders Agreement provides for the introduction of Unity Rocks Mining (Proprietary) Limited as an initial 85% shareholder in UCD III with UCEHSA holding the remaining 15% issued ordinary share capital of UCD III. Pursuant to a staggered subscription for further shares in UCD III by UCEHSA on the terms and conditions set out in the UCD III Shareholders Agreement, UCEHSA will ultimately hold a maximum of 74% of the issued ordinary share capital in UCD III and Unity Rocks Mining (Proprietary) Limited will hold a minimum of 26% of the issued ordinary share capital of UCD III. As at the date of this Title Opinion, UCEHSA is the holder of approximately 30% of the issued ordinary share capital of UCD III and Unity Rocks Mining (Proprietary) Limited is the holder of 70% of the issued ordinary share capital of UCD III. We were not provided with information on the HDSA/BEE Status of Unity Rocks Mining (Proprietary) Limited and
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Webber Wentzel Attorneys is not a BEE verification agent, we are therefore not in a position to comment on or verify Unity Rocks Mining (Proprietary) Limited's HDSA/BEE status; however, on the assumption the Unity Rocks Mining (Proprietary) Limited is owned and controlled by HDSAs, we are of the view that UCD III complies with and currently exceeds the ownership requirements imposed by the 2004 Charter and the 2010 Charter; and
11.1.24.3 UCD IV was satisfied by virtue of a shareholders agreement in respect of UCD IV entered into amongst UCEHSA, Xakwa Investments (Proprietary) Limited and UCD IV on 11 March 2009 (the "UCD IV Shareholders Agreement"), which UCD IV Shareholders Agreement was submitted to the Department of Mineral Resources in support of the application for Ministerial consent in terms of section 11 of the MPRDA for the transfer of 191/2009 PR from Xakwa Investments (Proprietary) Limited to UCD IV. The UCD IV Shareholders Agreement provides for the introduction of Xakwa Investments (Proprietary) Limited as an initial 85% shareholder in UCD IV with UCEHSA holding the remaining 15% of the issued ordinary share capital of UCD IV. Pursuant to a staggered subscription for further shares in UCD IV by UCEHSA on the terms and conditions set out in the UCD IV Shareholders Agreement, UCEHSA will ultimately hold a maximum of 74% of the issued ordinary share capital in UCD IV and Xakwa Investments (Proprietary) Limited will hold a minimum of 26% of the issued ordinary share capital of UCD IV. As at the date of this Title Opinion, UCEHSA is the holder of approximately 25% of the issued ordinary share capital of UCD IV and Xakwa Investments (Proprietary) Limited is the holder of approximately 75% of the issued ordinary share capital of UCD IV. We were not provided with information on the HDSA/BEE Status of Xakwa Investments (Proprietary) Limited and Webber Wentzel Attorneys is not a BEE verification agent, we are therefore not in a position to comment on or verify Xakwa Investments (Proprietary) Limited's HDSA/BEE status; however, on the assumption the Xakwa Investments (Proprietary) Limited is owned and controlled by HDSAs, we are of the view that UCD IV complies with and currently exceeds the ownership requirements imposed by the 2004 Charter and the 2010 Charter.
11.2 Mineral and Petroleum Resources Royalty Act, No. 28 of 2008
11.2.1 The South African Mineral and Petroleum Resources Royalty Act No. 28 of 2008 (the "Royalty Act") and the South African Mineral and Petroleum Resources Royalty (Administration) Act, No. 29 of 2008 (the "Administration Act") were promulgated on 17 November 2008. The Royalty Act provides for the imposition of a royalty on the transfer of mineral resources and the Administration Act provides for the administration of matters in connection with such imposition and matters connected therewith.
11.2.2 Certain administrative sections of the Royalty Act and the Administration Act came into operation on 1 November 2009, whilst the remaining sections came into operation on 1 March 2010.
11.2.3 Persons and/or entities who were the holders of prospecting rights, retention permits, exploration rights, mining rights, mining permits or production rights granted pursuant to the MPRDA and persons who win or recover mineral
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resources from within the Republic of South Africa on 1 November 2009 ("Affected Persons") were required to pre-register with the Commissioner for the South African Revenue Service (the "Commissioner") from 1 November 2009, but by no later than 31 January 2010. All persons who qualify as an Affected Person after 1 November 2009 are required to apply to register with the Commissioner within 60 days after the day on which that person qualifies as an Affected Person.
11.2.4 The Royalty Act imposes a royalty regime of a six monthly charge on resource extractors in respect of the transfer of South African mineral resources. Some of the essential elements of the royalty regime include:
11.2.4.1 a royalty is payable by an extractor (ie, a person who "wins" or "recovers" a mineral resource) during an assessment period, which is determined by multiplying the royalty rate (for that assessment period) by gross sales for that assessment period;
11.2.4.2 the Royalty Act distinguishes between refined and unrefined mineral resources. Different royalty rates apply in respect of refined and unrefined mineral resources;
11.2.4.3 the royalty rate depends on the operating profit directly associated with mineral resources transferred during an assessment period and is calculated in accordance with the following formula: 0,5 plus the earnings before interest and taxes of the extractor divided by its gross sales for the assessment period multiplied by either 12,5 or 9 (dependent on whether it is a refined or an unrefined mineral) and the result thereof multiplied by 100, subject to a maximum of 5% in respect of a refined mineral resource and 7% in respect of an unrefined mineral resource; and
11.2.4.4 provision is made for small mining business relief and an exemption for sampling in respect of the transfer of mineral resources if the gross sales thereof do not exceed R100 000 during a year of assessment.
11.2.5 The relevance of the royalty regime for prospecting activities lies in the provisions of section 19(2)(g) of the MPRDA. In terms of section 19(2)(g) the holder of a prospecting right is required, subject to section 20 of the MPRDA, to pay the State royalties in respect of any mineral removed and disposed of during the course of prospecting operations. Section 20 of the MPRDA provides that the holder of a prospecting right may only remove and dispose for his or her own account any mineral found by such holder in the course of prospecting operations conducted pursuant to such prospecting right in such quantities as may be required to conduct tests on it or to identify or analyse it. However, where the holder of a prospecting right intends to remove (and dispose of) for such holder’s own account bulk samples of any minerals found by such holder in the course of prospecting operations conducted pursuant to such prospecting right, the holder is required to obtain the Minister’s written permission to do so.
11.2.6 UCD I, UCD II, UCD III and UCD IV timeously submitted the prescribed registration form to the Commissioner for purposes of registration in terms of the Administration Act. Twin Cities will be required to register with the
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Commissioner within 60 days of the date on which it becomes the holder of the prospecting rights which it applied for.
11.3 Surface Access
11.3.1 UCD I, UCD III, UCD IV are not the registered owners of the surface rights to the properties to which 588/2006 PR, 654/2006 PR, 93/2007 PR, 245/2008 PR or 191/2009 PR relate; however, it is not a legal requirement for the holder of a prospecting and/or a mining right to be the owner of the surface rights to which such prospecting and/or mining rights relate. We note that no prospecting operations are currently being conducted by Bono Lithihi Investments Group (Proprietary) Limited and/or UCD II in respect of 342/2009 PR. Please refer to our discussion in this regard at paragraph 7 above.
11.3.2 Section 5(3)(a) of the MPRDA provides that the holder of a prospecting right or a mining right may enter the land to which such right relates together with his or her employees, and may bring onto that land any plant, machinery or equipment and build, construct or lay down any surface or underground infrastructure which may be required for, and to conduct prospecting or mining, as the case may be, subject to, inter alia, the provisions of section 5(4)(c) of the MPRDA, which provides that no person may prospect or mine or commence with any work incidental thereto on any area without notifying and consulting with the landowner or lawful occupier of the land in question.
11.3.3 In practice, difficulties are frequently experienced in situations where the holder of a prospecting or mining right is faced with an uncooperative or obstructive surface owner. In such circumstances, the holder of the prospecting or mining right is required to follow due process in terms of section 54 of the MPRDA to enforce its rights granted under the prospecting or mining right, as the case may be. Section 54 of the MPRDA provides for the procedure to be followed if the holder of a prospecting or a mining right is prevented from commencing or conducting prospecting or mining operations, as the landowner or lawful occupier of the land in question:
11.3.3.1 refuses to allow such holder to enter the land;
11.3.3.2 places unreasonable demands in return for access to the land; or
11.3.3.3 cannot be found in order to apply for access.
11.3.4 In terms of section 54 of the MPRDA, the owner or lawful occupier of land is entitled to compensation for losses and damages suffered or likely to be suffered as a result of prospecting or mining.
11.3.5 In practice, the holders of prospecting and/or mining rights conclude access/land use and compensation arrangements with the landowner or lawful occupier of the land in question to ensure access for purposes of conducting prospecting or mining operations.
11.3.6 We set out below the prospecting areas covered by 588/2006 PR, 654/2006 PR, 93/2007 PR, 245/2008 PR and 191/2009 PR and the status of the access thereto by the respective holders.
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Prospecting Area Registered owner of Prospecting Area
Land Use Agreement concluded
11.3.6.1 588/2006 PR
11.3.6.1.1 Remaining Extent of Portion 40 of the farm Middelbult No. 235
VV2 Eiendomme (Proprietary) Limited
Yes
11.3.6.1.2 Portion 82 of the farm Middelbult No. 235
JF du Plessis Yes
11.3.6.2 654/2006 PR
Portion 1 and the Remaining Extent of Portion 2 of the farm Wolvenfontein No. 244
Kallie-Madel Trust Yes
11.3.6.3 93/2007 PR
11.3.6.3.1 The remaining portion of the Remaining Extent of Portion 1 of the farm Modderfontein No. 236
Air Traffic and Navigation Services Co
Limited
No access agreement has been negotiated; however, Air Traffic and Navigation Services Co Limited were notified and no objections were received.
11.3.6.3.2 Portion 49 of the farm Modderfontein No. 236
MJ Potgieter No access agreement has been negotiated; however, MJ Potgieter was notified and no objections were received.
11.3.6.4 245/2008 PR
11.3.6.4.1 Remaining Extent and Portions 10 and 30 of the farm Brakfontein No. 264
Andries Schoeman Brakfontein Boerdery (Proprietary) Limited
Yes
11.3.6.4.2 Portion 6 of the farm Brakfontein No. 264
Norwesco Inv (Proprietary) Limited
Yes
11.3.6.4.3 Remaining Extent of Portion 8 of the farm Brakfontein No. 264
Hannes Potgieter Trustfonds
Yes
11.3.6.4.4 Remaining Extent of Portion 9 of the farm Brakfontein No. 264
Hermanus Petrus van Dyk
Yes
11.3.6.4.5 Portion 20 of the farm Brakfontein No. 264
Abundant Developments
(Proprietary) Limited
Yes
11.3.6.4.6 Portion 26 of the farm Brakfontein No. 264
Koos Uys & Seuns Boerdery CC
Koos Uys & Seuns Boerdery CC was consulted; however, an access agreement is still being negotiated.
11.3.6.5 191/2009 PR
11.3.6.5.1 Remaining Extent of the farm Roodekop No. 63
Emalahleni Local Municipality
Emalahleni Local Municipality was consulted; however, an access agreement is still being negotiated.
11.3.6.5.2 Portion 1 of the farm Roodekop No. 63 Izak Jakobus Gerhardus de Wet
Izak Jakobus Gerhardus de Wet was consulted; however, an access agreement is still being negotiated.
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11.3.7 We were not advised of a refusal by the abovementioned registered landowners to grant UCD I, UCD III or UCD IV access to the land in question to conduct prospecting operations at any stage.
11.4 Land Claims
11.4.1 Section 2(1) of the Restitution of Land Rights Act, No. 22 of 1994 (the "LR Act") provides that a person shall be entitled to restitution of a right in land if, inter alia:
11.4.1.1 it is a community or part of a community dispossessed of a right in land after 19 June 1913 as a result of past racially discriminatory laws or practices; and
11.4.1.2 the claim for such restitution is lodged before 31 December 1998.
11.4.2 The LR Act defines the term "right in land" as:
"any right in land whether registered or unregistered, and may include the interest of a labour tenant and sharecropper, a customary law interest, the interest of a beneficiary under a trust arrangement and beneficial occupation for a continuous period of not less than 10 years prior to the dispossession in question." (our underlining)
11.4.3 Section 10 of the LR Act provides that any person or community which is entitled to claim restitution of a right in land of which he, she or such community was dispossessed, may lodge such claim, which shall include a description of the land in question, the nature of the right in land of which he, she or such community was dispossessed and the nature of the right or equitable redress being claimed on the form prescribed for this purpose by the chief land claims commissioner under section 16 of the LR Act.
11.4.4 Regarding the procedure after the lodgement of a land claim, section 11(1) of the LR Act provides that if the regional land claims commissioner is satisfied that:
11.4.4.1 the claim has been lodged in the prescribed manner;
11.4.4.2 the claim is not precluded by the provisions of section 2 of the LR Act; and
11.4.4.3 the claim is not frivolous or vexatious,
the regional land claims commissioner shall cause notice of the claim to be published in the Government Gazette and shall take steps to make it known in the district in which the land in question is situated.
11.4.5 Section 11(2) of the LR Act grants the regional land claims commissioner concerned, on such conditions as he or she may determine, the discretion to condone the fact that a claim has not been lodged in the prescribed manner.
11.4.6 Section 11(6) of the LR Act provides that immediately after publishing the notice referred to in section 11(1), the regional land claims commissioner shall by notice in writing:
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11.4.6.1 advise the owner of the land in question and any other party which, in his or her opinion, might have an interest in the claim of the publication of the notice; and
11.4.6.2 refer the owner and such other party to the provisions of section 11(7).
11.4.7 Section 11(7) of the LR Act provides that once a notice has been published in respect of any land:
11.4.7.1 no person may in an improper manner obstruct the passage of the claim;
11.4.7.2 no person may sell, exchange, donate, lease, subdivide, rezone or develop the land in question without having given the regional land claims commissioner one month’s written notice of his or her intention to do so, and, where such notice was not given in respect of:
(a) any sale, exchange, donation, lease, subdivision or rezoning of land and the court is satisfied that such sale, exchange, donation, lease, subdivision or rezoning was not done in good faith, the court may set aside such sale, exchange, donation, lease, subdivision or rezoning or grant any other order it deems fit; or
(b) any development of land and the court is satisfied that such development was not done in good faith, the court may grant any order it deems fit;
11.4.7.3 no claimant who occupied the land in question at the date of commencement of the LR Act may be evicted from the said land without the written authority of the chief land claims commissioner;
11.4.7.4 no person shall in any manner whatsoever remove or cause to be removed, destroy or cause to be destroyed or damage or cause to be damaged, any improvements upon the land without the written authority of the chief land claims commissioner; and
11.4.7.5 no claimant or other person may enter upon and occupy the land without the permission of the owner or lawful occupier.
11.4.8 Section 11(7) of the LR Act provides that claimants may institute interdict proceedings in order to prevent any person from dealing with the land or otherwise conducting any operations in contravention of the above restrictions. Section 11(7)(aA) of the LR Act provides that no person may sell, exchange, donate, lease, subdivide, rezone or develop the land in question without having given the regional land claims commissioner one month’s written notice of his or her intention to do so, and, where such notice was not given in respect of -
11.4.8.1 any sale, exchange, donation, lease, subdivision or rezoning of land and the Court is satisfied that such sale, exchange, donation, lease, subdivision or rezoning was not done in good faith, the Court may set aside such sale, exchange, donation, lease, subdivision or rezoning or grant any other order it deems fit;
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11.4.8.2 any development of land and the Court is satisfied that such development was not done in good faith, the court may grant any order it deems fit.
11.4.9 It is possible that the claimants may allege that the claim also includes (and that they are entitled to) a claim to the mineral rights in respect of the land.
11.4.10 South African case law decided before the MPRDA took effect indicates that a claim under the LR Act may include mineral rights. To the extent that the broadly defined term "right in land", contained in section 1 of the LR Act, may in some cases have been held to include rights to minerals, that particular right in land was effectively expropriated by the provisions of the MPRDA, the consequence being, in our opinion, that restoration of rights to minerals pursuant to a successful claim in terms of the LR Act is no longer legally possible. In the case of Maccsand CC v Macassar Land Claims Committee (case number LCC 37/03), a decision of the Land Claims Court handed down by Pienaar AJ sitting with Gildenhuys J (concurring) on 14 June 2007, it was confirmed that an order for restitution of a right in land no longer includes the restoration of mineral rights. In this regard, Pienaar AJ made the following observations at paragraph [19] of her judgment:
"Concerning the mineral rights dispensation, when the Supreme Court of Appeal order was handed down, there was still a possibility that, were the restitution claim successful once it had been dealt with by the Land Claims Court, the successful claimant could be restored [to] Erf 1197 and connected therewith, also the mineral rights relating to that property. However, since the new dispensation relating to mineral rights had commenced on 1 May 2004 under the MPRD Act, land ownership and mineral rights had been divorced. Mineral and petroleum resources now belong to the nation with the State as the custodian thereof. Accordingly, an order for restitution, even specific restoration, would not include mineral rights anymore."
11.4.11 If the owner or holder of a right in land is opposed to a successful claim, such dispute might be settled through mediation and negotiation, in which case the parties will meet in an attempt to reach agreement on how the claim should be finalised. If the regional land claims commissioner is satisfied with the agreement, he or she will certify that in writing and in such event the agreement will not be required to be referred to the Land Claims Court to become effective. If the parties are unable to reach agreement on the finalisation of the claim, the regional land claims commissioner shall certify accordingly and shall refer the matter to the Land Claims Court.
11.4.12 The Land Claims Court has the power to, inter alia:
11.4.12.1 determine a right to restitution of any right in land in accordance with the LR Act; and
11.4.12.2 determine or approve compensation payable in respect of land owned by a private person upon expropriation or acquisition of such land in terms of the LR Act.
11.4.13 If the claim was successful the Land Claims Court may order, inter alia:
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11.4.13.1 the restoration of the land, a portion of the land or any right in the land (being the subject of the claim) to the claimants; or award any land, portion of, or a right in land (presumably land other than the land being the subject of the claim) to the claimants in full or partial settlement of the claim;
11.4.13.2 the State to grant the claimant an appropriate right in alternative State-owned land and, where necessary, order the State to designate it;
11.4.13.3 the State to pay the claimant compensation; or
11.4.13.4 grant the claimant any alternative relief.
