Bloomberg News

Coal of Africa Climbs Most in 2 1/2 Years on Vele Approval

July 06, 2011

(Updates with closing share price in fifth paragraph, environmental group to appeal decision in eighth.)

July 6 (Bloomberg) -- Coal of Africa Ltd., an Australian producer of the fuel, rose the most in more than 2 1/2 years after getting approval for its Vele project in South Africa, allowing work to resume at the site after environmental concerns led to an almost 12-month delay.

“We expect to restart within weeks rather than months,” Chief Executive Officer John Wallington said by phone today. The company plans to ramp up coal production to about 1 million metric tons a year, it said in a statement earlier.

Coal of Africa’s plans to mine at Vele, about 17 miles (27 kilometers) from the Mapungubwe Hill ruins, a World Heritage site, have been opposed by organizations concerned about the possible impact on the area. The South African Heritage Resource Agency and other groups have said they fear the site may be transformed into “an industrial area” from a tourism and nature-conservation zone.

The resolution of the authorization issue, which has weighed on Coal of Africa’s shares “for a long time now,” is “great news,” Evolution Securities analyst Charles Kernot said in an e-mailed note to clients today. Kernot has a “buy” recommendation on the stock.

Shares in the company rose 19 percent in Johannesburg, the most since Oct. 30, 2008, to 9.59 rand by the 5 p.m. close in Johannesburg, paring the stock’s decline over the past six months to 17 percent.

Specific Conditions

Coal of Africa is “acutely aware of the sensitivity of the area and of the significant responsibilities the approval” at Vele brings, it said. The company, based in Perth, is required to meet specific conditions at the site because of the “uniqueness of the area,” it said in today’s statement, without giving further details.

The iron-age Mapungubwe ruins, remnants of what was once one of southern Africa’s biggest kingdoms, are on a United Nations list of 878 heritage sites, ranging from Australia’s Great Barrier Reef to Baroque cathedrals in Latin America, according to South Africa’s environment ministry.

South Africa’s Endangered Wildlife Trust and a coalition of seven other environmental groups will appeal the ruling, Chief Executive Officer Yolan Friedmann said in an e-mail statement.

The environmental groups said the company has “grossly underestimated” the amount of water it will use at the project. Water from around the mine flows into the Limpopo River, which provides water for citrus farmers, wildlife and cattle ranchers.

--Editors: Alastair Reed, Amanda Jordan, Vernon Wessels, John Viljoen.

To contact the reporter on this story: Brian Latham in Durban at blatham@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net


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