South Africa: Gvm Should Know Feasibility of Holfontein Coal Mining in Weeks

South Africa: Gvm Should Know Feasibility of Holfontein Coal Mining in Weeks

BASE metals and coal company GVM Metals, which took a secondary listing on the JSE late last year, hoped to complete its bankable feasibility study on the Holfontein coal project before the end of March, it said yesterday.

The group recently raised its stake to 100% of the project through the purchase of the shares held by black empowerment group Motjoli Resources, in return for which Motjoli acquired a 32% holding in GVM.

The Holfontein deposit is south and west of Witbank in Mpumalanga and preliminary drilling had shown metallurgical and thermal coal deposits typical of the area, the group said.

Apart from Holfontein, GVM has recently extended its coal interests in SA through buying Petmin’s 50% interest in the Baobab coal project for A$6m in cash, bringing GVM’s share to 100%, as well as a 74% interest in the Limpopo Coal project.

The Baobab transaction is still being finalised. Baobab is a soft coking and steam coal deposit near Musina while the Limpopo project, which is 40-50km north of Rio Tinto’s Chapudi coal project, has an inferred resource of 352-million tons of coal at this stage.

In the six months to December, GVM’s sales revenue was A$23m, mainly representing sales from its subsidiary, Nimag.

Nimag made an operating profit of A$3,4m for the period as the nickel magnesium alloy business performed ahead of budgets, but the FeSiMag and Fibres business made a combined loss of A$265000, the company said.

Management expects those businesses to return to profit in the second half of the financial year.

At the end of December, GVM held A$10,7m in cash. It did not raise any money through listing on the JSE but earlier this month it completed a placing of shares with Asia Energy to raise A$6,1m.

The funds would be used to develop GVM’s expanding coal interests in SA, it said. It spent A$205000 on exploration in the past six months and plans to spend another A$900000 on exploration in the current quarter. It also repaid A$1,1m of long-term loans in the December quarter.

“Continued exchange rate levels and high nickel prices signify a positive outlook for the second half of the financial year,” management said.

GVM’s shares, which register sharp percentage rises and falls on the JSE because of their illiquidity, fell 150c or 25% yesterday to R4,50, but are still almost twice the level at which they first traded in SA at the beginning of December.

Management said at the time of listing that liquidity would improve as GVM issued more shares to make acquisitions.

Copyright © 2007 Business Day. All rights reserved.

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