11.4.14 The Minister of Land Affairs may purchase, acquire or in any other manner, consistent with the provisions of section 3 of the Promotion of Administrative Justice Act, No. 3 of 2000, expropriate land, or a portion of land or a right in land in respect of which a claim has been lodged.
11.4.15 The Expropriation Act, No. 63 of 1975, shall apply to an expropriation under the LR Act. Therefore, where land, a portion of land or a right in land has been expropriated in terms of the LR Act, the amount of compensation and the time and manner of payment shall be determined either by agreement or by the Court in accordance with section 25(3) of the Constitution of the Republic of South Africa, 1996 (the "Constitution").
11.4.16 The Constitution provides in section 25(3) that the amount of the compensation and the time and manner of payment must be just and equitable, reflecting an equitable balance between the public interest and the interests of those affected, having regard to all relevant circumstances, including:
11.4.16.1 the current use of the property;
11.4.16.2 the history of the acquisition and use of the property;
11.4.16.3 the market value of the property;
11.4.16.4 the extent of direct state investment and subsidy in the acquisition and beneficial capital improvement of the property; and
11.4.16.5 the purpose of the expropriation.
11.4.17 We conducted an electronic search for land claims published in the Government Gazette in respect of the immovable properties which form the subject of the prospecting areas covered by 588/2006 PR, 654/2006 PR, 93/2007 PR, 245/2008 PR, 191/2009 PR and 342/2009 PR. Our search revealed that the following immovable properties relating to 342/2009 PR are subject to land claims lodged on behalf of the Lishivha, Tshivula, Mulambwane and Machete communities (the "Communities"), listed in General Notice No. 879 of 2006, published in Government Gazette No. 29009, dated 7 July 2006 (the "Gazette Notice"):
11.4.17.1 the farm Bernice No. 548 MS;
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The Directors 32 Universal Coal Plc
11.4.17.2 the farm Doorvaart No. 355 MS;
11.4.17.3 the farm Gezelschap No. 395 MS;
11.4.17.4 the farm Hastings No. 485 MS;
11.4.17.5 the farm Langford No. 354 MS;
11.4.17.6 the farm Matsuri No. 358 MS;
11.4.17.7 the farm Scot No. 465 MS;
11.4.17.8 the farm Secrabje No. 470 MS;
11.4.17.9 the farm Trekpad No. 455 MS;
11.4.17.10 the farm Wintersveld No. 427 MS;
11.4.17.11 the farm Ratho No. 1 MS;
11.4.17.12 the farm Parma No. 40 MS;
11.4.17.13 the farm Point Drift No. 12 MS; and
11.4.17.14 the farm Patricia No. 65 MS.
11.4.18 We have not had sight of the claim forms and annexes thereto submitted in respect of these land claims and we therefore limit our review accordingly to the electronic search conducted. The Gazette Notice states that the respective land claims by the different Communities were lodged on 31 December 1998 on behalf of the Lishivha community, on 26 December 1998 on behalf of the Tshivula community, on 7 December 1998 on behalf of the Malumbwane community and "before the 31st December 1998" on behalf of the Machete community.
11.4.19 If the claims are successful in relation to the restitution of the land (excluding mineral rights), the provisions of the MPRDA which regulate the relationship between and the respective rights and obligations of, a landowner and the holder of a mining right in respect of land, would continue to apply.
11.4.20 The Minister may purchase, acquire or expropriate those portions of the land and restore or award such land to the claimants.
11.4.21 It should be noted that a claim under the LR Act is not against the current owner of the land. The current owner of the land is merely an interested party in relation to the claim.
11.4.22 If the Land Claims Court finds that the claimants were also dispossessed of the mineral rights (in respect of which restoration is not possible), an obligation to compensate the claimant for such loss cannot, in terms of the LR Act, be imposed on the holder of a prospecting and/or mining right. We cannot exclude the possibility that the State may negotiate with the holder of the prospecting and/or mining right to pay some form of compensation (in the form of a royalty on minerals mined or the participation or inclusion of the
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The Directors 33 Universal Coal Plc
claimant community in its operations or social and labour practices) or on some other basis. Whilst we cannot comment on the amount of such compensation, it would not, in our view, make commercial or economic sense to require compensation which would render the prospecting and/or mining operations uneconomic or would impact significantly on its financial viability.
11.5 New Companies Act Regime
11.5.1 The Companies Act, No. 71 of 2008 (the "Companies Act 2008") will come into operation on a date to be fixed by the President of the Republic of South Africa by proclamation in the Government Gazette and will repeal the Companies Act 1973. It remains uncertain at this stage when such date of proclamation will occur. The Companies Act 2008 differs substantially from the Companies Act 1973, amongst others as regards the protection of shareholders' rights and may render existing contractual rights voidable. In certain instances shareholders, in particular but not limited to minority shareholders, may run the risk of losing certain rights or having declared void certain of the rights they may have under the Companies Act 1973, in terms of their present constitutional documents and/or in agreements, including shareholders' agreements. In terms of the Companies Act 2008, any provision in a company's articles of association will be voidable if it conflicts with an unalterable provision in the Companies Act 2008. Although a two year grace period will apply after the effective date of the Companies Act 2008, during which a company may follow its constitutional documents even if they conflict with the Companies Act 2008, there are exceptions to this general rule. Furthermore, in terms of the Companies Act 2008, any provision in any agreement to which more than one shareholder is a party and which agreement concerns the company in question will be voidable if it is inconsistent with the company's constitutional documents or the Companies Act 2008. The two year grace period does not apply to the aforesaid agreements.
11.5.2 We have reviewed2 the provisions of the UCD I, UCD II, UCD III, UCD IV, UCEHSA and Twin Cities memoranda and articles of association (the "Memoranda and Articles of Association") and the provisions of the UCD I, UCD II, UCD III, UDC IV and Twin Cities shareholders' agreements (the "Shareholders' Agreements") in light of the Companies Act 2008 and noted certain amendments, insertions, deletions which should be made to such documents as well as identifying material risks and other matters for consideration. Given that the Companies Act 2008 is not yet effective, there is no case law or other legal precedent to prescribe how the provisions thereof will ultimately be interpreted and applied. The reviews of the Memoranda and Articles of Association and the Shareholders' Agreement are accordingly based on our understanding and interpretation of the Companies Act 2008 as at the date of this Title Opinion.
2 The review of the Memoranda and Articles of Association and the Shareholders' Agreements are contained in
the due diligence reports prepared by Webber Wentzel Attorneys on behalf of Universal Coal in respect of each of UCD I, UCD II, UCD III, UCD IV, UCEHSA and Twin Cities.
Mining Title Opinion
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The Directors 34 Universal Coal Plc
Yours faithfully
WEBBER WENTZEL
DHL Booysen
Direct tel +27 (0) 11 530 5224
Direct fax +27 (0) 11 530 6224 [email protected]
Mining Title Opinion
For
per
sona
l use
onl
y
35
AN
NE
XE
A
Min
era
l Title
R
eg
iste
red
H
old
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Co
mm
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ce
me
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Da
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Ex
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ate
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Are
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Co
mm
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- U
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- -
- -
As a
t the
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te o
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Title
Op
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not
the
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y rig
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rosp
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C
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farm
M
idd
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35
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Dis
trict
De
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me
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As a
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date
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pin
ion
, UC
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the
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58
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gis
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951
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As a
t the
date
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itle O
pin
ion
, UC
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the
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UC
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ubm
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an
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on
15
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min
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the
Are
a
co
ve
red
b
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sp
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g
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65
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PR
.
Th
e
Dire
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en
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e D
ep
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eso
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ad
vis
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U
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w
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7 S
ep
tem
be
r 2
010
tha
t th
e
ap
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rig
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gra
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and
th
at
the
R
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ion
al
Ma
na
ge
r w
ill a
pp
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th
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en
viro
nm
en
tal
ma
na
gem
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ram
me
a
nd
sig
n
the
m
inin
g
righ
t. S
ectio
n 2
3(5
) o
f th
e
MP
RD
A
pro
vid
es
tha
t a
min
ing
rig
ht
gra
nte
d in
te
rms o
f se
ctio
n 2
3(1
) of
the
M
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co
mes
into
e
ffect
on
th
e
da
te
on
wh
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the e
nviro
nm
en
tal m
ana
ge
me
nt p
rog
ram
me
is
app
rove
d
in
term
s
of
se
ctio
n 3
9(4
) o
f th
e
MP
RD
A. A
s a
t the
da
te o
f this
Title
Op
inio
n, th
e
min
ing
rig
ht
gra
nte
d p
urs
uant
to th
e a
pplic
atio
n
ha
s n
ot y
et b
een
no
taria
lly e
xe
cu
ted
an
d n
ot y
et
co
me
into
effe
ct.
3 P
lease
refe
r to p
ara
gra
ph
5 o
f this
Title
Op
inio
n.
4 Ple
ase
refe
r to p
ara
gra
ph
6.1
.1 o
f this
Title
Op
inio
n.
5 Ple
ase
refe
r to p
ara
gra
ph
s 6
.1.2
and
6.2
of th
is T
itle O
pin
ion
.
Mining Title Opinion
For
per
sona
l use
onl
y
159
The D
irecto
rs
36
Univ
ers
al C
oal P
lc
Min
era
l T
itle
R
eg
iste
red
H
old
er
Co
mm
en
ce
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Da
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Ex
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D
ate
M
ine
ral
Are
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Co
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7
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20
11
C
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of
the
fa
rm
Mo
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on
tein
N
o. 2
36
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Ma
gis
teri
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elm
as,
me
asu
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g
127
,587
8
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res
As a
t th
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ate
of
this
Title
Op
inio
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D I
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he
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hold
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g
Rig
ht
93
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PR
B
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20
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D
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. 54
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MS
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arm
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line
No.
54
7
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farm
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o.
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farm
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art
N
o.
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M
S,
the
fa
rm D
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No
. 4
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MS
, th
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farm
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eze
lsch
ap
N
o.
39
5
MS
, th
e
farm
H
astin
gs
No
. 4
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MS
, th
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farm
L
on
gfo
rd
No.
35
4
MS
(e
xclu
din
g
dia
mo
nds),
th
e
farm
Ma
tsu
ri N
o.
35
8 M
S,
the
farm
Mo
nm
ou
th N
o.
29
4 M
S
(exclu
din
g
dia
mon
ds
an
d
co
ppe
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the
fa
rm
Sco
t N
o.
46
5
MS
, th
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farm
S
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bje
N
o.
47
0
MS
, th
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farm
S
mith
fie
ld
No
. 4
56
M
S,
the
fa
rm
Tre
kp
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N
o.
45
5
MS
, th
e fa
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the
fa
rm
Tw
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in
No
. 4
83
MS
, th
e
farm
V
rie
ndscha
p N
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S,
the
fa
rm
Win
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ld
No
. 42
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MS
, th
e
farm
R
ath
o
No
. 1
MS
, th
e f
arm
Pa
rma
No
. 4
0
As a
t th
e d
ate
of
this
Title
Op
inio
n,
UC
D I
I is
not
the
h
old
er
of
an
y
pro
spe
cting
ri
gh
ts
gra
nte
d
in
term
s o
f th
e M
PR
DA
.8
Th
e s
ale
of
Pro
sp
ecting
Rig
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34
2/2
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9 P
R f
rom
Bo
no
Lith
ihi
Inve
stm
en
ts
Gro
up
(P
rop
rie
tary
) L
imited
is
sub
ject
to
Min
iste
ria
l con
sen
t in
te
rms o
f sectio
n 1
1 o
f th
e
MP
RD
A.
An
ap
plic
ation
fo
r M
inis
teri
al
con
sen
t in
te
rms o
f sectio
n 1
1 t
o t
he
tra
nsfe
r o
f 34
2/2
00
9 P
R
fro
m B
on
o L
ith
ihi
Gro
up
In
vestm
en
ts (
Pro
prie
tary
) L
imite
d
to
UC
D I
I w
as
su
bm
itte
d
on
25
Au
gu
st
20
10
fo
r con
sid
era
tio
n
by
the
M
inis
ter.
In
ou
r e
xp
eri
en
ce
, o
bta
inin
g
su
ch
co
nse
nt
can
ta
ke
be
twe
en
6 t
o 1
8 m
onth
s.
6 P
lease
re
fer
to p
ara
gra
ph
6.1
.3 o
f th
is T
itle
Op
inio
n.
7 P
lease
re
fer
to p
ara
gra
ph
7.1
.1 o
f th
is T
itle
Op
inio
n w
ith
re
ga
rds to
the
re
fere
nce
to "
un
spe
cifie
d m
ine
rals
".
8 P
lease
re
fer
to p
ara
gra
ph
s 7
.1.1
, 7
.1.3
an
d 7
.1.4
of th
is T
itle
Op
inio
n.
Mining Title Opinion
For
per
sona
l use
onl
y
The D
irecto
rs
37
Univ
ers
al C
oal P
lc
Min
era
l Title
R
eg
iste
red
H
old
er
Co
mm
en
ce
me
nt
Da
te
Ex
pira
tion
D
ate
M
ine
ral
Are
a
Co
mm
en
t
MS
, th
e
farm
P
on
t D
rift N
o. 1
2 M
S, th
e fa
rm P
rince
ss
Ro
ya
l N
o.
10
M
S,
the
fa
rm
Mo
ntro
w N
o. 6
MS
, the
farm
S
om
erv
ille N
o. 9
MS
an
dth
e
farm
P
atric
ia
No
. 65
M
S
(exclu
din
g
co
al),
situ
ate
d
in
So
utp
an
sbe
rg,
me
asu
ring
39
484
,289
4 h
ecta
res
Pro
sp
ectin
g R
igh
t 2
45
/20
08
PR
U
nity
Ro
cks
Min
ing
(P
rop
rieta
ry)
Lim
ited
10
Ju
ly 2
008
9
July
20
11
C
oa
l P
ortio
ns 6
, 8
, 9
, 10
, 20
, 26
, 3
0 a
nd
the
Re
main
ing
Exte
nt
of
the
fa
rm
Bra
kfo
nte
in
No
. 26
4
IR,
situ
ate
d
in
the
Ma
gis
teria
l Dis
trict o
f De
lmas
in th
e M
pu
ma
lang
a P
rovin
ce
, m
easu
ring
8
78
,903
3
he
cta
res
As a
t the
da
te o
f this
Title
Opin
ion
, UC
D III is
not
ye
t th
e
reg
iste
red
h
old
er
of
Pro
sp
ectin
g
Rig
ht
24
5/2
00
8 P
R.
M
inis
teria
l co
nsen
t in
te
rms
of
se
ctio
n 1
1
of
the
MP
RD
A
to
the
tra
nsfe
r of
Pro
sp
ectin
g R
igh
t 24
5/2
00
8 P
R fro
m U
nity
Ro
cks
Min
ing
(P
rop
rieta
ry)
Lim
ited
to
U
CD
III w
as
gra
nte
d o
n 6
Ma
y 2
01
0; h
ow
eve
r, UC
D III w
ill on
ly
be
th
e
reg
iste
red
ho
lde
r o
f P
rosp
ectin
g
Rig
ht
24
5/2
00
8 P
R
upo
n
the
e
xe
cu
tion
o
f a
no
taria
l d
ee
d
of
ce
ssio
n
ce
din
g
Pro
sp
ectin
g
Rig
ht
24
5/2
00
8 P
R
from
U
nity
R
ocks
Min
ing
(Pro
prie
tary
) L
imite
d
to
UC
D III
an
d
the
reg
istra
tion
of s
uch n
ota
rial d
ee
d o
f cessio
n in
the
MP
TR
O. 9
Pro
sp
ectin
g R
igh
t 1
91
/20
09
PR
X
akw
a
Inve
stm
en
ts
(Pro
prie
tary
) L
imite
d
21
Ap
ril 200
9
20
Ap
ril 201
2
Co
al
Th
e
farm
R
oo
dekop
N
o. 6
3
IS, s
itua
ted
in th
e M
ag
iste
rial
Dis
trict
Krie
l, M
pu
ma
lang
a
Pro
vin
ce
, m
easu
ring
86
0,0
00
0 h
ecta
res
As a
t the
date
of th
is T
itle O
pin
ion
, UC
D IV
is n
ot
ye
t th
e
reg
iste
red
h
old
er
of
Pro
sp
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For
per
sona
l use
onl
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161
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Mining Title Opinion
For
per
sona
l use
onl
y
The Witbank projectsare located near tooperating coal mines,
road and railway infrastructure and withina radius of 30-70kmfrom four coal-firedpower station
For
per
sona
l use
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163
10. RISK FACTORSAn investment in the Company is not risk free and
prospective new investors should consider the risk factors
described below, together with information contained
elsewhere in this Prospectus, before deciding whether to
apply for Shares.
Specifically potential investor should read this Section in
conjunction with Section 12.4, which refers to the differences
between UK and Australian Corporate Law. The Company is
incorporated under UK law and will be bound by Australian
law if it is listed in the ASX.
The following is not intended to be an exhaustive list of the
risk factors to which the Company is exposed.
10.1 Specific risks related to the Company
Offtake Risks
As at the date of this Offer, the Company has no committed
offtake agreements in place. In the future, the Company
may enter into offtake transactions in order to fix or underpin
the price for a portion of its production or for a particular
type of coal. There is a risk that the Company may not be
able to deliver physical production into committed offtake
agreements; if for example, there was a production stoppage.
In that event the Company could be adversely affected if the
price was to move unfavourably. In addition, there is a mark-
to-market risk in respect of accounting for offtake agreements
that could adversely impact the Company’s financial results.
No Geographical Diversification
The Company’s projects are all located in South Africa.
Any circumstance or event which negatively impacts the
ownership or development of these areas or which negatively
affects South Africa could materially affect the financial
performance of the Company and more significantly than if it
had a diversified asset base.
Coal Price Volatility
Substantially all of the Company’s revenues and cash flows
(should the Company enter production) will be derived from
the sale of coal. Therefore, the financial performance of the
Company would be exposed to fluctuations in the coal price.
Historically, the coal price has fluctuated widely and has
experienced periods of significant decline. Coal prices are
affected by numerous factors and events that are beyond the
control of the Company. These factors and events include
general economic activity, world demand, forward selling
activity as well as general global economic conditions and
political trends.
If coal prices should fall below or remain below the
Company’s costs of production for any sustained period
due to these or other factors and events, the Company’s
exploration and proposed production could be delayed or
even abandoned. A delay in exploration or production or the
abandonment of one or more of the Company’s projects
may require the Company to write-down its coal resources
and may have a material adverse effect on the Company’s
production, earnings and financial position.
