Johannesburg - Xstrata and African Rainbow Minerals (ARM) said yesterday that they might spend R2.9 billion to develop the Goedgevonden coal mine in South Africa.
The mine, which is set to start operations in 2009, would produce 12.3 million tons of coal a year, of which 3.1 million tons would be exported, ARM said in a presentation to analysts and fund managers on Monday.
The media was not invited and no notification of the presentation was given.
"Goedgevonden will probably transform Xstrata's coal business in South Africa," said Macquarie First South's David Pleming.
Pleming has been ranked first for his coverage of mineral extractors and mining houses for seven out of the past nine years in an annual survey of fund managers by the Financial Mail
"This one mine will add a third to Xstrata's current production and enhance the overall cost competitiveness of the business," Pleming explained.
Goedgevonden, which is the Dutch word for "approved", accounted for 357 million tons of Xstrata's 827 million tons of proven and probable coal reserves in South Africa, a measure of coal contained in deposits that might be mined by the companies, according to the presentation.
Eskom will be supplied with 3.6 million tons of coal a year from the mine, about 100km east of Johannesburg.
Goedgevonden, which will have a 33-year production life, would be "one of the lowest-cost export coal mines in South Africa", ARM and Xstrata told analysts in the presentation.
ARM owns 51 percent of the Goedgevonden venture, while X-strata owns the rest.
Xstrata said it increased production by 26 percent even as it cut 1 200 jobs over the past four years in South Africa.
ARM spokesperson Corne Bobbert was not able to say which analysts and fund managers were invited on the visit. She said the presentation did not constitute selective disclosure.
Investec Securities raised ARM to buy from hold yesterday after the visit.
Xstrata rose 41p to £24.30 (R340) yesterday afternoon in London. Shares of ARM gained 50c to R74 on the JSE, while the mining sector rose 0.23 percent. - Bloomberg