Shareholders in Gleneagle Gold Ltd (ASX: GLN) today approved the company's proposal to take up a massive coal resource in the Waterberg coalfield in Limpopo Province - a region that reputedly contains more than half the country's coal reserves.
Gleneagles, which came to grief in 2008 trying to re-open the Fortnum gold mine in Western Australia, is taking up licences at Grootgeluk that have an indicated 1.31bn tonnes of coal. Nearby is the Exxaro group's Grootgeluk operation ranked as the largest coal beneficiation complex in the world.
The licenses are 240 kilometres north-west of Pretoria and 70 km south of the border with Botswana.
Director Lee Bold told shareholders the transactions marked a very significant turning point with the acquisition of a substantial coal inventory as the foundation for an aggressive growth strategy in one of the world's most prospective new coal provinces.
The objective is to have a coking coal export operation launched by late 2011. In the meantime the company will seek listing on the Johannesburg Stock Exchange.
Gleneagles can take a 70% stake in the coal properties, partnering Namane Resources, a subsidiary of the black empowerment group Community Investments Holdings (CIH).
With the transaction Gleneagles will acquire an initial 35% stake in the prospecting rights and will pay Namane R15m ($A2.3m) and issue 100m shares and 50m options. Gleneagles then can acquire a further 35% by spending R100m ($A15.4m) within two years to produce a bankable feasibility study. A further 420m shares and 435m options will be part of the second phase equity earning.
Boyd said that given the quality resource base and strategic location, the newly acquired holdings are ideally positioned to meet the widening shortfall between power supply and demand in South Africa.
South Africa's electricity utility, ESKOM, recently estimated that between R90 and R110bn will need to be invested in coal mines by 2020 - equivalent to 40 new mines being opened. South Africa is expected to consume 374m tonnes of coal by 2018, of which ESKOM itself would required 200m tonnes to supply all of its power stations including two now under construction.
The Waterberg region is considered to have the potential to support 8-10 additional new power stations.
Joining the Gleneagles board will be CIH founders Dr Anna Mokgokong and Joe Madungandaba, and Roy Adair, president and chief executive of Senoko Power, the largest electricity generator and retailer in Singapore. Adair will be non executive chairman.