Foreign Exchange Rate Risk
Any revenue received by the Company would likely be in
South African Rands and US dollars derived from the sale
of coal and the Company’s operating expenses would be
incurred principally in South African Rands. Coal is sold
throughout the world based principally on a US dollar price,
however domestically within South Africa, the coal price is
set in South African Rands. Furthermore the income and
expenditure accounts will be initially prepared in the Pound
Sterling (GPB). Therefore, Australian dollar reported revenue
will be directly impacted by movements in the US dollar coal
price, the South African Rand coal price and the USD/AUD,
USD/GPB, ZAR/AUD, ZAR/GPB and GPB/AUD exchange
rates. Movements in the USD/AUD or ZAR/AUD exchange
rates and/or the US dollar coal price or South African Rand
coal price may adversely or beneficially affect the Company’s
results or operations and cash flows.
Limited Takeover Protection
As a company incorporated in England and Wales, the rights
of Shareholders are governed by English law. The rights of
shareholders under English law differ in some respects from
the rights of shareholders of companies incorporated
in Australia.
As the Company is incorporated in England and Wales, the
takeover provisions in the Corporations Act do not apply
to the Company. In the United Kingdom, the City Code on
Takeovers and Mergers (City Code) regulates takeovers
and substantial shareholders. Although the Company is
incorporated in the United Kingdom, the place of central
management and control of the Company is currently outside
of the United Kingdom, Channel Islands and the Isle of Man.
Accordingly, the Company is currently not subject to the
City Code and the shareholders will not be afforded any
protections under the City Code. As a result, any takeover
offer for the Company or consolidation of control in the
Company will not be regulated by the Corporations Act, the
City Code or any other takeover regime. The Articles contain
certain limited takeover protections (summarised in Section
12.1(i)) although they do not provide the full protections
afforded by the Corporations Act or City Code.
For
per
sona
l use
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y
Electricity Supply
The major producer and distributor of electricity in South
Africa is the State-owned utility Eskom which provides over
95% of the country’s energy usage. During 2008 South Africa
experienced load shedding and rolling blackouts due to the
shortage of electricity generating capacity. Eskom’s current
reserve margin is between 5% and 10% whilst an acceptable
margin would be 15% to 20%. Although the situation
appears to have stabilised, major new generation capacity
is needed. Historically, the price of electricity in South Africa
is low compared to other countries. However the price may
increase substantially over the next three years in order to
fund the capacity of development projects. Power rationing,
increased prices and availability of electricity all pose potential
risks to the viability and profit margins of the Company’s
projects.
Water Supply
Water supply for each of the Company’s projects will be
sourced from the individual locations. An application for a
water use licence in respect of the Kangala Project has been
lodged. The remaining members of the Company Group
will be required to apply for and obtain water use licences
from the relevant governmental authorities. The process
for obtaining a water use licence is a lengthy process and
the Company Group’s mining operations may be adversely
affected in the event that the relevant licences are not
timeously obtained. An inadequate water supply would
negatively affect the Projects.
Labour Risk
The Company Group’s operations may be adversely affected
by labour disputes or changes in South African labour laws.
In South Africa a number of trade unions have close links to
various political parties and have had a significant influence
as vehicles for social and political reform and in the collective
bargaining process. Since 1995 South Africa has enacted
various labour laws that enhance the rights of employees,
which may impose costs on the Company Group. Significant
labour disputes, work stoppages, increased employee
expenses as a result of collective bargaining and the cost of
compliance with labour laws could disrupt operations and
affect the profitability of the Projects.
HIV/AIDS
South Africa has one of the highest HIV infection rates in
the world. The exact impact of increased mortality rates due
to HIV/AIDS related deaths on the cost of doing business
in South Africa and the potential growth in the economy is
unclear at this time although employee related costs in South
Africa could increase as a result of the HIV/AIDS epidemic.
The Company Group’s results may be adversely affected by
the loss of productivity and increased costs arising from any
effect of HIV/AIDS on the Company Group’s workforce.
Political Risk
The Company Group is conducting its activities in South
Africa. The Directors believe that the Government of South
Africa supports the development of natural resources by
foreign investors. However, there is no assurance that future
political and economic conditions in South Africa will not
result in the Government of South Africa adopting different
policies regarding foreign development and ownership of
mineral resources. Any changes in policy may result in
legislative changes affecting ownership of assets, taxation,
rates of exchange, environmental protection, labour relations,
repatriation of income and return on capital, all of which may
affect the Company Group’s ability to develop the Projects.
Mining and Prospecting Rights
Acquisition and retention of Prospecting Rights and Mining
Rights is a detailed and time-consuming process. There is no
guarantee that the relevant members of the Company Group
will be granted the Mining Rights necessary to develop the
projects on acceptable terms in a timely manner or at all.
A wide range of factors and principles must be taken into
account by the South African Minister of Mineral Resources
when considering applications for Mining Rights. The factors
taken into account include the applicant’s access to financial
resources, the applicant’s technical ability to conduct the
proposed mining operation optimally in accordance with
the mining work programme, the mining must not result in
unacceptable pollution, ecological degradation or damage
to the environment, the applicant must provide financially
and otherwise for the prescribed social and labour plan, the
applicant must have the ability to comply with the relevant
provisions of the Mine Health and Safety Act and the granting
of the application must substantially and meaningfully expand
opportunities for historically disadvantaged South Africans
(including women) to enter the mineral and petroleum industry
and to benefit from the exploitation of the nation’s mineral
resources, promote employment and advance the social and
economic welfare of all South Africans in accordance with
the approved social and labour plan. In addition the grant of
a Mining or Prospecting Right may be disputed or challenged
by third parties in the event that the correct procedures were
not followed.
Prospecting and Mining Rights are liable to be cancelled or
suspended for breach of the terms of the right and non-
compliance with MPRDA. The terms of the Prospecting
and Mining Rights include, inter alia, the prospecting work
programme, mining work programme, the social and labour
plan, the approved environmental management plan/
programme, the provisions of the MPRDA and the Charter
developed pursuant to the provisions of section 100(2) of
the MPRDA.
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165
Competition for Mining Rights
There is generally competition for prospecting and mining
rights in South Africa. The MPRDA provides that applications
for Mining Rights and/or Prospecting Rights must be dealt
with in the order of receipt (save for applications for the same
mineral and land received on the same date, in which case
preference must be given to applications from historically
disadvantaged persons). In respect of new applications
for prospecting and mining rights which the members of
the Company Group may wish to bring, as part of the
Company’s future growth strategy, there is a risk that such
applications may not be successful if other applicants have
already applied for such minerals and land. There is also no
guarantee that suitable deposits will be available in future.
In respect of the current Prospecting Rights which the
Company Group holds, the risk of applications for Mining
Rights not being successful is mitigated by the provisions of
section 9(1)(b) of the MPRDA which provides that the holder
of a Prospecting Right has the sole and exclusive right to
apply for and be granted a Mining Right in respect of the
relevant mineral(s) and land.
Despite the aforesaid mitigation, the requirements for the
grant of a Mining Right are discretionary and there is a
risk that such application may only be successful if such
discretionary requirements are satisfied which may result in
increased costs.
Joint Venture Parties, Agents and Contractors
The Directors are unable to predict the risk of financial failure
or default by a participant in any earn-in agreement or joint
venture to which the Company is or may become a party or
the insolvency or managerial failure by any of the contractors
used (or to be used in the future) by the Company in any of
its activities or the insolvency or other managerial failure by
any of the other service providers used (or to be used in the
future) by the Company for any activity.
Black Economic Empowerment and Social Development
Each of the members of the Company Group must comply
and remain compliant with the South African Mining Charter,
the Mining Codes and the black economic empowerment
participation requirements and the approved social and labour
plan in order to retain prospecting and mining rights. Any
failure by the Company Group to satisfy and to continue to
satisfy the black economic empowerment requirements of
the MPRDA, the Charter the approved social and labour plan
and/or the Mining Codes could jeopardise the Prospecting
Rights held by the Company Group and impede the
Company Group’s ability to acquire, develop or maintain any
additional Mining or Prospecting Rights.
The framework, targets and timetable for the entry of
historically disadvantaged South Africans into the mining
industry which allow such South Africans to benefit from the
exploitation of mining and mineral resources, are set out in
the Charter developed pursuant to the provisions of section
100(2) of the MPRDA.
As amended Charter was published on 13 September
2010, which requires the following by 2014: (i) a minimum
of 26% meaningful economic participation by historically
disadvantage South Africans, (ii) that a minimum of 40% of
capital goods, 70% of services and 50% of consumer goods
are procured from BEE entities, being entities of which 25%
+ one vote is directly owned by historically disadvantage
South African demographic board, senior management, core
skills, middle management and junior management level,
(iv) that at least 5% of annual payroll is spent on essential
skills development. Compliance with the requirements of the
amended Charter may increase the costs of the Company’s
operations and affect profitability.
On 29 April 2009 the Department of Mineral Resources
published Codes of Good Practice for the minerals industry
in South Africa, in terms of section 100(1)(b) of the MPRDA.
The purpose of such Codes is to set out administrative
principles in order to facilitate effective implementation
of the minerals and mining legislation and enhance the
implementation of the Charter. These Codes introduce
general principles for measuring each of the nine elements to
which the Charter relates and sets out compliance targets.
Although published and theoretically in force, the Department
of Mineral Resources has yet to implement these Codes.
When implemented the principles contained in the Codes
may affect the Company’s compliance with the Charter and
effectively increase the BEE requirements.
To satisfy the social development requires of the MPRDA to
obtain and retain Mining Rights, the Company must obtain
approval of, provide financially for and comply with the
prescribed social and labour plan. This will be a cost which
may affect the Company’s profitability.
Export Infrastructure
The primary port for export of coal out of South Africa is the
Richards Bay Coal Terminal owned and operated by the
Richards Bay Coal Terminal Company Limited (RBCT). In
order to export coal through RBCT, it is required to have
RBCT throughput entitlement. The Company has not yet
acquired the entitlement to transport coal to the available
ports where coal destined for offshore markets can be
shipped from. There is no assurance that such entitlement will
be obtained and, if so obtained, as to the terms thereof.
Export coal is transported from the coal producing areas to
RBCT by Transnet. The transport capacity on the RBCT rail
line is subject to limitations which may impact adversely on
the ability of the Company and its operating subsidiaries to
export coal.
For
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Land Claims
UCD II has an entitlement to acquire a Prospecting Right
held by Bono Lithihi Investments Group (Proprietary) Limited.
Certain of the properties over which Bono Lithihi Investments
Group (Proprietary) Limited holds a Prospecting Right are
subject to land claims lodged by or on behalf of four different
communities. It is important to note that a land claim is
against the State. In the event that a claim is successful, the
Land Claims Court may, inter alia, order, (i) the restoration of
the land, a portion of the land and any right in the land; (ii) the
State to grant the claimant an appropriate right in alternative
State-owned land and, where necessary, order the State
to designate such land; (iii) the State to pay the claimant
compensation; or (iv) grant the claimant any alternative relief.
In the event that the land claim is successful and restoration
of the land is awarded to the claimants, the holder of the
Prospecting Right will be required to negotiate and agree
access arrangements with the claimants notwithstanding that
the Bono Lithihi Investments Group (Proprietary) Limited may
have already concluded access agreements with the current
land owner. The terms of such access agreements may be
onerous and/or impose additional costs on the holder of the
Prospecting Right.
It is possible that the claimants may allege that their claim to
the land includes a claim in respect of the mineral rights to
such land. The legal position on the question of whether a
claim could include mineral rights is not clear. The substantial
change in the South African mineral and mining law regime
brought about by the MPRDA may arguably prevent a claim in
respect of mineral rights from being successful on the basis
that the MPRDA extinguished privately held mineral rights.
10.2 General Risks
Operating and Development Risks
The Company’s ability to achieve production, development,
operating cost and capital expenditure estimates on a timely
basis cannot be assured. The business of coal mining
involves many risks and may be impacted by factors including
geology, ore tonnes, yield, input prices (some of which are
unpredictable and outside the control of the Company),
overall availability of free cash to fund continuing development
activities, labour force disruptions, cost overruns, changes
in the regulatory environment and other unforeseen
contingencies.
The operations of the Company may be disrupted by a
variety of risks and hazards which are beyond the control
of the Company, including geological, geotechnical and
seismic factors, environmental hazards, industrial accidents,
occupational and health hazards, technical failures, labour
disputes, unusual or unexpected geological conditions,
flooding and extended interruptions due to inclement or
hazardous weather conditions, explosions and other acts of
God. These risks and hazards could also result in damage
to, or destruction of, future production facilities, personal
injury, environmental damage, business interruption, monetary
losses and possible legal liability. No assurance can be given
that the Company will be able to obtain insurance coverage
at reasonable rates (or at all), or that any coverage it obtains
will be adequate and available to cover any such claims.
In addition the Company’s profitability could be adversely
affected if for any reason its production and processing
of coal or mine development is unexpectedly interrupted
or slowed. Examples of events which could have such
an impact include unscheduled plant shutdowns or other
processing problems, mechanical failures, the unavailability
of materials and equipment, pit slope failures, unusual or
unexpected geological formations, poor or unexpected
geological or metallurgical conditions, interruptions to gas and
electricity supplies, human error and adverse
weather conditions.
The risks outlined above also mean that there can be
no assurances as to the future development of a mining
operation in relation to any of the Company’s projects
described in this Prospectus or which the Company may
acquire in the future.
Estimates of Ore Reserves and Coal Resources
The coal resource estimates for the Company’s coal assets
are estimates only and no assurance can be given that
any particular yield of coal from coal reserves will in fact be
realised or that an identified coal reserves will ever qualify as
a commercially mineable ore body that can be economically
exploited. The Company’s estimates comply with the JORC
Code. However, coal resources estimates are expressions of
judgment based on knowledge, experience and
industry practice.
The estimating of coal resources is a subjective process
and the accuracy of reserve and resource estimates is a
function of the quantity and quality of available data and
the assumptions used and judgments made in interpreting
engineering and geological information. There is significant
uncertainty in any reserve or resource estimate and the
actual deposits encountered and the economic viability of
mining a deposit may differ materially from the Company’s
estimates. The exploration of coal is speculative in nature and
is frequently unsuccessful. The Company may be unable to
successfully discover and exploit new reserves to replace
those they plan to mine to ensure the ongoing viability of the
Company’s projects.For
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l use
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167
Estimated coal resources may have to be recalculated based
on changes in coal prices, further exploration or development
activity or actual production experience. This could have
a material adverse effect on estimates of the volume,
estimated yield or other important factors that influence
reserve or resource estimates. Market price fluctuations
for coal, increased production costs or reduced yields, or
other factors may render the coal resources of the Company
uneconomical or unprofitable to develop at a particular site
or sites.
Production Estimates and Yield
The Company will prepare estimates of future production
for its operations. The Company cannot give any assurance
that it will achieve its production estimates. The failure of the
Company to achieve its production estimates could have a
material and adverse effect on any or all of its future cash
flows, results of operations and financial condition. These
production estimates are dependent on, among other things,
the accuracy of Ore Reserve and coal resource estimates,
the accuracy of assumptions regarding coal composition and
yields, ground conditions and physical characteristics of ores,
such as interbedding with non-coal material and the presence
or absence of particular coal characteristics (such as calorific
value, volatile matter, sulphur and moisture) and the accuracy
of estimated rates and costs of mining and processing.
The Company’s actual future production may also vary from
its estimates for a variety of reasons, including, adverse
operating conditions (such as unexpected geological
conditions, fire, weather, accidents), compliance with
governmental requirements, labour and safety issues,
delays in installing or repairing plant and equipment, inability
to complete, or lack of success of, capital development
and exploration drilling. Problems may also arise due to
interruptions to essential services (such as power, water, fuel,
equipment or transport capacity) or technical support which
results in a failure to achieve expected target dates
for production
Each of these factors applies to the Company’s sites not yet
in production. Depending on the price of coal, the Company
may determine that it is impractical to commence commercial
production at a particular site.
The inability of the Directors to estimate coal specifications
correctly may have an adverse effect on the Company’s
production estimates.
Mine Development
The Company’s ability to commence production is dependent
upon the successful development of new producing mines.
There is no guarantee that any of the Company’s projects
will be commercially feasible. If the Company is unable to
develop new coal resources, it will not be able to meet its
planned production levels. Reduced production or non
commencement of production could have a material adverse
effect on future cash flows, results of operations and the
financial condition of the Company.
Feasibility studies are used to determine the economic
viability of a deposit. Many factors are involved in the
determination of the economic viability of a deposit, including
the achievement of satisfactory coal reserve estimates, the
level of estimated coal yields, capital and operating cost
estimates and the estimate of future coal prices. Capital
and operating cost estimates are based upon many factors,
including anticipated tonnage and yields to be mined and
processed, the configuration of the ore body, ground
and mining conditions and anticipated environmental and
regulatory compliance costs. Each of these factors involves
uncertainties and as a result, the Company cannot give any
assurance that its development or exploration projects will
become operating mines. If a mine is developed, actual
operating results may differ from those anticipated in a
feasibility study.
Exploration Projects
Coal exploration is highly speculative in nature. The
Company’s exploration projects involve many risks and
success in exploration is dependent upon a number of
factors including, but not limited to, quality of management,
quality and availability of geological expertise and availability of
exploration capital. The Company cannot give any assurance
that its future exploration efforts will result in the discovery
of an ore reserve or coal resource. The Company cannot
give assurance that its exploration programs will result in the
discovery of new producing mines.
Environmental Health and Safety Matters
The Company’s mining operations are subject to extensive
South African health and safety and environmental laws and
regulations which could impose significant costs and burdens
on the Company (the extent of which cannot be predicted).
Financial provision for the estimated costs of rehabilitating
disturbances caused by prospecting and mining activities
must be provided to the Department of Mineral Resources
over the life of the operation. These laws and regulations
provide for penalties and other liabilities for violation of such
standards and establish, in certain circumstances, obligations
to rehabilitate current and former facilities and locations where
operations are or were conducted. Permission to operate
could be withdrawn temporarily where there is evidence of
serious breaches of health and safety and environmental laws
and regulations and even permanently in the case of
extreme breaches.
