Odds against Mmamabula licence appeal

MBONGENI MGUNI
Staff Writer | Friday June 24, 2011 00:00

Insiders told BusinessWeek that the Canadian company's appeal over the non-renewal of the Mmamabula South prospecting licence was unlikely to be fruitful. The licence carries about 300 million of the 2.6 billion tonnes that is Mmamabula, slightly shaving the resource estimation.

Studies prior to CIC Energy's entry in 2006 indicated an in situ resource of two billion tonnes at Mmamabula South, with recoverable coal pegged at 500 million tonnes.

Insiders said 'the fatal weakness' in CIC Energy's appeal for an extension of the Mmamabula South licence was the likelihood that the Canadian company had misdirected itself in applying for the extension. Said an insider close to the developments:

'A prospecting licence is granted for prospecting activities as are the two extensions allowed by the law. The third renewal, which the company was hoping for, would be granted at the Minister's discretion only if previous exploration had made a discovery that was yet to be properly evaluated.

'In this case, CIC Energy had finalised the exploration and were actually aiming for a mining licence for the holdings in the area. Therefore, asking for a renewal of the prospecting licence was misdirected, as they were likely not fulfilling the required activities set out in the law for these types of licences.'

The official pointed to a CIC Energy statement on March 31 indicating that 'geological and mining plans' had been conducted for Mmamabula South as evidence that prospecting activities had been completed.

The insider suggested that CIC should have rather applied for a retention licence, which under law can be valid for three years and renewed once. However, the application for a retention licence has to be made three months prior to the prospecting licence's expiry, which CIC Energy has not indicated it did.

According to the law, CIC Energy was likely to have fulfilled the major requirements for a retention licence, being that full feasibility studies exist for the resource and that profitable mining activities could not be undertaken at the time of application. The Director of the Department of Geological Survey, Tiyapo Ngwisanyi, referred enquiries on the appealed licence to the Director of Mineral Affairs, Nchidzi Mmolawa, who said:

'The law is clear on what needs to be done in terms of first, second and third renewals of prospecting licences.However, on the specifics with regards to CIC Energy, we cannot comment as the law prohibits us from doing so. Specifics on licences are confidential.'

Since taking over Meepong Resources in 2006, CIC Energy had control over the Mmamabula South prospecting licence over two renewals during which extensive resource estimation studies were conducted together with the larger Mmamabula East. In the March 31 announcement, company officials sought to play down the non-renewal of Mmamabula South, saying:

'Although we are obviously disappointed not to have received the renewal of Mmamabula South, our geological analyses and mine plan studies have indicated that mining the resources in Mmamabula South would have been more difficult than will be the case for Mmamabula East. So we believe that the loss of Mmamabula South will not have a material impact on the company's mining plans.'

Market watchers expect the Canadian company to unveil its latest suitors following the collapse of a takeover deal with Indian firm, JSW Energy.