Coal of Africa Ltd., which owns collieries in South Africa, jumped the most in more than five months in Johannesburg after saying its Makhado project may deliver 5.5 million metric tons of the fuel annually.
The stock rose as much as 17 percent, the biggest intraday jump since Jan. 10, and was 16 percent higher at 1.92 rand by 2:20 p.m. About 2 million shares, or more than six times the three-month daily average, changed hands. Coal of Africa was the worst-performing stock on the 63-member FTSE/JSE Africa Small Cap Index after Litha Healthcare Group Ltd. (LHG) this year until yesterday.
The project in South Africa’s northern Limpopo province will cost $406.3 million and produce 2.3 million tons of hard coking coal used in steelmaking and 3.2 million tons of thermal coal for power plants annually, the Perth, Australia company said in a statement. Coal of Africa, which reported a loss in the six months through December, is putting its Mooiplaats colliery on care and maintenance after falling thermal-coal prices hampered efforts to make the operation profitable.
“The Makhado project is definitely the reason for the jump today,” Richard Middleton, who helps oversee the equivalent of $600 million, including Coal of Africa shares, at Cape Town-based Investec Asset Management, said by phone. “With what’s happened in the company over the last couple of years, people have been quite skeptical about this particular project. It’s our view that this project is not appropriately reflected in the current share price.”
Coal of Africa’s market value is 2 billion rand ($201 million). The net present value of the Makhado project is $697 million, the company said.
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