Mining operations have inherent risks and liabilities associated
with safety and damage to the environment and the disposal
of waste products occurring as a result of coal exploration
and production. The occurrence of any such safety or
environmental incident could delay production or increase
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production costs. The Company’s proposed operations
have been designed to comply with known or reasonably
predictable conditions, however, it is not possible to predict
all prevailing conditions that may affect the Company’s
operations at all times in the future. Events, such as
unpredictable rainfall may impact on the Company’s ongoing
compliance with environmental legislation, regulations
and licences. Significant liabilities could be imposed on
the Company for damages, clean up costs or penalties
in the event of certain discharges into the environment,
environmental damage caused by previous operations or
non-compliance with environmental laws or regulations.
The disposal of mining and process waste and mine
water discharge are under constant legislative scrutiny
and regulation. There is a risk that environmental laws and
regulations become more onerous making the Company’s
operations more expensive.
Approvals are required for land clearing and for ground
disturbing activities. Delays in obtaining such approvals can
result in the delay to anticipated exploration programmes or
mining activities.
Approvals are required for a rehabilitation or mine closure plan
that establishes the Company’s obligation to rehabilitate the
land after coal has been mined from the site. Rehabilitation by
the Company of its exploration and mining sites takes place
both during and after the active life of exploration and mining
activities.
Key Personnel and Management Risks
The Company’s business depends on its ability to attract
and retain the services of key personnel who are qualified
and experienced. The success of the Company is, and
will continue to be, to a significant extent dependent on
the expertise and experience of the Directors and senior
management. While the Company has contracts of service
or employment with its key personnel and in respect of
key resources, the retention of their services cannot be
guaranteed. The resources industry is largely driven by
fluctuations in commodity prices which, when high, can lead
to a large number of projects being developed which in turn
increases the demand for skilled personnel, contractors,
material and supplies. Accordingly, there is a risk to the
Company of losing or being unable to secure enough suitable
key personnel or key resources and, as a result, being
exposed to increased capital and operating costs and delays,
which may in turn adversely affect the development of new
and existing projects, the expansion of existing operations,
the results of those operations and the Company’s financial
condition and prospects.
There can be no assurance that the Company will be able
to manage effectively the commencement of operations or
that the Company’s current personnel, systems, procedures
and controls will be adequate to support the Company’s
proposed operations. Any failure of management to manage
effectively the Company’s growth and development could
have a material adverse effect on the Company’s business,
financial condition and results of operations.
Regulatory Risk
The Company’s mining operations and exploration and
development activities are subject to extensive laws
and regulations relating to numerous matters, including
various resource licence consent conditions pertaining
to environmental compliance and rehabilitation, taxation,
social and labour relations, health and worker safety,
waste disposal, water use, protection of the environment,
successful land claims and heritage matters, protection
of endangered and protected species and other matters.
The Company generally requires permits from regulatory
authorities to authorise the Company’s operations. These
permits relate to exploration, development, production and
rehabilitation activities.
Obtaining necessary permits can be a time consuming
process and there is a risk that the Company will not obtain
these permits on acceptable terms, in a timely manner or at
all. The costs and delays associated with obtaining necessary
permits and complying with these permits and applicable
laws and regulations could materially delay or restrict the
Company from proceeding with the development of a project
or the operation or further development of a mine. Any failure
to comply with applicable laws and regulations or permits,
even if inadvertent, could result in material fines, penalties
or other liabilities. In extreme cases, failure could result in
suspension of the Company’s activities or forfeiture of one or
more of the mining tenements.
Funding Risk
The Company’s ability to effectively implement its business
and operations plans in the future, to take advantage of
opportunities for acquisitions, joint ventures or other business
opportunities and to meet any unanticipated liabilities or
expenses which the Company may incur may depend in
part on its ability to raise additional funds. The Company may
seek to raise further funds through equity or debt financing,
joint ventures, production sharing arrangements, processing
plant financing or other means. Failure to obtain sufficient
financing for the Company’s activities and future projects may
result in delay and indefinite postponement of exploration,
development or production on the Company’s properties or
even loss of a property interest. There can be no assurance
that additional finance will be available when needed or, if
available, the terms of the financing might not be favourable
to the Company and might involve substantial dilution
to Shareholders.
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For example, the Company intends to finance the processing
facility on a Build-Own-Operate-Transfer (BOOT) basis in
relation to the Kangala Project. BOOT is a form of project
financing, wherein a private entity (such as an engineering
company) receives a contract from the private or public
sector to finance, design, construct and operate a processing
facility for the period stated in the contract. This enables the
project proponent to recover its investment, operating and
maintenance expenses in the project. Upon expiry of the
period, the ownership of the facility is transferred back to the
mining company. This may involve a balloon payment for the
residual capital. The ability to operate on a BOOT basis will
depend on the Company being able to obtain the
requisite financing.
Further, the Company, in the ordinary course of its operations
and developments, is required to issue financial assurances,
particularly insurances and bond/bank guarantee instruments
to secure statutory and environmental performance
undertakings and commercial arrangements. The Company’s
ability to provide such assurances is subject to external
financial and credit market assessments, and its own
financial position.
Loan agreements and other financing rearrangements such
as debt facilities, convertible note issues and finance leases
(and any related guarantee and security) that may be entered
into by the Company may contain covenants, undertakings
and other provisions which, if breached, may entitle lenders
to accelerate repayment of loans and there is no assurance
that the Company would be able to repay such loans in the
event of an acceleration. Enforcement of any security granted
by the Company or default under a finance lease could also
result in the loss of assets.
General Economic Conditions
Changes in both South African and global economic
conditions may affect the financial performance of the
Company. These factors over which the Company has
no control include general market, political and economic
conditions, including inflation rates, interest rates and foreign
currency exchange rates, changes in market valuations of
listed stocks in general and coal, structural changes to the
global mining industry, supply and demand conditions for
coal, and fluctuations in the coal price.
In addition, factors such as political movements, stock market
trends, commodity prices, industrial disruption, environmental
and adverse weather impacts, taxation changes and
legislative or regulatory changes, may all have an adverse
impact on the Company’s operating costs, profit margins
and price at which CDI’s trade. These factors are beyond the
control of the Company and the Company cannot, to any
degree of certainty, predict how they will impact on
the Company.
General Resource Sector Risk
In common with other entities undertaking business in the
natural resources sector, certain risks are substantially outside
the control of the Company. These risks include abnormal
stoppages in production or delivery due to factors such as
industrial disruption, major equipment failure, accident, power
failure or supply disruption, unforeseen adverse geological or
mining conditions and/or changes to predicted ore or coal
quality, the state of supply and demand for coal in South
Africa and overseas markets and the effect of the coal price,
changes in government regulations (including environmental
regulations) and government imposts such as royalties, rail
freight charges and taxes and risks to land titles, mining titles
and the use thereof as a result of land claims and related
claims or disputes in respect thereof.
10.3 Investment Speculative
The above list of risk factors ought not to be taken as
exhaustive of the risks faced by the Company or by
investors in the Company. The above factors, and others
not specifically referred to above, may in the future materially
affect the financial performance of the Company and the
value of the CDIs for Shares offered under this Prospectus.
Therefore, the CDIs for Shares to be issued pursuant to this
Prospectus carry no guarantee with respect to the payment
of dividends, returns of capital or the market value of
those securities.
Potential investors should consider that an investment in the
Company is speculative and should consult their professional
advisers before deciding whether to apply for CDIs for Shares
pursuant to this Prospectus.
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Universal Coal also has
two advanced explorationprojects Roodekop and Brakfontein, which are about to commence feasibility studies
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11. MATERIAL CONTRACTSSet out below are summaries of the following agreements:
• Kangala Coal Project Acquisition Agreement (Kangala
Acquisition Agreement) under which Universal Coal
Development I (Proprietary) Limited acquired the
Prospecting Rights to the Kangala Coal Project from
Injula Mining Operations (Proprietary) Limited. This
Agreement relates to the Kangala Project.
• Roodekop Coal Project Acquisition and Option
Agreement (Roodekop Acquisition Agreement) under
which Universal Coal Development IV (Proprietary)
Limited acquired the Prospecting Right to the Roodekop
Coal Project from Xakwa Investments (Proprietary)
Limited. This Agreement relates to the
Roodekop Project.
• Brakfontein Coal Project Acquisition and Option
Agreement (Brakfontein Acquisition Agreement) under
which Universal Coal Development III (Proprietary) Limited
acquired the Prospecting Right to the Brakfontein Coal
Project from Unity Rocks Mining (Proprietary) Limited.
This Agreement relates to the Brakfontein Project.
• Soutpansberg Coal Project Acquisition and Option
Agreement (Soutpansberg Acquisition Agreement)
under which Universal Coal Development II (Proprietary)
Limited is in the process of acquiring the Prospecting
Right to the Soutpansberg Coal Project from Bono Lithihi
Investments Group (Proprietary) Limited. This Agreement
relates to the Limpopo Project.
• Facilitation Agreement.
• Service agreements between the Company and
Dr Antony Harwood.
• Service agreements between the Company and
Mr Anton Weber.
• Mountain Rush Consultancy Agreement.
• Lead Manager Agreement between the Company
and Pursuit.
• Sponsoring Broker’s Agreement between the Company
and StoneBridge Securities Limited.
• Introducer’s Agreement between the Company and
Cong Ming Limited.
• Directors Deeds of Indemnity.
Please refer to Corporate Structure set out in Section 4 of this
Prospectus to assist with reading the summaries.
11.2 Kangala Acquisition Agreement
On 1 May 2008 (and subsequently amended by a first addendum dated 2 July 2008, a second addendum dated 2 April 2009 and a third addendum dated 4 September 2010), UCD I and Injula Mining Operations (Proprietary) Limited (Injula) entered into the Kangala Acquisition Agreement pursuant to which UCD I agreed to acquire from Injula the following Prospecting Rights (collectively known as the Kangala Coal Project):
• Prospecting Right No. 588/2006 PR in respect of
Portions 40 and 82 of the farm Middelbult No. 235 IR
measuring 942.1852 hectares;
• Prospecting Right No. 654/2006 PR in respect of
Portion 1 and the remaining extent of Portion 2 of the
farm Wolvenfontein No. 244 IR measuring 951.1174
hectares; and
• Prospecting Right No. 93/2007 PR in respect of Portion
1 of the farm Modderfontein No. 236 IR measuring
127.5878 hectares.
The consideration under the Kangala Acquisition Agreement
is the issue of 21,400,000 Shares in the Company to Injula
(Injula Consideration Shares).
On 28 August 2010, the South African Reserve Bank granted
exchange control permission for the issue of the Injula
Consideration Shares in satisfaction of the final
condition precedent.
Injula has directed that certain Consideration Shares are
issued amongst Marthinus (Jaco) Malan, Michael Seeger,
Pieter Janeke, Gerhardus Dreyer, Gerhardus Koekemoer,
Mosima Makgamatha; Antony Harwood (director of the
Company), Hendrik Bonsma (director of the Company) and
Anton Weber (director of the Company).
UCEHSA holds 70.5% of the issued capital of UCD I.
Mountain Rush Trading 6 (Proprietary) Limited holds the
remaining 29.5% of the issued capital of UCD I, in satisfaction
of the ownership component of the BEE requirements of the
Socio-Economic Empowerment Charter for the South African
mining industry (Charter).
11.3 Roodekop Acquisition Agreement
On 13 March 2009 (and subsequently amended by a first
addendum dated 7 April 2009), UCEHSA, UCD IV and Xakwa
Investments (Proprietary) Limited (Xakwa) entered into the
Roodekop Acquisition Agreement pursuant to which UCD
IV agreed to acquire from Xakwa the Prospecting Right in
respect of the farm Roodekop 83 IS measuring 860 hectares.
The consideration payable by UCEHSA to Xakwa under the
Roodekop Acquisition Agreement is cash and shares.
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UCEHSA has paid to Xakwa the cash consideration
of R1,500,000 following satisfaction of the conditions
precedent.
Xakwa was issued 85% of the shares in UCD IV on the Closing Date with UCEHSA holding the remaining 15%. UCD IV is the owner of the Prospecting Right for the Roodekop Project UCEHSA has the right to manage the project and increase its level of equity in UCD IV via the completion of various milestones as follows:
a) within one year of the Closing Date, upon the delineation
of an Indicated coal resource, UCD IV shall issue shares
to UCEHSA to equal a 25% interest;
b) within two years of the Closing Date, upon delineation of
a measured coal resource, UCD IV shall issue shares to
UCEHSA to equal a 35% interest; and
c) upon the conclusion of a feasibility study, UCD IV shall
issue shares to UCEHSA to equal a 50% interest in
UCD IV.
Once Xakwa and UCEHSA each hold 50% of the total issued
share capital of UCD IV, Xakwa agrees to grant to UCEHSA
an option to acquire a further 24% interest in UCD IV. The
option is valid for an indefinite period and may be exercised
in the sole discretion of UCEHSA. Upon the exercise of
the option and within 14 days of obtaining the Minister’s
consent in terms of section 11 of the MPRDA, UCEHSA or its
nominee shall pay to Xakwa the amount of the market value
of the option (to be determined by the parties or otherwise by
an independent expert).
As at the date of this Prospectus, UCEHSA holds 25% of
the issued capital of UCD IV. Xakwa will hold a minimum of
a 26% interest in UCD IV under the terms of the Roodekop
Acquisition Agreement, in satisfaction of the ownership
component of the BEE requirements of the Charter.
11.4 Brakfontein Acquisition Agreement
On 17 April 2009, UCEHSA, UCD III and Unity Rocks
Mining (Proprietary) Limited (Unity Rocks) entered into the
Brakfontein Acquisition Agreement pursuant to which UCD III
agreed to acquire from Unity Rocks the Prospecting Right in
respect of Portions 6, 8, 9, 10, 20, 26, 30 and the remaining
extent of the farm Brakfontein No. 264 IR measuring
879 hectares.
The consideration payable by UCEHSA to Unity Rocks under
the Brakfontein Acquisition Agreement is cash and shares.
The cash consideration payable by UCEHSA for the acquisition is as follows:
• R2,500,000 following acceptance of due diligence
undertaken by UCEHSA (paid on or about 6 May 2009);
• R2,500,000 following the application for Ministerial
consent under section 11 of the MPRDA to transfer the
Prospecting Right No. 245/2008 PR (paid on or about 20
August 2009);
• R2,500,000 upon the approval by the Minister under
section 11 of the MPRDA to transfer the Prospecting Right
and upon lodgement of the notarial deed of cession of the
Prospecting Right for registration; and
• R4,500,000 upon the granting of a Mining Right to UCD III.
Unity Rocks was issued 85% of the shares in UCD III following satisfaction of the conditions precedent to the acquisition (Closing Date) with UCEHSA holding the remaining 15%. UCEHSA has the right to manage the project and increase its level of equity in UCD III via the completion of various milestones as follows:
• within one year of the Closing Date, upon the delineation
of an Indicated coal resource UCD III shall issue shares to
UCEHSA to equal a 30% interest;
• within two years of the Closing Date, upon the delineation
of a Measured coal resource UCD III shall issue shares to
UCEHSA to equal a 40% interest; and
• upon the conclusion of a feasibility study, UCD III shall
issue shares to UCEHSA to equal a 50% interest in UCD III.
Once UCEHSA and Unity Rocks each hold 50% of the total
issued shares in UCD III, the parties shall discuss in good
faith whether UCEHSA shall be entitled to exercise an option
to acquire a further 24% interest UCD III at market value (to
be determined by the parties or otherwise by an independent
expert). Upon the exercise of the option and within 14 days of
obtaining the Minister’s consent in terms of section 11 of the
MPRDA, UCEHSA, or its nominee, must pay to Unity Rocks
in cash the amount of the market value of the option.
As at the date of this Prospectus, UCEHSA holds 30% of the
issued capital of UCD III. Unity Rocks will hold a minimum of
a 26% interest in UCD III under the terms of the Brakfontein
Acquisition Agreement, in satisfaction of the ownership
component of the BEE requirements of the Charter.
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11.5 Soutpansberg Acquisition Agreement
On 5 February 2010 (and subsequently amended by a first
addendum dated 16 April 2010 and a second addendum
dated 20 July 2010), UCEHSA, UCD II and Bono Lithihi
Investments Group (Proprietary) Limited (Bono Lithihi) entered into an agreement pursuant to which UCD II may
acquire from Bono Lithihi the MPT 342/2009 Prospecting
Right (Prospecting Right), granted to Bono Lithihi, in respect
of coal on certain farms in the Limpopo region, (being the the
Soutpansberg Properties and the Remaining Properties)
measuring a total of 39,484 hectares.
The Soutpansberg properties include the following farms:
Berenice 548 MS; Celine 547 MS; Doornvaart 355 MS;
Longford 354 MS and Matsuri 358 MS.
The remaining properties include the following farms:
Doncaster 414 MS; Duinen 419 MS; Gezelschap 395 MS;
Hastings 485; Monmouth 294 MS (excluding diamonds
and copper); Scot 465 MS; Secrabje 470 MS; Smithfield
456 MS; Trekpad 455 MS; Troy 458 MS; Twyfelfontein 483
MS; Vriendschap 460 MS; Wintersveld 427 MS; Ratho 1
MS; Parma 40 MS; Pont Drift 12 MS; Princess Royal 10
MS; Montrow 6 MS; Somerville 9MS and Patrica 65 MS
(excluding coal).
The consideration payable by UCEHSA to Bono Lithihi under
the Soutpansberg Acquisition Agreement is cash and shares.
The cash consideration payable by UCEHSA for the acquisition is as follows:
• R1,000,000 upon execution of the Soutpansberg
Acquisition Agreement (paid on or about
25 February 2010);
• R3,000,000 following the acceptance of the financial and
technical due diligence by UCEHSA (paid on
16 April 2010);
• R3,000,000 upon the approval by the Minister under
section 11 of the MPRDA to transfer the Prospecting
Right; and
• R3,000,000 payable within five Business Days of the
granting of an application for a renewal of the Prospecting
Right.
Bono Lithihi was issued 93% of the shares in UCD II following
the completion of the due diligence in satisfaction of (b) above
with UCEHSA holding the remaining 7%.
Upon the satisfaction of (c) and (d) above, UCD II will allot and
issue 10 shares to UCEHSA, resulting in Bono Lithihi holding
approximately 84.5% of the shares in UCD II and UCEHSA
holding the remaining 15.5% approximately.
