Coal of Africa (CoAL) jumped 10.64 percent to 52 cents a share on the JSE on Friday as the market warmed to the news of an imminent Chinese investment and an update of its acquisition of Universal Coal.

In its quarterly review published last week, CoAL indicated that a due diligence was under way on the potential equity investment by Qingdao Hengshun Zhongsheng Group in its subsidiary Baobab Mining and Exploration.

Baobab owns the mining right to Makhado and it has signed a memorandum of understanding (MOU) with the Qingdao Hengshun Zhongsheng Group, which focused on, among others, the sale of high-voltage reactive power in December.


CoAL chief executive David Brown said the regulatory progress and project development achievements during the March quarter had reinforced the company’s commitment to the execution of its medium-term strategy.

“The MOU with Hengshun is an important milestone in the identification of a strategic investor for the development of the company’s flagship Makhado coking coal project,” Brown said. “Hengshun has commenced its due diligence on Makhado and has also expressed its interest to acquire a stake in the project and provide facilitated debt.”

Despite its strengthening share price, CoAL is not out of the woods. The the development of its Makhado Project in Limpopo, which is expected in the second half of the year, hangs in the balance following the suspension of the integrated water use licence (Iwul) following an appeal to the Department of Water and Sanitation submitted by Vhembe Mineral Resources Forum comprising concerned farmers and residents in Limpopo. The lack of a water use licence is a setback for the mine, which is expected to produce 5.5 million tons of coal a year for the domestic and export market.

CoAL said it had anticipated the appeal and it was preparing an urgent representation to the Minster of Water and Sanitation, Nomvula Mokonyane, to request Iwul to remain in full force and effect pending the conclusion of the appeal to the Water Tribunal.

In terms of the Universal Coal Project, 93.2 percent of Universal Coal has given CoAL the green light for the acquisition. Coal has also extended the closing date for the deal to May 26.