Continental Coal inks offtake agreement with EDF Trading

South African-focussed coal company Continental Coal (ASX: CCC) has struck a key offtake agreement for coal from Continental’s production of export thermal coal product from its Vaalbank, Project X and Vlakvarkfontein Coal Mines with EDF Trading.
EDF is a leader in the international wholesale energy markets and a wholly-owned subsidiary of EDF S.A., Europe’s leading electricity producer.
Under the terms of the Heads of Agreement, EDF Trading has agreed in principle to provide Continental with a “coal loan” of US$20M, through an advance purchase of thermal coal from the Vaalbank, Project X and Vlakvarkfontein coal mines.
Continental commenced mining activities at its Vlakvarkfontein coal mine in February 2010 and both the Vaalbank and Project X mines are forecast to commence production of an aggregate 2.4mtpa of export coal in 2011.
Under the agreement EDF Trading has also agreed to an off-take agreement with Continental that will see them secure thermal coal production from these mines for an initial period of 20 years at a market API4 benchmark price FOB Richards Bay.
Continental has agreed to the issue to EDF Trading of 40m options at AUD$0.05 and 40m options at AUD$0.10 subject to any necessary shareholder approvals. The Heads of Agreement is subject to final binding legal agreement.
Continental Coal Limited managing director, Bruce Buthelezi, said "the benefits of securing funding and off take from one of the world’s leading energy traders was compelling, and something we believe will deliver a significantly beneficial outcome for the company, and most importantly, enable us to deliver first production of export coal in early 2011.”
Continental has commenced mining activities at its first South African coal mine, Vlakvarkfontein.
This follows the appointment of experienced open cast coal mining contractor Trollope Mining Services (TMS) in February 2010. Since mobilising to site less than 6 weeks ago, mining activities by TMS have continued uninterrupted with pre-stripping and other mining activities now well advanced.
During the month of March 2010 Continental achieved another key milestone in its progress towards first coal sales with the commencement of blasting operations in the initial box cut.
TMS is currently operating a two shift operation, employing 45 workers and moving in excess of 6,000 cubic metres of material per shift.
Pre-split drilling was completed during the week commencing 15 March with blasting commencing 22 March. Blasting activities focused on the main ramp access area commenced on 26 March. TMS commenced overburden blasting on 29 March.
As part of the drilling for the overburden blasting, approximately 18 metres of hard overburden was encountered and for a test, the hole was drilled through the No. 4 Coal Seam to test the coal seam thickness. A coal seam thickness of over 7.5 metres of coal was reported by the drilling contractor.
TMS will commence production blasting in the next 4-5 weeks with mining of the No. 4 coal seam using conventional open cast “rollover” methods commencing immediately. Mining operations remain on schedule and within budget and move towards first coal sales in May 2010.
Continental has confirmed that it is in further advanced discussions with four European and Asian based global energy trading companies in respect of an off-take agreement and associated funding package for the development of its 122Mt Vlakplaats Coal Mine into a 2.4mtpa open cast and underground coal mining operation.
Continental has also announced that it has executed documentation with its logistics consultants securing up to 300,000t per month of rail allocation for its planned exports of thermal coal.
This allocation matches the company’s forecast annual steady state production of export thermal coal from its Vaalbank, Project X and Vlakplaats coal mines in the coming 18-24 months.
Continental’s voluntary suspension from quotation is to continue until it is in a position to make a formal announcement in relation to the finalisation of the off-take and funding discussions for the Vlakplaats Coal Mine.
This is expected to occur on or before 9 April 2010.

http://www.proactiveinvestors.co.uk/companies/news/15075/continental-coal-inks-offtake-agreement-with-edf-trading-15075.html