UCEHSA has the right to manage the project and increase its level of equity in UCD II via the completion of various milestones as follows:
• within one year of the date of satisfaction of the conditions
precedent to the acquisition (Closing Date), upon the
delineation of an Inferred Coal resource, UCD II shall issue
shares to UCEHSA to equal a 25% interest;
• within two years of the Closing Date, upon the delineation
of an Indicated coal resource within an area of the
Soutpansberg Properties capable of supporting a 20
year life of mine operation, UCD II shall issue shares to
UCEHSA to equal a 35% interest;
• within three years of the Closing Date, upon the
delineation of a Measured coal resource within the
selected area of the Soutpansberg Properties, UCD II shall
issue shares to UCEHSA to equal a 45% interest; and
• upon the delineation of an Inferred coal resource within
the remaining properties, UCD II shall issue shares to
UCEHSA to equal a 50% interest in UCD II.
Upon the delineation of an Indicated coal resource, UCEHSA
shall be entitled to exercise an option to acquire a further 24%
interest in UCD II at market value (to be determined by an
independent expert to be agreed upon by the parties). The
option is valid for an indefinite period and may be exercised
in the sole discretion of UCEHSA. Upon the exercise of
the option and within 14 days of obtaining the Minister’s
consent in terms of section 11 of the MPRDA, UCEHSA, or
its nominee, must pay to Bono Lithihi in cash the amount of
the market value of the option. UCEHSA may elect to settle
the consideration payable for the exercise of the option by
procuring the issue of shares in the Company.
As at the date of this Prospectus, UCEHSA holds 7% of the
issued capital of UCD II. Bono Lithihi will hold a minimum of a
26% interest in UCD II under the terms of the Soutpansberg
Acquisition Agreement, in satisfaction of the ownership
component of the BEE requirements of the Charter.
11.6 Facilitation Agreement
On 4 September 2010 the Company entered into a
Facilitation Agreement (Agreement) with UCD II and Shammy
Luvhengo (Luvhengo) (together the Parties). Under the
Agreement Luvhengo is to provide to UCD II, in his capacity
as a geologist, services relating to the acquisition of the
Prospecting Right (prospecting right MPT 342/2009),
including all prospecting and mining activities and other
activities reasonably required by UCD II from time to time.
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The material terms of the Agreement are as follows:
• (Conditions Precedent): the provisions of the Agreement
are subject to the fulfilment or waiver of certain conditions
precedent by no later than 1 December 2010. These
conditions precedent are:
• registration of the cession of the Prospecting Right
with the Mineral and Petroleum Titles Registration
Office in the name of UCD II and
• the Exchange Control Authorities of the Reserve Bank
of South Africa giving their written approval for the
issue of Consideration Shares (defined below) in the
Company to Luvhengo.
• (Duration): the Agreement commenced on 4 September
2010 and will continue indefinitely unless cancelled in
accordance with the Agreement.
• (Facilitation Consideration): subject to fulfilment of the
Conditions Precedent and subject to Luvhengo having
performed the services referred to in the agreement to the
reasonable satisfaction of the Company and UCDII, the
Company shall pay to Luvhengo the Consideration Fee
(£220,000) and Luvhengo shall immediately thereafter
subscribe for the 1,100,000 ordinary shares at an issue
price of £0.30 each (being 2,200,000 shares of nominal
value of £0.05 at an issue price of £0.15 each following
the sub-division of this Company’s share capital which
occurred on 8 September 2010)
(the Consideration Shares).
• (Restriction on the sale or encumbrance of Consideration Shares): Luvhengo shall not be entitled
to sell all or any of the Consideration Shares, but shall
be entitled to encumber all or any of the Consideration
Shares in favour of any person, at any time for a period
of 12 months from the Issue Date (five days after the
fulfilment of the Conditions Precedent and, being the date
on which Luvhengo shall subscribe for the consideration
shares in accordance with the provisions of clause 8 of
the agreement).
• (Indemnity): Luvhengo indemnifies the Company
and UCD II, and their directors, officers, employees,
managers, advisors and agents, and holds them harmless
against any claims, liability, loss, proceedings, damages,
expenses and costs of whatsoever nature howsoever
arising (including any claim brought against the Company
and UCD II by any employee, sub-contractor or agent of
Luvhengo or any third party in respect of loss, damage,
injury or death) as made against the Company and UCDII
as a result of any negligent act or omission of Luvhengo or
any of his employees, contractors or agents.
• (Breach): if either party commits a material breach of the
Agreement, the other Party shall be entitled to give the
defaulting Party written notice calling upon the defaulting
Party to remedy the breach. Failure to comply with such
a notice within five business days of receipt of notice will
entitle the other Party to enforce specific performance or
cancel the Agreement and recover damages.
11.7 Employment contract with Dr Antony Harwood
The Company is a party to a consultancy services agreement
with Zander Investing Limited, a company incorporated in the
British Virgin Islands and associated with Dr Harwood.
Under this agreement, Zander Investing Limited is engaged
to provide services to the Company, including the services
of Dr Harwood. In consideration for providing Dr Harwood’s
services, Zander Investing Limited receives fees of £100,000
per annum.
The Company has entered into a separate service agreement
with Dr Harwood in September 2010, which is deemed
to have commenced on 1 December 2009. Under this
agreement, Dr Harwood is employed as an executive director
of the Company performing his duties in Johannesburg
or in any area where the Company does business, as the
Board may require, and is expected to work on 1.5 days
per calendar week in performance of his duties, although
is required to work whatever hours are necessary for the
completion of his duties as the needs of the Company may
require.
Dr Harwood is prohibited under the service agreement from
engaging in any other employment or engagements without
the Company’s prior written consent (which cannot be
unreasonably withheld).
Under the service agreement, Dr Harwood is entitled to salary
of £30,000 per annum, and is entitled to take 7.2 working
days’ holiday per annum (in addition to public holidays in
South Africa). Dr Harwood is also entitled to reimbursement
of travelling, hotel and other expenses incurred in the
performance of his duties, subject to any expense in excess
of £10,000 per month being agreed with the CEO or the
Board in advance.
The service agreement made between the Company
and Dr Harwood may be terminated by either party giving
twelve months’ notice to the other, and provides for
summary termination in certain circumstances including
upon termination of the consultancy agreement with Zander
Investing Limited.
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Under the service agreement, the Company may pay in lieu
of any period of notice and may place Dr Harwood on garden
leave during any period of notice. The service agreement
contains provisions relating to intellectual property and
confidential information, and sets out certain post-termination
restrictions on Dr Harwood for a specified period following
termination of employment.
The Company’s agreement with Zander Investing Limited
remains in force up to and including 30 June 2013, and
may be terminated earlier by Zander Investing Limited giving
not less than one month’s written notice to the Company.
The agreement also provides summary termination in limited
circumstances and contains other terms and conditions
standard in agreements of this nature.
11.8 Employment contract with Mr Anton Weber
The Company is a party to a consultancy services agreement
with Zander Investing Limited, a company incorporated in the
British Virgin Islands and associated with Mr Weber.
Under this agreement, Zander Investing Limited is engaged
to provide services to the Company, including the services of
Mr Weber. In consideration for providing Mr Weber’s services,
Zander Investing Limited receives fees of £100,000 per
annum.
The Company has entered into a separate service agreement
with Mr Weber dated in September 2010, which is deemed
to have commenced on 1 December 2009. Under this
agreement, Mr Weber is employed as an executive director of
the Company performing his duties in Johannesburg or in any
area where the Company does business, as the Board may
require, and is expected to work on 1.5 days per calendar
week in performance of his duties, although is required to
work whatever hours are necessary for the completion of his
duties as the needs of the Company may require.
Mr Weber is prohibited under the service agreement from
engaging in any other employment or engagements without
the Company’s prior written consent (which cannot be
unreasonably withheld).
Under the service agreement, Mr Weber is entitled to salary
of £30,000 per annum, and is entitled to take 7.2 working
days’ holiday per annum (in addition to public holidays in
South Africa). Mr Weber is also entitled to reimbursement
of travelling, hotel and other expenses incurred in the
performance of his duties, subject to any expense in excess
of £10,000 being agreed with the Chairman or the Board in
advance.
The service agreement made between the Company and
Mr Weber may be terminated by either party giving twelve
months’ notice to the other, and provides for summary
termination in certain circumstances including upon
termination of the consultancy agreement with Zander
Investing Limited.
Under the service agreement, the Company may pay in lieu
of any period of notice and may place Mr Weber on garden
leave during any period of notice. The service agreement
contains provisions relating to intellectual property and
confidential information, and sets out certain post-termination
restrictions on Mr Weber for a specified period following
termination of employment.
The Company’s agreement with Zander Investing Limited
remains in force up to and including 30 June 2013, and
may be terminated earlier by Zander Investing Limited giving
not less than one month’s written notice to the Company.
The agreement also provides summary termination in limited
circumstances and contains other terms and conditions
standard in agreements of this nature.
11.9 Mountain Rush Consultancy Agreement
The Company and Mountain Rush Trading 6 (Proprietary)
Limited (Mountain Rush) entered into a Consultancy
Agreement (Agreement) (collectively the Parties) under which
Mountain Rush would provide its expertise in assisting the
Company to meet its obligations in regard to black-economic
empowerment (BEE). Under the Agreement Mountain Rush
will act as a consultant to the Company. The material terms of
the Agreement are as follows:
• (Conditions Precedent): The provisions of the
Agreement are subject to the Share Sale Agreement
(between Mountain Rush and Move-on-up 210
(Proprietary) Limited dated 24 April 2008 as amended)
becoming unconditional in accordance with its terms and
entering into force;
• (Duration): The Agreement will run from the Effective Date
(the date upon which the Conditions Precedent are met)
for a period of two years;
• (Services to be rendered): Mountain Rush will render
the following services to the Company:
• provide technical and advisory assistance with regard
to scope, effects and requirements of the Broad-
based Black Economic Empowerment Act (Act), the
Codes of Good Practice issued under the Act and
other BEE requirements;
• assistance with the acquisition of relevant
regulatory approvals;
• introduction to potential partners who may assist in
meeting relevant BEE requirements;
• sourcing new corporate opportunities for the Company
and its subsidiaries; and
• any other services that the Parties agree to in writing.
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• (Payment terms): As remuneration for its services,
Mountain Rush shall be entitled to R6,000,000 and
£301,200. The R6,000,000 will be paid in cash and
the £301,200 will be paid in shares. The payment of
the R6,000,000 will be made within 10 business days
of the Effective Date and the shares will be allotted
within 10 business days of the Company listing on the
Johannesburg Stock Exchange (JSE). The Company has
already paid R6,000,000 in respect of the
services rendered.
• (Non-listing): In the event that the Company does not list
on the JSE within 18 months of the Kangala Acquisition
Agreement becoming unconditional, the parties confirm
that the Company can elect to pay the £301,200 in cash
or issue Mountain Rush with shares to the value
of £301,200 in UCEHSA.
• (Indemnity): Mountain Rush indemnifies the Company,
its directors, officers, employees, managers, advisors
and agents and holds them harmless against any claim,
liability, loss, proceeding, damages, expenses and/
or costs of whatsoever nature as made against the
Company as a result of a negligent act or omission of
Mountain Rush or its employees, subcontractors, or
agents pursuant to the performance of Mountain Rush’s
obligations under the Agreement.
• (Cancellation of loan agreement): The Parties agree
to cancel the loan agreement entered into by them on 24
April 2008 and the Company acknowledges that Mountain
Rush is not indebted to the Company in any way in terms
of that agreement.
11.10 Lead Manager Agreement
On 30 September 2010, the Company and Pursuit entered
into a Lead Manager Agreement in relation to the Offer
(Lead Manager Agreement).
Under the Lead Manager Agreement Pursuit agreed to
assist the Company with its proposed listing on ASX and its
associated equity capital raising.
The material terms and conditions of the Lead Manager Agreement are as follows:
• (Fees): the following fees are payable by the Company
to Pursuit:
• a corporate finance fee of $75,000, with $25,000 paid
in advance on 5 May 2010. The balance of the fee is
to be paid upon the Company listing on ASX;
• An ongoing corporate advisory fee of $20,000 per
month for an initial period of 12 months from the date
of lodgement of this Prospectus.
• a management fee equal to 1% of any funds raised
under this Prospectus, excluding funds raised by
nominated parties for which no commission shall be
payable; and
• a brokerage commission equal to 5% of any funds
raised directly by Pursuit under this Prospectus.
Pursuit may pay some of the brokerage commission to
parties that assist in introducing capital under the Offer.
The funds raised directly by Pursuit do not include
amounts raised by the Sponsoring Broker;
• (Options): the Company has agreed to issue to Pursuit
Options equal to 5% of all the total shares issued under
this Prospectus excluding capital raised from nominated
parties or other investors introduced by Universal. The
Options are exercisable at $0.26 with an expiry date of 5
years from the date of admission of the Company to the
Official List;
• (Strategic Investment Fee):For any moneys received
from strategic Indian investors introduced by Pursuit via
either asset sale agreement, off take agreement, joint
venture agreement or any other agreement that results in
a financial investment for the benefit of the Company, the
Company shall pay to Pursuit 3% of the funds received
from such investment or value of the transaction over its
life;d) (Post-Listing Services): For the ongoing use of the
Pursuit office as a registered office in Australia and the
provision of company secretarial services, Universal will
pay to Pursuit $60,000 per annum. This is subject to
a minimum term of 12 months and may be terminated
thereafter by 1 month notice.
• (Termination): the Lead Manager Agreement may be
terminated by 1 month notice in writing, subject to the
payment by the Company of the Fees to Pursuit as set
out above.
11.11 Agreement with StoneBridge Securities Limited
The Company has entered into an agreement with
StoneBridge Securities Limited, whereby StoneBridge
Securities Limited is appointed as sponsoring broker to the
Company with respect to the Offer.
In consideration of the services provided under the agreement, the Company agrees to pay StoneBridge:
• a fee of 5.5% of the total funds raised under the Offer
(excluding funds raised by the Company, under the
process to find a cornerstone investor run by Pursuit
Capital or those funds identified by Pursuit Capital prior to
execution of this Agreement);
• a fee of $10,000 per month for a period of 12 months
from the listing of the Company on ASX; and
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• that number of Options equal to 2.5% of the number
of Shares on issue as at the date of admission of the
Company to the Official List, for nil consideration, with an
expiry date of 31 December 2013. 40% of the Options
are exercisable at $0.26, 40% are exercisable at $0.286
and 20% are exercisable at $0.312.
The Company has given StoneBridge covenants in relation
to the conduct of the Company during the term of the
agreement and in relation to the provision of information
to StoneBridge. The Company has agreed to indemnify
StoneBridge in relation to certain liabilities which StoneBridge
and other associated parties may incur in relation to
StoneBridge’s obligations under the agreement.
The agreement may be terminated on one month’s
written notice.
11.12 Agreement with Cong Ming Limited
On 19 August 2010 the Company entered into an agreement that governs the introduction of cornerstone investors by Cong Ming Limited (Cong Ming) to take part in the Offer. The material terms of the Agreement, which are on a success basis only, are as follows:
• for any cornerstone position an investor takes in the Offer,
Cong Ming or its nominees will be paid:
• 2.5% of the total amount committed and invested by
the investor in cash (payable out of the Brokerage
Commission payable to Pursuit Capital); and
• 5 million unlisted options in the Company, exercisable
at the Offer price for a period of five years.
• if an investor has a significant holding of the Company’s
shares, they will be entitled to nominate one representative
to the Board and negotiate an off-take agreement on the
Company’s coking coal assets.
• the Investor may take part in future transactions in
the Company upon which Pursuit and Cong Ming will
negotiate a fee structure appropriate to the transaction.
11.13 Directors’ Deeds of Indemnity
The Company has entered, or intends to enter, into a deed
of indemnity, insurance and access with each of its Directors.
Under these deeds, the Company agrees to indemnify each
Director to the extent permitted by law and the Company’s
articles of association against any liability arising as a result of
the Director acting as an officer of the Company or a related
body corporate. The Company is also required to maintain
insurance policies for the benefit of the Director and must also
allow the Directors to inspect Company documents in
certain circumstances.
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The Company hasan experienced teamof directors seniormanagers and geoscientistswith extensive expertisein both coal explorationand mining in South Africa
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12. ADDITIONAL INFORMATION
12.1 Articles of Association
The current Articles of Association of the Company were
adopted by a special resolution passed on 8 September
2010. The Articles of Association were amended to comply
with the ASX Listing Rules (amongst other things), and the
ASX has provided in principle confirmation that the form of the
Articles of Association is consistent with the ASX
Listing Rules.
The following is a summary of the key provisions of the
Articles of Association and principal rights and restrictions of
Shareholders. This summary is not exhaustive, nor does it
constitute a definitive statement of the rights and restrictions
of Shareholders.
Investors should note that they will be issued with CDIs under
this Prospectus. With the exception of voting arrangements,
holders of CDIs for Shares have the same rights as holders of
Shares, which are legally registered in their own name. Please
see Section 12.2 and 12.3 for more information about CDIs.
a) Application of Listing Rules
To the extent of any inconsistency between the Articles
of Association and the ASX Listing Rules, the ASX Listing
Rules prevail.
b) General Meetings
The Board may, whenever it thinks fit, and in accordance
with the UK Companies Act convene a general meeting.
Notice of every general meeting shall be given to every
member of the Company who is, under the Articles of
Association, entitled to receive such notices from
the Company.
c) Voting Rights
Subject to any special terms as to voting upon which
Shares may be issued or may for the time being be held,
on a show of hands every member present by person or
proxy shall have one vote. On a poll every member who is
present by person or proxy shall have one vote for every
Share they hold.
Where there are two or more joint holders of a share and
more than one of them is present at a general meeting in
person or by proxy and tenders a vote in respect of the
share, the Company will count only the vote cast by, or
on behalf of, the member whose name appears first in the
Company’s register of members.
d) Dividends
The Company may by ordinary resolution declare
dividends to be paid out of the profits of the Company
available for distribution. No dividend shall be declared in
excess of the amount recommended by the Board.
The Board may, provided that in its opinion the profits of
the Company justify such payment, pay interim dividends
from time to time of such amounts and on such dates and
in respect of such periods as it thinks fit.
Except as otherwise provided by the rights attached to
the Shares, all dividends shall be declared and paid pro
rata according to the amounts paid up on the Shares
in respect of which the dividend is declared and paid
(divided) during any portion or portions of the period in
respect of which the dividend is declared. For these
purposes no amounts paid in advance of calls upon the
members shall be treated as paid on the Shares.
Any dividend unclaimed for a period of 12 years from
the date on which the dividend becomes payable will be
forfeited and will revert to the Company.
e) Winding Up
The Company has only issued one class of Shares, which
all rank equally in the event of winding up.
