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NOT MUCH SHAKING AT HCI’S KHUSELA

15 May Mining

INVESTORS who think coal mining is where easy money can be made should have a squizz at the latest year to end-March results from empowerment group Hosken Consolidated Investments (HCI).

HCI owns 80% of Khusela Coal – which operates the Mbali (formerly Klipoortjie) and Palesa (Loopspruit) projects.

Initial expectations were that Khusela would be mining by mid-2008 and in full production by the end of that year. Targets were set at for four million tonnes of coal at full production.

The start-up production dates were then extended to the end of 2008 for the Mbali mine, with the Palesa mine – which supplies coal to state power utility Eskom – set for full production during 2009.

HCI’s results, however, show that Khusela managed revenue of just R6,4m – a figure that suggests minimal mining activity up to the end of March this year.

HCI CEO Johnny Copelyn said Khusela endured several difficulties in the start up phase of its operations.

“In the case of the Palesa mine, after some delay, the mine has started production of raw coal to supply to Eskom under its current contract.”

Copelyn said in the next few months the completion of the Palesa mine’s wash plant would allow it to increase production significantly. “But we currently believe it will only be at full production levels in the second half of our financial year (end March 2010)”.

There were also issues at Mbali. Copelyn said the “inexplicable granting” of a key portion of the mining right to the Central Energy Fund (CEF) – “despite our prospecting right” – resulted in Khusela having to redesign the placement of slurry ponds.

He said this development required further environmental approvals before mining could commence at Mbali.

HCI’s results showed that Khusela’s pre-tax losses had extended to nearly R20m from around R9m last year.

HCI, which bought into the Khusela in mid-2006, has invested well over R200m into the project.

HCI shares were unchanged at R35.60 by mid-afternoon trade on the JSE.

Source: Miningmx – Marc Hasenfuss