A liquidator may, with the authority of a special resolution
of Shareholders, divide among the shareholders in kind
the whole or any part of the property of the Company, and
may for that purpose set such value as he considers fair
upon any property to be so divided, and may determine
how the division is to be carried out as between the
shareholders. The liquidator can with the sanction of a
special resolution of the Company’s shareholders vest the
whole or any part of the assets in trust for the benefit of
shareholders as the liquidator thinks fit, but no shareholder
of the Company can be compelled to accept any CDIs for
Shares or other property in respect of which there is
a liability.
f) Purchase of Own Shares
Subject to the UK Companies Act, the Company may
purchase its own Shares (including any redeemable
shares) or enter into such agreement (contingent or
otherwise) in relation to the purchase of its own Shares on
such terms and in such manner as may be permitted by
the UK Companies Act.
g) Transfer of Shares
In relation to a transfer of ordinary Shares which are in
certificated form:
• such transfers may be effected by transfer in writing in
any usual form or in such other form as the Board may
approve. The instrument of transfer shall be executed
by or on behalf of the transferor and (in the case of a
partly paid share) by or on behalf of the transferee;
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• the Board may refuse to register any transfer of
partly paid Shares or Shares on which the Company
has a lien or any instrument of transfer in favour of
an entity which is not a natural or legal person, a
minor, infant person in respect of whom a receiving
order or adjudication order in bankruptcy remains
undischarged, a person with mental disorder or where
the share is to be held jointly by more than 4 persons;
and
• the Board may not decline to register any instrument
of transfer if the instrument of transfer is duly stamped
(if required), is in respect of only one class of share
and is in favour of not more than four joint transferees,
provided that to do so is not contrary to the ASX
Listing Rules.
h) Alteration of Capital
The Company may by ordinary resolution, consolidate or
sub-divide all or any of its Shares or cancel any Shares
which have not been taken or agreed to be taken by
any person.
Subject to the UK Companies Act and any other consent
required by law, the Company may by special resolution
reduce its issued Share Capital, any capital redemption
reserve fund or any share premium account or any other
undistributable reserves in any manner.
i) Takeover Protection
The Board of Directors may disenfranchise a Shareholder
who does not make a takeover offer in circumstances
where this would be required under rule 9 of the City
Code but at a time when the City Code does not apply,
so that the protection is triggered upon acquiring 20%
rather than 30% ownership in the Company (in line with
standard provisions applying to Australian incorporated
public companies listed on ASX).
12.2 Rights of CDI Holders
With the exception of voting arrangements, CDI holders
have the same rights as holders whose securities are
legally registered in their own name. The ASTC Settlement
Rules require that all economic benefits, such as dividends,
bonus issues, rights issues or similar corporate actions flow
through to CDI holders as if they were the legal owners of the
underlying securities.
The ASTC Settlement Rules require the Company to give
notices to CDI holders of general meetings of Shareholders.
The notice of meeting must include a form permitting the CDI
holder to direct CDN to cast proxy votes in accordance with
the CDI holder’s written directions. CDI holders cannot vote
personally at Shareholder meetings. The CDI holder must
convert their CDIs for Shares into certificated Shares prior to
the relevant meeting in order to vote at the meeting in person.
12.3 Converting from a CDI to a Share
CDI holders may at any time convert their holding of CDIs (tradeable on ASX) to certificated Shares:
a) For CDIs held through the issuer sponsored sub-register,
contacting Computershare Investor Services Pty Limited in
Australia directly to obtain the applicable request form. The
removed holding would then be registered into the same
address that appeared on the Australian CDI register; or
b) for CDIs held on the CHESS sub-register, contacting their
controlling participant (generally a stockbroker), who will
liaise with Computershare Investor Services Pty Limited in
Australia to obtain and complete the request form.
Upon receipt of a request form, the relevant number of CDIs
will be cancelled and Shares will be transferred from CDN into
the name of the CDI holder and a registered share certificate
be issued. This will cause your Shares to be registered on the
certificated UK register of Shares and trading will no longer be
possible on the ASX.
A holder of Shares may also convert their Shares to CDIs for
Shares, by contacting the Company Secretary in the United
Kingdom at +44 207 292 9110 or
[email protected], Computershare Investor Services
Pty Limited in Australia, or their stockbroker (or applicable
controlling participant). In this case, the Shares will be
certificated if held in uncertified form, transferred from the
Shareholder’s name into the name of CDN and a holding
statement will be issued for the CDIs. The CDIs will be
tradeable on ASX.
12.4 Differences between UK and Australian Corporate Law
The Company is incorporated under the laws of England and
Wales. The following table sets out the principal differences
between laws and regulations concerning shares in a
company incorporated in England and Wales as opposed
to Australia.
This summary is provided as a general guide only, and
is not a comprehensive summary or analysis of all of the
consequences resulting from acquiring, holding or disposing
of shares or interests in such companies. The laws, rules,
regulations and procedures described are subject to change
from time to time, and investors should seek their own
independent advice in relation to such differences. Please
also refer to the risk factors set out in Section 10 of
this prospectus
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Share capital and issue of shares
United Kingdom
The articles of association of some English companies contain a limit
on authorised share capital. (Universal Coal’s Articles do not contain
such a limit.) This may be increased by way of ordinary resolution of the
company’s shareholders.
The directors may allot shares if authorised to do so by either ordinary
resolution of the company’s shareholders or by the articles of association.
Under English law, shareholders have pre-emption rights unless those
rights are explicitly excluded or disapplied. This means that on an
issue of equity securities (which term includes rights to subscribe for or
convert into ordinary shares), such equity securities must be offered in
the first instance to the existing equity shareholders in proportion to their
respective nominal values of their holdings, unless a special resolution has
been passed at a general meeting of shareholders to the contrary.
At the general meeting of Universal Coal held on 8 September 2010,
Shareholders approved the Directors’ authorities to allot shares up to an
aggregate nominal amount of £50 million and suspend the application of
the UK pre-emption rights up to an aggregate nominal amount of £50
million until:
• if Official Quotation has taken place prior to the date of the 2010
AGM, the earlier of (A) 5 years from the date of passing the resolution
at the general meeting and (B) the date of cessation of Universal
Coal’s listing on ASX.
• if Official Quotation has not taken place prior to the 2010 AGM, upon
conclusion of the 2010 AGM.
Australia
The constitution of a typical Australian public company authorises the
board to issue shares, options and other securities with preferred,
deferred or other special rights or such restrictions, whether with regards
to dividends, voting, return of capital and other matters as the directors
may decide. The constitution typically does not impose any maximum limit
on the number of shares.
Under Australian law a company, as part of its legal personality, has the
power to issue and cancel shares in the company. In addition to this
power a company may also issue bonus shares, preference shares and
partly paid shares. The company has the power to determine the terms of
and rights and restrictions attaching to the shares it issues.
ASX Listing Rule 7.1 provides that a company must not issue or agree
to issue shares exceeding 15% of the company’s issued capital without
shareholder approval. Listing Rule 7.4 allows a company to obtain
subsequent approval of a security issue, as per Listing Rule 7.1, in order
that it is treated as if it had received prior approval.
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Share buybacks and share reductions
United Kingdom
Under English law, shareholders must approve by special resolution any
reductions of capital (subject to sanction by the Court and any restrictions
in the articles of association) and certain re-purchases of shares (such as
off-market purchases).
Australia
Under Australian law, a company may reduce its share capital if the
reduction is fair and reasonable to the company’s shareholders as a
whole, does not materially prejudice the company’s ability to pay its
creditors and is approved by shareholders in accordance with the
Corporations Act and relevant filings are made and the statutory time
period is adhered to.
Under the Corporations Act, if the reduction is an equal reduction, it must
be approved by an ordinary resolution passed at a general meeting of the
company. However, if the reduction is a selective reduction, it must be
approved by either a:
• special resolution passed at general meeting of the company with no
votes cast by those who are to receive consideration as part of the
reduction; or
• a resolution agreed to at a general meeting by all ordinary
shareholders.
In addition, if the reduction involves the cancellation of shares, it must
also be approved by a special resolution passed at a meeting of the
shareholders whose shares are to be cancelled.
Under Australian law, a company may buy back its own shares if the
buy-back does not materially prejudice the company’s ability to pay
its creditors and the company follows the procedures laid down in the
Corporations Act.
Under the Corporations Act:
• shareholder approval by ordinary resolution will be required if the
buy-back will exceed more than 10% of the company’s issued capital
within a 12 month period; and
• shareholder approval will be required by special resolution if the buy-
back will not qualify as an equal access buy-back (a buy-back will
qualify as an equal access buy-back if it, among other things, relates
only to ordinary shares and the offer is made equally to all holders of
ordinary shares, otherwise the buy-back will be a selective buy-back).
Winding up
United Kingdom
A company can be wound up voluntarily by the shareholders if the
directors are prepared to give a statutory declaration of solvency. A
shareholders’ voluntary winding up is started by the shareholders passing
a special resolution.
If the directors are not willing to give a statutory declaration of solvency
a creditors’ voluntary winding up can commence by the shareholders
passing a special resolution.
Any surplus after payment of debts and interest will go to the shareholders
according to the rights attached to their shares. As with unsecured
creditors, they would be paid out of free assets or any funds available
from charged assets following payment of all prior claims (i.e. fixed charge
holders, preferential creditors and floating charge holders).
Australia
Voluntary winding up requires the company to pass a special resolution
that it be wound up voluntarily. Subject to the provisions of the
Corporations Act regarding preferential payments, upon winding up the
property of the company must be applied in satisfaction of its liabilities
equally and, unless the company’s constitution otherwise provides, be
distributed among the members according to their rights and interests in
the company.
For winding-up in insolvency or by the court, a distribution of the surplus
assets can only made by order of the court.
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Takeovers
United Kingdom
As Universal Coal is not currently managed and controlled within the
UK, Channel Islands or Isle of Man, the UK City Code on Takeovers and
Mergers (the Takeover Code) does not currently apply to Universal
Coal. The Takeover Code provides companies with certain protections, in
particular if an individual investor or a group of investors acting in concert
acquires ordinary shares representing 30%, or more of the issued share
capital of a company they will be under an obligation to make an offer to
acquire the ordinary shares not owned by them.
It is usual for public limited companies to incorporate equivalent
takeover protection in their articles of association. Such provisions
provide protection against takeovers by allowing the board of directors
to disenfranchise a shareholder who does not make a takeover offer in
circumstances where this would be required under rule 9 of the Takeover
Code. Universal Coal’s Articles contain such provisions which are
triggered when a holding of 20% or more is reached – refer to section
12.1 above.
Sections 983 to 985 of the UK Companies Act give minority shareholders
in a company a right to be bought out in certain circumstances by an
offeror who has made a takeover offer as defined in section 974 of the UK
Companies Act. If a takeover offer related to all the shares and at any time
before the end of the period within which the offer could be accepted the
offeror held or had agreed to acquire not less than 90% of the shares, any
holder of shares to which the offer related who had not accepted the offer
could by a written communication to the offeror require it to acquire those
shares. If a shareholder exercises his/her rights, the offeror is bound to
acquire those shares on the terms of the offer or on such other terms as
may be agreed.
Australia
The Corporations Act places restrictions on a person acquiring relevant
interests in the voting shares of an Australian unlisted public company
which has more than 50 members, or an Australian listed company,
where, as a result of the acquisition, that person’s or someone else’s
voting power in the company (together with the voting power of their
associates increases from 20% or below to more than 20% or from a
starting point that is above 20% and below 90%.
Certain exceptions apply, such as acquisitions of relevant interests in
voting shares made under takeover bids or made with shareholder
approval, or creeping acquisitions of not more than 3% in a 6 month
period.
Similar to the position under the UK Companies Act, the Corporations Act
permits compulsory acquisition of the shares for which acceptances have
not been received, where a bidder holds not less than a 90% relevant
interest in the relevant securities.
Takeover bids must treat all shareholders alike and must not involve any
collateral benefits.
Limitations on directors’ liability
United Kingdom
Under English law, an English company may not generally exempt a
director from, or indemnify him against, liability in connection with any
negligence, default, breach of duty or breach of trust by him in relation
to the company. However, the general prohibition against exemption or
indemnification by a UK company of its directors is subject to relaxation
and UCP’s Articles provide that:
• UCP may, at its discretion and subject to any policies adopted by
the directors, indemnify every director or other officer or auditor of
the company out of the assets of the company against all costs,
damages, losses, expenses and liabilities incurred by him in relation
to the company in or about the actual or purported execution of the
duties of his office or the exercise or purported exercise of his power
or otherwise in relation thereto, including any liability incurred by him
in defending any criminal or civil proceedings (subject to various
exceptions); and
• UCP may at its discretion provide a Director or other officer with
funds, or otherwise arrange, to meet expenditure incurred or to be
incurred by him in defending any criminal or civil proceedings or
defending himself in, for example, an investigation by a regulatory
authority or against action proposed to be taken by a regulatory
authority.
Australia
Under the Australian Corporations Act a company or a related body
corporate must not exempt a person (whether directly or via an interposed
entity) from a liability to the company incurred as an officer of the
company.
A company or a related body corporate cannot indemnify a director from
any of the following liabilities incurred as an officer of the company:
• a liability owed to the company;
• a liability for a pecuniary penalty or a compensation order incurred
under the Act; or
• a liability that is owed to someone other than the company or a
related body corporate and did not arise out of conduct in good
faith. This prohibition does not apply to legal costs (but the Act also
restricts a company from indemnifying directors against certain types
of legal costs).
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Disclosure of substantial holdings
United Kingdom
Pursuant to Part 22 of the UK Companies Act and Universal Coal’s
Articles, Universal Coal is empowered by notice in writing to require any
person whom Universal Coal knows, or has reasonable cause to believe
to be or, at any time during the three years immediately preceding the
date on which the notice is issued, within a reasonable time to disclose
to Universal Coal particulars of any interests, rights, agreements or
arrangements affecting any of the shares held by that person or in which
such other person as aforesaid is interested.
A shareholder in a UK public Company with shares admitted to trading on
a regulated market and/or prescribed market must notify the Company
of the percentage of voting rights it holds as a shareholder (or holds
or is deemed to hold through his direct or indirect holding of financial
instruments) if the percentage of voting rights reaches, exceeds or falls
below 3% or any 1% threshold above 3% as a result of an acquisition or
disposal of share or financial instruments.
Australia
Under the Corporations Act, a shareholder who begins or ceases to have
a substantial holding in a listed company or has a substantial holding in a
listed company and there is a movement by at least 1% in their holding,
must give a notice to the company and ASX.
A person has a substantial holding if that person and that person’s
associates have a relevant interest in 5% or more of the voting shares in
the company.
The Company is not subject to the provisions of the Corporations Act
relating to the disclosure of substantial holdings.
Protection of minority shareholders–oppression
United Kingdom
Under English law, if shareholders consider that a company’s affairs
are being conducted in an unfairly prejudicial manner to the interests of
shareholders generally or to some part of its shareholders, or that an
actual or proposed act or omission would be so prejudicial, they may
apply to the court for an order. If the court is satisfied that the action is
well founded, it may make such order as it thinks fit (such as a purchase
order requiring the company to purchase the petitioner shareholder’s
shares.) Under English law, minority shareholders also have the following
protections:
• they may, in certain circumstances, take proceedings for injunctive or
other relief to prevent the majority from exercising their voting power
improperly by virtue of the doctrine of fraud on the minority; and
• they may bring proceedings on behalf of a company (i.e. a
derivative action) in certain circumstances.
Australia
Under Australian law, a shareholder of an Australian company may apply
to the court under the Corporations Act to bring an action in cases of
conduct which is either contrary to the interests of shareholders as a
whole, or oppressive to, unfairly prejudicial to, or unfairly discriminatory
against, any shareholders in their capacity as a shareholder, or
themselves in a capacity other than as a shareholder.
Accounting and Auditors
United Kingdom
UK companies are required to prepare for circulation to shareholders and
filing with Companies House annual accounting records in the prescribed
form; failure to do so will result in a penalty being payable by the company
and directors of the company being liable for prosecution.
Under English law, shareholders of public companies may appoint
auditors by ordinary resolution at the general meeting of the company at
which the company’s annual accounts are laid (usually the annual general
meeting). Members can also appoint auditors if the company should have
made the appointment at such an accounts meeting but failed to do so
or where the directors have the power but have failed to do so. Directors
can appoint the auditors at any time before the company’s first accounts
meeting, after a period of exemption or to fill a casual vacancy. The
Secretary of State has power to appoint an auditor where the company
has failed to do so.
Australia
Under the Corporations Act a company must report to members for a
financial year by providing financial reports for the year, director’s reports
for the year and an auditor’s report on the financial report or a concise
report as specified under the Corporations Act.
The directors of a public company must appoint an auditor within 1
month after the day on which the company is registered; however
this appointment is subject to confirmation at the next annual general
meeting. A public company must appoint an auditor of the company to
fill any vacancy in the office of auditor at each subsequent annual general
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12.5 Options
New Option Agreements
The Company has entered, or intends to enter, into Option agreements to grant the following new Options over Shares of the Company:
Holder Number Exercise Price
Antony Harwood 634,187 24.5c
Anton Weber 251,134 24.5c
Hendrik Bonsma 43,715 24.5c
Tim Horgan 22,222 24.5c
Duncan Craib 50,000 24.5c
Antony Harwood 1,000,000 37.0c
Anton Weber 1,000,000 37.0c
Hendrik Bonsma 1,000,000 37.0c
Jaco Malan 800,000 37.0c
Michael Seeger 200,000 37.0c
Tim Horgan 200,000 37.0c
Duncan Craib 200,000 37.0c
Antony Harwood 1,000,000 75.0c
Anton Weber 1,000,000 75.0c
Hendrik Bonsma 800,000 75.0c
Shammy
Luvhengo
800,000 75.0c
John Hopkins 800,000 75.0c
Jaco Malan 800,000 75.0c
Michael Seeger 200,000 75.0c
Tim Horgan 200,000 75.0c
Duncan Craib 200,000 75.0c
Material Terms of New Options
The material terms and conditions of the amended and restated Options, as they have been, or are intended to be entered into, are summarised as follows:
• Each of the new Options is granted with a date of grant of
the earlier of:
• The date of admission of CDIs to trading on ASX; or
• 31 December 2010.
• The new Options exercisable at a price of 24.5c may be
exercised from their date of grant until the fifth anniversary
of their date of grant.
• The new Options exercisable at prices of 37.0c and
75.0c may be exercised:
• in respect of the first 1/3rd of the Shares subject
to them (rounded up to the nearest whole number
of Shares) from their date of grant until the fifth
anniversary of their date of grant;
• in respect of the next 1/3rd of the Shares subject to
them (rounded up to the nearest whole number of
Shares) from the first anniversary of their date of grant
until the fifth anniversary of their date of grant; and
• in respect of the remainder of Shares subject to them,
from the second anniversary of their date of grant until
the fifith anniversary of their date of grant.
• If the price payable for a CDI under this Prospectus is
less than 50.0c, the number of Shares subject to the
new Options with exercise prices as specified above
of 37.0c and/or 75.0c, and/or those exercise prices,
shall be adjusted pro-rata according to the percentage
difference between the price payable for one CDI upon
the admission of CDIs to trading on ASX and 50.0c,
in such manner as the Company shall in its absolute
discretion determine is fair and reasonable, provided
that the aggregate amount payable on the exercise of a
new Option (in respect of those Options with exercise
prices as specified above of 37.0c and/or 75.0c) in full
is not increased and the price payable for a Share is not
reduced below its nominal value.
• An Option (or the relevant part thereof) lapses following
expiry of the periods set out above, and in other
circumstances specified in the Option agreements.
• In the event of an optionholder (or in the case of Jaco
Malan and Michael Seeger, of the Company or any of
its subsidiaries) ceasing to be an employee, director
or consultant of the Company, his Option will lapse on
the date of such cessation in respect of all Shares over
which it had not become exercisable at the date of
such cessation. In the event of an optionholder’s death,
his Option may be exercised during the period of one
year following his death by his personal representatives,
following which it will lapse.
• Alternate terms in relation to exercise of Options apply
in the event of a resolution for the winding up of the
Company being passed, and for a twenty-four month
period in the event of a person obtaining ‘control’ (as
defined in the new Option agreements) of the Company.
• In the event of any consolidation or sub-division of the
Shares, the Options are to be adjusted in a manner
consistent with the ASX Listing Rules.
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• There are no participating rights or entitlements inherent
in an Option and an optionholder will not be entitled to
participate in new issues of capital offered to Shareholders
during the currency of the Option. However, the Company
must ensure that for the purposes of determining
entitlements to any such issue, the record date will be at
least 6 working days after the issue is announced.
• An Option may confer a right to a change in its exercise
price, or a change to the number of securities over which
it can be exercised, in accordance with the ASX
Listing Rules.
• Other than in the event of an optionholder’s death, a
new Option may not be transferred, assigned or charged
without the prior consent of the Board.
• In the case of any inconsistency between the terms of a
new Option and the ASX Listing Rules, the terms of the
ASX Listing Rules shall prevail.
Amended and Restated Option Agreements
The Company has entered, or intends to enter, into Option agreements amending and restating the following Option agreements:
• an Option agreement made between Wychwood Estate
Limited and the Company dated 12 October 2009;
• an Option agreement made between Vitaliy Limited and
the Company dated on or around 12 October 2009; and
• an Option agreement made between Bruce Stewart and
the Company dated 8 October 2009.
The amended and restated Option agreements, as they have been, or are intended to be, entered into, document the grant of Options over Shares in the Company as follows:
Holder Number Exercise
Price
Date of
Grant
Wychwood
Estate Limited
3,600,000 24.5c 12 October
2009
Vitaliy Limited 3,000,000 24.5c 12 October
2009
Bruce Stewart 1,600,000 24.5c 8 October
2009
Wychwood
Estate Limited
1,600,000 65.5c 12 October
2009
Vitaliy Limited 800,000 65.5c 12 October
2009
Bruce Stewart 800,000 65.5c 8 October
2009
Material Terms of Amended and Restated Options
The material terms and conditions of the amended and restated Options are summarised as follows:
a) Each of the amended and restated Options is granted
with a date of grant as set out in the table above.
b) No part of an amended and restated Option may be
exercised later than the fifth anniversary of the date of
admission of CDIs to trading on ASX.
c) An amended and restated Option lapses following expiry
of the period set out above, and in other circumstances
specified in the amended and restated
Option agreements.
d) If the price payable for a CDI under this Prospectus
is less than $0.50, the number of Shares subject to
the amended and restated Options and/or the price(s)
payable for each of those Shares shall be adjusted pro-
rata according to the percentage difference between the
price payable for one CDI upon the admission of CDIs
to trading on ASX and $0.50, in such manner as the
Company shall in its absolute discretion determine is fair
and reasonable, provided that the aggregate amount
payable on the exercise of the amended and restated
Option in full is not increased and the price payable for a
Share is not reduced below its nominal value.
e) In the event of an optionholder’s death, his amended
and restated Option may be exercised during the
period of one year following his death by his personal
representatives, following which it will lapse.
f) Alternate terms in relation to exercise of the amended
and restated Options apply in the event of a resolution
for the winding up of the Company being passed, and
for a twenty-four month period in the event of a person
obtaining ‘control’ (as defined in the amended and
restated Option agreements) of the Company.
g) In the event of any consolidation or sub-division of the
Shares, the amended and restated Options are to be
adjusted in a manner consistent with the ASX
Listing Rules.
h) There are no participating rights or entitlements inherent
in an Option and an optionholder will not be entitled to
participate in new issues of capital offered to Shareholders
during the currency of the Option. However, the Company
must ensure that for the purposes of determining
entitlements to any such issue, the record date will be at
least 6 working days after the issue is announced.
i) An Option may confer a right to a change in its exercise
price, or a change to the number of securities over which
it can be exercised, in accordance with the ASX
Listing Rules.
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j) An amended and restated Option may be transferred,
assigned or charged to a third party provided that the
grantee procures that any relevant third party or parties
(as determined by the Company) shall enter into a deed
of adherence with the Company by which it agrees (or
they agree) to be bound by the provisions of the relevant
amended and restated Option agreement.
k) In the case of any inconsistency between the terms of a
new Option and the ASX Listing Rules, the terms of the
ASX Listing Rules shall prevail.
Shellbright Option Agreements
The Company entered into an Option agreement with
Shellbright Ltd (Shellbright) on 27 June 2009 by which
Shellbright was granted the right to subscribe for 1,875,000
Shares at a price of £0.02GBP per share, and entered into
a further Option agreement with Shellbright on 4 November
2009 by which Shellbright was granted the right to subscribe
for 3,937,500 Shares at a price of £0.02GBP per share
(the Shellbright Options). The terms of each Shellbright
Option were amended by a letter dated 14 September 2010,
pursuant to the subdivision and previous consolidation of the
Company’s share capital.
a) The terms of the Shellbright Option agreements (as
amended) provide that each option is exercisable for from
the date of its grant until the fifth anniversary of the date of
its admission of CDIs trading on ASX (or the next business
day if such anniversary falls on a weekend on
market holiday).
b) Each Shellbright Option shall lapse following expiry of the
exercise period described above save to the extent that it
has been exercised prior to expiry of that period.
c) In the event of a consolidation or subdivision of the
Company’s share capital, the number and nominal value
of Shares subject to the Shellbright Options and./or the
price payable per Share under those options is subject to
amendment.
d) Pursuant to the above provision of the Shellbright Options,
and to the sub-division of the Company’s share capital
that took place on 8 September 2010, the Company
has agreed with Shellbright by the letter deed dated 14
September 2010, that the number of shares subject
to the Shellbright Options have been amended from
1,875,000 Shares and 3,937,000 Shares to 483,913
Shares and 1,016,087 Shares respectively, and that the
price payable per Share on exercise of the Shellbright
Options has been amended from £0.02GBP
to AUD$0.20.
e) If, on a date (or by reference to a record date) during the
period when a Shellbright Option is capable of exercise,
the Company makes any offer or invitation (whether by
rights issue or otherwise but not being an offer to which
the provisions described in the paragraph (e) below apply)
to Shareholders, or any offer or invitation (not being an
offer to which the provisions described in the paragraph
(e) below applies) is made to Shareholders otherwise
than by the Company, then the Company shall, so far
as it is able, make or procure that at the same time the
same offer or invitation is made to Shellbright as if its
subscription rights under the relevant Shellbright Option
had been exercisable and had been exercised on the
date immediately preceding the record date of such offer
or invitation.
f) If at any time during the period when a Shellbright Option
is capable of exercise an offer is made to all Shareholders
(or all Shareholders other than the offeror and/or the
company controlled by the offeror and/or persons acting
in concert with the offeror) to acquire the whole or any part
of the issued ordinary share capital of the Company and
as a result of such offer the right to cast a majority of the
votes which may ordinarily be cast on a poll at a general
meeting of the Company has or will become vested in the
offeror and/or such persons or companies as aforesaid,
the Company shall give notice to Shellbright of such offer
and Shellbright shall be entitled to exercise the relevant
Shellbright Option during a period of two months from
the date the offer is declared unconditional. On the expiry
of such two month period the Shellbright Option(s) shall
lapse. Publication of a scheme of arrangement under
the provisions of the Companies Act providing for the
acquisition (by whatever means) by any person of the
whole or any part of the issued ordinary share capital of
the Company is deemed to be the making of an “offer” for
the purposes of this provision.
g) Additional provisions apply to the exercise and lapse of
the Shellbright Options in the event of a resolution being
passed for the winding up of the Company, if any person
becomes bound or entitled to acquire Shares under
sections 974 or 975 of the Companies Act, or if an offer
or invitation is made by the Company to Shareholders for
the purchase by the Company of its Shares.
h) Shellbright may assign the benefit of the Shellbright
Options to any other member of Shellbright’s group.
12.6 Disclosure of Directors’ Interests
Directors are not required under the Articles to hold any Shares. The relevant interests of the Directors in Securities as at the date of this Prospectus and to be issued to the Directors are as follows:
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Director Existing Shares Options4
Dr Antony Harwood 4,268,3731 2,634,187
Mr Anton Weber 4,502,2681 2,251,134
Mr Hendrik Bonsma 4,087,4301 1,843,715
Mr Shammy Luvhengo 2,200,0003 800,000
Mr John Hopkins - 800,000
The Directors may subscribe for CDIs for Shares under
this Prospectus.
Notes:
1. Messrs Anton Weber and Hendrik Bonsma each hold a relevant interest in 4,000,000
Shares and Dr Antony Harwood holds 3,000,000 Shares by virtue of the issue of the
Injula Consideration Shares pursuant to the Deed of Cession, in accordance with the
Kangala Acquisition Agreement (as summarised in Section 11.2). Notwithstanding
that Dr Harwood Mr Weber and Mr Bonsma were not directors of the Company at
the time of execution of the Kangala Acquisition Agreement, the Company obtained
Shareholder approval on 8 September 2010 for the entry into the Kangala Project
arrangements, for the purpose of the issue of these Shares.
2. Mr Luvhengo also holds a 10% interest in Mountain Rush, the Company’s BEE partner
at the Kangala Coal Project, and is an indirect shareholder of a 4.8% interest in Bono
Lithihi.
3 These Shares have not been issued yet and are subject to (i) the completion of
the conditions precedent of the Facilitation Agreement; and (ii) Mr Luvhengo having
performed the services under the Facilitation Agreement to the reasonable satisfaction
of the Company and UCDII (please refer to Section 11.6 for further details).
4. Please refer to Section 12.5 for details of these Options.
12.7 Remuneration of Directors
The Articles provide that the remuneration of non-executive
Directors will be not more than the aggregate fixed
sum determined by a general meeting. The aggregate
remuneration for non-executive Directors has been set at an
amount not to exceed £200,000 per annum.
The remuneration of executive Directors will be fixed by
the Directors and may be paid by way of fixed salary or
consultancy fee.
The annual remuneration (inclusive of superannuation) payable to each of
the Directors as the date of this Prospectus is as follows:
Director Fees/Salary (AUD)
Dr Antony Harwood 214,939
Mr Anton Weber 214,939
Mr Hendrik Bonsma 49,601
Mr Shammy Luvhengo 49,601
Mr John Hopkins 49,601
Notes:
1. Assuming an exchange rate of £1.00 = AUD$1.65338 on 31 March 2010.
12.8 Fees and Benefits
Except as disclosed in this Prospectus, no promoter or other person named in this Prospectus as performing a function in a professional, advisory or other capacity in connection with the preparation or distribution of this Prospectus, holds, or during the last two years has held, any interest in:
• the formation or promotion of the Company;
• property acquired or proposed to be acquired by the
Company in connection with its formation or promotion
or the Offer; or
• the Offer.
Except as disclosed in this Prospectus, no amounts of any
kind (whether in cash, securities or otherwise) have been paid
or agreed to be paid to a promoter or any person named in
this Prospectus as performing a function in a professional,
advisory or other capacity in connection with the preparation
or distribution of this Prospectus for services rendered by that
person in connection with the formation or promotion of the
Company or the Offer.
Pursuit Capital has acted as Corporate Adviser and Lead
Manager to the Offer. The terms of the Lead Manager
agreement and the fees to be paid to Pursuit are summarised
in Section 11.10. Pursuit has received fees totalling $10,500
from the Company in the last two years for the provision
of research.
StoneBridge Securities has acted as Sponsoring Broker to
the Offer. The terms of the Sponsoring Broker Agreement and
the fees to be paid to StoneBridge is summarised in Section
11.11. StoneBridge has not received any other payments
from the Company in the last two years.
Ord Nexia has acted as the Investigating Accountant in
relation to the Offer. The Company will pay approximately
$15,000 exclusive of GST and disbursements to Ord Nexia
for these services. Ord Nexia has not received any other
payments from the Company in the last two years.
Coffey Mining has prepared an Independent Competent
Persons Report for each of the Kangala, Roodekop and
Brakfontein thermal coal projects included in this Prospectus.
In respect of this work the Company paid approximately ZAR
443,691 for these services (being $65,533 based on an
exchange rate of 1 AUD: 6.5338 ZAR on 31 March 2010).
Coffey Mining has not received any other payments from the
Company in the last two years.
Gemecs has prepared the Independent Competent Persons
Report for the Limpopo Project included in this Prospectus.
In respect of this work the Company paid approximately ZAR
424,909 for these services (being $62,759 based on an
exchange rate of 1 AUD: 6.5338 ZAR on 31 March 2010.
Gemecs has not received any other payments from the
Company in the last two years.
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Webber Wentzel has prepared the Mining Title Opinion which
is included in this Prospectus. In respect of this work, the
Company incurred legal fees of approximately ZAR600,000
(being $91,830 based on an exchange rate of 1 AUD:
6.5338 ZAR on 31 March 2010). Webber Wentzel have
received other fees for services to the Company in the last
two years totalling £166,310 (being $276,041 based on an
exchange rate of 1 AUD: £0.6099 on 31 March 2010).
Steinepreis Paganin has acted as Australian solicitors to the
Offer and in that capacity have been involved in providing
legal advice to the Company in relation to the Offer. The
Company will pay approximately $125,000 exclusive of GST
and disbursements to Steinepreis Paganin for these services.
Subsequently fees will be paid in accordance with normal
hourly rates. Steinepreis Paganin has not received any other
payments from the Company in the last two years.
Watson, Farley & Williams LLP has acted as English solicitors
to the Offer, and in that capacity have been involved in
providing legal advice to the Company in relation to the Offer.
The Company will pay approximately £100,000 exclusive
of disbursements to Watson, Farley & William LLP for these
services (being $163,961 based on an exchange rate of 1
AUD: £0.6099 on 31 March 2010). Subsequently, fees will
be paid in accordance with normal hourly rates. Watson,
Farley & Williams LLP has received £228,555 in fees from the
Company in the past two years (being $374,742 based on
an exchange rate of 1 AUD: £0.6099 on 31 March 2010).
The amounts disclosed above are exclusive of any amount of
goods and services tax payable by the Company in respect
of those amounts.
12.9 Consents
Each of the parties referred to in this Section 12.9:
• does not make, or purport to make, any statement in
this Prospectus or on which a statement made in this
Prospectus is based other than as specified in
this Section,
• to the maximum extent permitted by law, expressly
disclaims and takes no responsibility for any part of this
Prospectus other than a reference to its name and a
statement included in this Prospectus with the consent of
that party as specified in this Section, and
• has not caused or authorised the issue of this Prospectus.
Coffey Mining has given its written consent to the inclusion
in this Prospectus of its Independent Competent Persons
Report’s, and all statements referring to those reports or
matters derived from those reports in this Prospectus in the
form and context in which they are included and has not
withdrawn such consent before lodgement of this Prospectus
with ASIC.
Gemecs has given its written consent to the inclusion in this
Prospectus of its Independent Competent Persons Report,
and all statements referring to that report or matters derived
from that report in this Prospectus in the form and context in
which they are included and has not withdrawn such consent
before lodgement of this Prospectus with ASIC.
Ord Nexia has given its written consent to the inclusion in
this Prospectus of the Investigating Accountant’s Report in
the form and context in which they are included and has not
withdrawn such consent before lodgement of this Prospectus
with ASIC.
Webber Wentzel has given its written consent to the
inclusion in this Prospectus of its Mining Title Opinion and all
statements referring to that report or matters derived from that
report in this Prospectus in the form and context in which they
are included and has not withdrawn such consent before
lodgement of this Prospectus with ASIC.
Each of the following has consented to being named in this Prospectus in the capacity as noted below and have not withdrawn such consent prior to the lodgement of this Prospectus with ASIC:
• Coffey Mining (SA) Pty Ltd as an Independent
Competent Person;
• Computershare Investor Services Pty Limited as Australian
Share Registry;
• Computershare Investor Services Plc as UK
Share Registry;
• Gemecs (Pty) Ltd as an Independent Competent Person;
• Mazars LLP as UK auditors to the Company;
• Ord Nexia Pty Ltd as Investigating Accountant to
the Company;
• Pursuit Capital Pty Ltd as Corporate Adviser and Lead
Manager to the Offer;
• SAB&T as South African auditors to the Company;
• Steinepreis Paganin as Australian solicitors to
the Company;
• StoneBridge Securities Limited as Sponsoring Broker to
the Offer;
• Watson, Farley & Williams LLP as English solicitors to the
Company; and
• Webber Wentzel as South African solicitors to
the Company;
There are a number of persons referred to elsewhere in this
Prospectus who are not experts and who have not made
statements included in this Prospectus nor are there any
statements made in this Prospectus on the basis of any
statements made by those persons. These persons did
not consent to being named in this Prospectus and did not
authorise or cause the issue of this Prospectus.
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The Company reserves the right not to accept an Application
Form from a person if it has reason to believe that when that
person was given access to the electronic Application Form,
it was not provided together with the electronic Prospectus
and any relevant supplementary or replacement prospectus
or any of those documents were incomplete or altered. In
such a case, the application moneys received will be dealt
with in accordance with Section 722 of the Corporations Act.
12.14 Taxation
The acquisition and disposal of CDIs for Shares in the
Company will have tax consequences, which will differ
depending on the tax status (including residing for tax
purposes) and individual financial affairs of each investor.
All potential investors in the Company are urged to obtain
independent financial advice about the consequences of
acquiring CDIs for Shares from a taxation viewpoint
and generally.
There are no UK stamp taxes on an issue of CDIs for Shares
and the Company understands that HMRC has agreed with
ASX and CDN that, although subsequent transfers of CDIs for
Shares remain technically subject to UK stamp duty reserve
tax, they will not seek to recover any UK stamp taxes from
transfers of CDIs for Shares on ASX. Transfers of interests in
Shares other than by way of disposals of CDIs for shares may
give rise to a liability to UK stamp taxes at a rate of 0.5% of
the consideration.
To the maximum extent permitted by law, the Company,
its officers and each of their respective advisers accept
no liability and responsibility with respect to the taxation
consequences of subscribing for CDIs for Shares under
this Prospectus.
12.15 Forecasts
The Company is an exploration company with the intention to
become a producer in the medium term.
Given the speculative nature of exploration, mineral
development and production, there are significant
uncertainties associated with forecasting future revenue. On
this basis, the Directors believe that reliable forecasts cannot
be prepared and accordingly have not included forecasts in
this Prospectus.
12.10 Restricted Securities
ASX has indicated that certain existing security holders may
be required to enter into agreements which restrict dealings
in Securities held by them. These agreements will be entered
into in accordance with the Listing Rules.
12.11 Expenses of the Offer
The total expenses of the Offer are estimated to be approximately $2,370,665 and are expected to be applied towards the items set out in the table below:
Item of Expenditure Amount ($)
ASIC Fees 2,068
ASX Fees 75,879
Accountant Fees 15,000
Legal Advisory Fees 365,486
Corporate Advisory Fees – Pursuit Capital 75,000
Capital Raising Commissions – Pursuit Capital 277,940
Capital Raising Commissions - Brokers 1,100,000
Printing and Publication 29,000
TOTAL 1,940,373
The estimated Costs of the Offer are based on the
Minimum Subscription of $20,000,000. If the full
amount of oversubscriptions are accepted by the
Company, the Costs of the Offer are estimated to be
$2,495,474.
12.12 Litigation
As at the date of this Prospectus, the Company is not
involved in any material legal proceedings and the Directors
are not aware of any material legal proceedings pending or
threatened against the Company.
12.13 Electronic Prospectus
Pursuant to Class Order 00/044 ASIC has exempted
compliance with certain provisions of the Corporations Act to
allow distribution of an electronic prospectus on the basis of a
paper prospectus lodged with ASIC and the issue of CDIs for
Shares in response to an electronic application form, subject
to compliance with certain provisions.
If you have received this Prospectus as an electronic
Prospectus please ensure that you have received the entire
Prospectus accompanied by the Application Form. If you
have not, please email the Company at
[email protected] and the Company will send
to you, for free, either a hard copy or a further electronic copy
of this Prospectus or both. Alternatively, you may obtain a
copy of this Prospectus at www.universalcoal.com
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13. DIRECTORS’ AUTHORISATIONThe Directors state that they have made all reasonable
enquiries and on that basis have reasonable grounds to
believe that any statements made by the Directors in this
Prospectus are not misleading or deceptive and that in
respect to any other statements made in this Prospectus
by persons other than Directors, the Directors have made
reasonable enquiries and on that basis have reasonable
grounds to believe that persons making the statement or
statements were competent to make such statements, those
persons have given their consent to the statements being
included in this Prospectus in the form and context in which
they are included and have not withdrawn that consent before
lodgement of this Prospectus with ASIC, or to the Directors
knowledge, before any issue of CDIs for Shares pursuant to
this Prospectus.
This Prospectus is prepared on the basis that certain matters
may be reasonably expected to be known to likely investors
or their professional advisers.
Each Director has consented to the lodgement of this
Prospectus with ASIC and has not withdrawn that consent.
JOHN HOPKINSNON-EXECUTIVE DIRECTORFor and on behalf of Universal Coal plc
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14. GLOSSARYWhere the following terms are used in this Prospectus they have the following meanings:
Applicant a person who submits a valid Application Form pursuant to this
Prospectus.
Application a valid application made on an Application Form to subscribe for
CDIs for Shares pursuant to this Prospectus.
Application Form the application form attached to this Prospectus.
Articles the Articles of Association of Universal Coal plc as adopted by
special resolution passed on 8 September 2010.
ASIC the Australian Securities & Investments Commission.
ASTC ASX Settlement and Transfer Corporation Pty Ltd
(ACN 008 504 532).
ASTC Settlement Rules the operating rules of ASTC for the settlement processing facility
for ASX’s markets.
AFSL Australian Financial Services Licence.
ASX the ASX Limited ACN 008 624 691.
BEE black economic empowerment.
Berenice Project the project described in Section 4.3 of this Prospectus.
Brakfontein, Brakfontein Project or Brakfontein Coal Project
the Project described in Section 4.1 of this Prospectus.
Coal Resources Has the meaning given in the JORC Code.
CDI CHESS Depositary Interest representing a unit of beneficial
ownership in the Shares registered in the name of CDN.
CDN CHESS Depositary Nominees Pty Ltd.
CHESS Clearing House Electronic Subregister System.
Closing Date The closing date for receipt of Application Forms under this
Prospectus, estimated to be 5.00pm WST on 20 October 2010
or an amended time as set by the Board.
Coffey Mining Coffey Mining (SA) Pty Ltd.
Company or Universal Coal Universal Coal plc ARBN 143 750 038 or Universal Coal plc
and its Related Bodies Corporate, as the context requires.
Company Group The Company and any and all of UCD I, UCD II, UCD III, UCD IV,
UCEHSA and Twin Cities.
Corporate Adviser and Lead Manager or Pursuit Pursuit Capital Pty Ltd AFSL 339211.
Corporations Act the Corporations Act 2001 (Cth).
Director a director of the Company.
Exploration Target Has the meaning given in the JORC Code.
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Exposure Period the period of 7 days after the date of lodgement of this
Prospectus, which period may be extended by ASIC by
not more than 6 days pursuant to Section 727(3) of the
Corporations Act.
Gemecs Gemecs (Pty) Ltd.
HMRC HM Revenue & Customs (UK).
Independent Competent Person Coffey Mining or Gemecs (as the context requires).
Indicated Resource Has the meaning given in the JORC Code.
Inferred Resources Has the meaning given in the JORC Code.
JORC Code or JORC the Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves prepared by the Joint
Ore Reserves Committee of the Australasian Institute of Mining
and Metallurgy, Australian Institute of Geoscientists and Minerals
Council of Australia.
JSE Johannesburg Stock Exchange.
Kangala, Kangala Project or Kangala Coal Project the project described in Section 4.1 of this Prospectus.
Limpopo Project or Limpopo Coal Project the project described in Section 4.3 of this Prospectus,
comprising the Soutpansberg Project and the Tuli Project.
Listing Rules or ASX Listing Rules the listing rules of the ASX.
Measured Resource has the meaning given in the JORC Code.
Minimum Subscription the minimum amount to be raised under the Offer which is
$20,000,000.
Mining Right a right to mine granted in terms of section 23(1) of the MPRDA.
Mining Title Opinion The mining title opinion on Tenements dated 28 September
2010 and prepared by Webber Wentzel as included in
Section 9.
MPRDA South African Mineral and Petroleum Resources Development
Act, 28 of 2002.
Offer an invitation made in this Prospectus to subscribe for CDIs for
Shares.
Official Quotation official quotation by ASX in accordance with the Listing Rules.
Official List the official list of the ASX.
Opening Date 8 October 2010
Option an option to subscribe for a Share.
Ord Nexia Ord Nexia Pty Ltd.
Ore Reserve has the meaning given in the JORC Code.
Prospecting Right a right to prospect granted in terms of section 17(1) of the
MPRDA.
Prospecting Right Applications an application for a Prospecting Right.
Prospectus this Prospectus and includes the electronic prospectus.
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Related Bodies Corporate has the same meaning as in the Corporations Act.
Roodekop, Roodekop Coal Project or Roodekop Project
the project described in Section 4.1 of this Prospectus.
Securities Shares and Options.
Share a fully paid ordinary share in the Company.
Shareholder the registered holder of Shares in the Company.
Share Registry Computershare Investor Services
Somerville Project the project described in Section 4.3 of this Prospectus.
Sponsoring Broker or StoneBridge StoneBridge Securities Limited AFSL 238148.
Tenements The tenements set out in the Schedule in Section 9.
Transnet Transnet Limited, registration number 1990/00900/06.
Tuli Project the project described in Section 4.3 of this Prospectus.
Twin Cities Twin Cities Trading 374 (Proprietary) Limited, registration number
2010/002831/07.
UCD I Universal Coal Development I (Proprietary) Limited, registration
number 2007/032600/07.
UCD II Universal Coal Development II (Proprietary) Limited, registration
number 2008/01872/07.
UCD III Universal Coal Development III (Proprietary) Limited, registration
number 2008/009596/07.
UCD IV Universal Coal Development IV (Proprietary) Limited, registration
number 2008/028397/07.
UCEHSA Universal Coal and Energy Holdings South Africa (Proprietary)
Limited, registration number 2008/002002/07, a wholly owned
subsidiary of the Company.
UK Companies Act the Companies Act 2006.
Webber Wentzel Webber Wentzel Attorneys.
WST Australian Western Standard Time.
$ or A$ or A dollars Australian dollars.
£ UK pounds sterling.
R or ZAR South African rand.
US $ or US dollars United States dollars.
Unless otherwise stated, all references to “$”, dollars and cents are to Australian currency.
Figures disclosed in this Prospectus are exclusive of goods and services tax, unless otherwise disclosed.
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JC
Application Form
Unit Street Number Street Name or PO Box /Other Information
I/we apply forA
Payment details – Please note that funds are unable to be directly debited from your bank accountG BSB Number Account NumberDrawer Amount of cheque
A$
Cheque Number
Number of CDI’s in Universal Coal Plc at A$0.26 per CDI or such lesser number of CDI’s which may be allocated to me/us
Enter your postal address - Include State and Postcode
City / Suburb / Town State Postcode
D
C Individual/Joint applications - refer to naming standards overleaf for correct forms of registrable title(s)Title or Company Name Given Name(s) Surname
Joint Applicant 2 or Account Designation
Joint Applicant 3 or Account Designation
E
F
Enter your contact details
Holder Identification Number (HIN)
CHESS Participant
By submitting this Application Form, I/we declare that this application is completed and lodged according to the Prospectus and the declarations/statements on the reverse of this Application form and I/we declare that all details and statements made by me/us (including the declaration on the reverse of this Application Form) are complete and accurate. I/we agree to be bound by the Constitution of the Company.
Broker Code Adviser CodeThis Application Form is important. If you are in doubt as to how to deal with it, please contact your stockbroker or professional adviser without delay. You should read the entire prospectus carefully before completing this form. To meet the requirements of the Corporations Act, this Application Form must not be distributed unless included in, or accompanied by, the prospectus.
I P O
Registry Use Only
I/we lodge full Application MoneyB
.A$
Contact Name Telephone Number - Business Hours / After Hours
( )
X
See back of form for completion guidelines
Please note that if you supply a CHESS HIN but the name and address details on your form do not correspond exactly with the registration details held at CHESS, your application will be deemed to be made without the CHESS HIN, and any securities issued as a result of the IPO will be held on the Issuer Sponsored subregister.
U N V
Make your cheque or bank draft payable to Universal Coal Plc - Share Offer Account
*M000001456Q02*
SAMP_PAYMENT_000000/000001/000001/i
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JCxBefore completing the Application Form the applicant(s) should read the prospectus to which this application relates. By lodging the Application Form, the applicant agrees that this application for CDI’s in Universal Coal Plc is upon and subject to the terms of the prospectus and the Constitution of Universal Coal Plc, agrees to take any number of CDI’s that may be allotted to the Applicant(s) pursuant to the prospectus and declares that all details and statements made are complete and accurate. It is not necessary to sign the Application Form.
Lodgement of ApplicationApplication Forms must be received by Computershare Investor Services Pty Limited Perth by no later than 5pm AWST on 20 October 2010. You should allow sufficient time for this to occur. Return the Application Form with cheque(s) attached to:
Computershare Investor Services Pty LimitedGPO Box D182 PERTH WA 6840
Neither CIS nor the Company accepts any responsibility if you lodge the Application Form at any other address or by any other means.
Privacy StatementPersonal information is collected on this form by Computershare Investor Services Pty Limited (“CIS”), as registrar for securities issuers (“the issuer”), for the purpose of maintaining registers of securityholders, facilitating distribution payments and other corporate actions and communications. Your personal information may be disclosed to our related bodies corporate, to external service companies such as print or mail service providers, or as otherwise required or permitted by law. If you would like details of your personal information held by CIS, or you would like to correct information that is inaccurate, incorrect or out of date, please contact CIS. In accordance with the Corporations Act 2001, you may be sent material (including marketing material) approved by the issuer in addition to general corporate communications. You may elect not to receive marketing material by contacting CIS. You can contact CIS using the details provided on the front of this form or e-mail [email protected]
If you have any enquiries concerning your application, please contact the Computershare Investor Services Pty Limited on 1300 850 505.
Correct forms of registrable title(s)Note that ONLY legal entities are allowed to hold CDI’s. Applications must be made in the name(s) of natural persons, companies or other legal entities in accordance with the Corporations Act. At least one full given name and the surname is required for each natural person. The name of the beneficial owner or any other registrable name may be included by way of an account designation if completed exactly as described in the examples of correct forms of registrable title(s) below.
How to complete this formShares Applied forEnter the number of CDI’s you wish to apply for. The application must be for a minimum of 8000 CDI’s. Applications for greater than 8000 CDI’s must be in multiples of 1000 CDI’s.
Application MoniesEnter the amount of Application Monies. To calculate the amount, multiply the number of CDI’s by the price per CDI.
Applicant Name(s)Enter the full name you wish to appear on the statement of share holding. This must be either your own name or the name of a company. Up to 3 joint Applicants may register. You should refer to the table below for the correct forms of registrable title. Applications using the wrong form of names may be rejected. Clearing House Electronic Subregister System (CHESS) participants should complete their name identically to that presently registered in the CHESS system.
Postal AddressEnter your postal address for all correspondence. All communications to you from the Registry will be mailed to the person(s) and address as shown. For joint Applicants, only one address can be entered.
Contact DetailsEnter your contact details. These are not compulsory but will assist us if we need to contact you.
A
B
C
D
E
CHESSUniversal Coal Plc (the Company) will apply to the ASX to participate in CHESS, operated by ASX Settlement and Transfer Corporation Pty Ltd, a wholly owned subsidiary of Australian Securities Exchange Limited. In CHESS, the company will operate an electronic CHESS Subregister of security holdings and an electronic Issuer Sponsored Subregister of security holdings. Together the two Subregisters will make up the Company’s principal register of securities. The Company will not be issuing certificates to applicants in respect of CDI’s allotted. If you are a CHESS participant (or are sponsored by a CHESS participant) and you wish to hold CDI’s allotted to you under this Application on the CHESS Subregister, enter your CHESS HIN. Otherwise, leave this section blank and on allotment, you will be sponsored by the Company and allocated a Securityholder Reference Number (SRN).
PaymentMake your cheque or bank draft payable to Universal Coal Plc - Share Offer Account in Australian currency and cross it Not Negotiable. Your cheque or bank draft must be drawn on an Australian Bank. Complete the cheque details in the boxes provided. The total amount must agree with the amount shown in box B. Please note that funds are unable to be directly debited from your bank account.Cheques will be processed on the day of receipt and as such, sufficient cleared funds must be held in your account as cheques returned unpaid may not be re-presented and may result in your Application being rejected. Paperclip (do not staple) your cheque(s) to the Application Form where indicated. Cash will not be accepted. Receipt for payment will not be forwarded.
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G
Type of Investor Correct Form of Registration Incorrect Form of Registration
Trusts- Use trustee(s) personal name(s)- Do not use the name of the trust
Individual- Use given name(s) in full, not initials
Joint- Use given name(s) in full, not initials
Company- Use company title, not abbreviations
Deceased Estates- Use executor(s) personal name(s)- Do not use the name of the deceased
Minor (a person under the age of 18)- Use the name of a responsible adult with an appropriate designationPartnerships- Use partners personal name(s)- Do not use the name of the partnership
Clubs/Unincorporated Bodies/Business Names- Use office bearer(s) personal name(s)- Do not use the name of the club etcSuperannuation Funds- Use the name of trustee of the fund- Do not use the name of the fund
Mr John Alfred Smith
Mr John Alfred Smith & Mrs Janet Marie Smith
ABC Pty Ltd
Ms Penny Smith<Penny Smith Family A/C>
Mr Michael Smith<Est John Smith A/C>
Mr John Alfred Smith<Peter Smith A/C>Mr John Smith &Mr Michael Smith<John Smith & Son A/C>
Mrs Janet Smith<ABC Tennis Association A/C>
John Smith Pty Ltd<Super Fund A/C>
J.A Smith
ABC P/LABC Co
Penny Smith Family Trust
Estate of Late John Smith
Peter Smith
John Smith & Son
ABC Tennis Association
John Smith Pty Ltd Superannuation Fund
John Alfred &Janet Marie Smith
IPO
UN
V
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In England
(Registered Office):
Princes House
38 Jermyn Street
London SW1Y 6DN
UNITED KINGDOM
Telephone: +44 207 292 9110
Facsimile: +44 203 214 0079
In South Africa
(Principal Office):
467 Fehrsen Street
Brooklyn 0182
Pretoria
SOUTH AFRICA
Telephone: +27 12 460 0805
Facsimile: +27 12 460 2417
In Australia:
Suite 10, 38 Colin Street
West Perth WA 6005
AUSTRALIA
Telephone: +61 8 6267 9030
Facsimile: +61 8 9481 1840
Registered and Principal Offices
www.universalcoal.com
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