StockMarketWire.com - Coal of Africa Limited [LON:CZA] was the sector's biggest riser after it was granted a new order mining right for its flagship Makhado hard coking and thermal coal project in Limpopo Province by the South African Department of Mineral Resources.

The DMR has also granted the section 11 approval transferring the right from CoAL to its wholly owned subsidiary Baobab Mining & Exploration (Pty) Ltd, which will be the project development company.

CoAL completed a class II definitive feasibility study on the project during 2013 and anticipates developing the colliery to produce 2.3 million tonnes per annum of hard coking coal and a further 3.2 Mtpa of thermal coal over a 16 year life of mine.

The project can produce hard coking coal that has been benchmarked by independent consultants. Tests confirmed that the coal can be successfully beneficiated to produce high strength coke for the steel manufacturing industry.

Following the granting of the section 11 approval, the Makhado Colliery Community Development Trust, representing seven local communities living in the vicinity of the project, will acquire a 20% interest in Baobab.

A further 6% interest in Baobab has been acquired by Yoright Investments (Pty) Ltd formed by black entrepreneur Mike Nkuna whose shareholder grouping will include other Historically Disadvantaged South Africans.

The trust and Yoright have two years to raise sufficient funding to acquire their interests in Baobab with the final amount payable subject to due diligence which will be negotiated with CoAL . The completion of the acquisition transactions will result in the Trust owning 20%, Yoright 6% and CoAL 74% of Baobab.

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Fresnillo's [LON:FRES] aim to increase its silver production to 65 million ounces in 2018 remains on track, shareholders at the annual general meeting later today will be told.

And the company says the acquisition of the remaining 44% of the Penmont joint venture for $450m had substantially strengthening its gold production and resource base and allowed it to increase the 2018 gold production target from 500,000 ounces to 750,000 ounces.

Chairman Alberto Baillères will tell shareholders that 2014 was again a challenging year for precious metals producers, with a further decline in prices affecting all companies in the sector.

But he will adds: "Our high quality assets, low cost operations, strong balance sheet and solid pipeline of organic growth projects again provided some protection and allowed us to deliver a robust operational and financial performance."

He will continue: "Our annual silver production of 45 million ounces in 2014 exceeded our budget and in gold we met our revised production guidance following the Penmont acquisition, producing 596 thousand ounces over the year. 2014 was of course not without its operational challenges, in particular a lower ore grade at the Fresnillo mine, the stoppage of operations at Soledad-Dipolos, and processing capacity issues at Herradura.

"However, these factors were mitigated by increased production at other mines and we are confident that the measures we put in place during the year at Fresnillo and Herradura will result in improved production in 2015. In addition, in 2014 we saw the start-up of the dynamic leaching plant at Herradura and we made excellent progress at our development projects, with the commissioning of Saucito II in December on time and on budget and San Julian set to start up by the end of this year. This progress was achieved in the context of a maturing sustainability framework and a continuously improving safety culture.

"In our recent Production Report for the first quarter of 2015, we reported a strong start to the year, with production of over 12 million ounces of silver and 182 thousand ounces of gold and we remain on track to achieve our 2015 production guidance of 45 to 47 million ounces of silver, and 670 to 685 thousand ounces of gold. Furthermore, during the quarter we improved development work at the Fresnillo mine and started to see the results of the measures being taken to solve the challenges faced at Herradura in 2014.

"Turning now to exploration, our strategy of continued investment in exploration to underpin organic growth yielded good results in 2014. Although the total investment in exploration was reduced from the original US$225.0 million budget to US$184.5 million, as costs for contracted exploration and drilling declined, the pace of progress was essentially unchanged from plan. We added 3 million ounces of gold (an increase of 45%) and 102 million ounces of silver (an increase of 21%) to our reserves, although lower price assumptions led to a narrower increase in gold resources and a 6% decrease in silver resources. We were particularly encouraged by the strong increase in resources and reserves at Herradura, underscoring the value of our acquisition. Our financial performance in 2014 was affected by a 10% decline in our average realised gold price, which fell to US$1,257.7 per ounce, and an 18% fall in our average realised silver price, to US$18.6 per ounce. We reported adjusted revenue of US$1,545.0 million in 2014, EBITDA of US$567.3 million and operating profit of US$245.6 million. These figures reflect the aforementioned decline in average realised silver and gold prices, as well as lower volumes of gold sold and increased stripping in the Herradura District in accordance with our mine plans, increased depreciation expenses as new projects came into operations and lower ore grades at Fresnillo and Ciénega, all of which were partially mitigated by lower refining charges and the devaluation of the Mexican peso against the US dollar.

"While profit margins remain strong despite lower precious metal prices, they did decline in 2014. However cost control measures and efficiency improvements allowed us to maintain our position as a low cash cost producer. Furthermore, we maintained our strong balance sheet, reporting cash, cash equivalents and short-term investments totalling US$449.3 million at 31 December 2014, while total debt on the balance sheet was US$796.2 million, providing us with low leverage and significant financial flexibility.

"In line with our conservative growth strategy, Fresnillo initiated a one-off hedging programme in 2014 to protect the value of the investment made in the Penmont acquisition, allowing for partial exposure to gold prices. This phased hedging programme was strictly limited to the 44% of Penmont (and associated companies) acquired, implemented at management's discretion depending on prevailing market conditions. The Group's hedging policy remains unchanged for the remainder of the portfolio, providing shareholders with full exposure to gold and silver prices.

"In July 2014 the Board conducted a comprehensive review of the Company's current and future financial requirements and found that the balance sheet was well placed to meet capital expenditure plans and future potential growth opportunities. Thus, while the 2014 dividend was brought forward and paid in November 2013, a special dividend was declared in 2014 of 5.0 US cents per share, equivalent to US$36.8 million. Whilst industry conditions have clearly deteriorated since that time, we remain committed to prudent financial policies that ensure sufficient cash on hand to invest in existing operations, profitable growth, and shareholder returns. Based on the Group's long-term dividend policy, the Directors have recommended a final dividend of 3.0 US cents per share, equivalent to US$22.1 million, which will be paid, subject to shareholder approval at today's Annual General Meeting, on 22 May 2015 to shareholders on the register on 1 May 2015.

"I am also pleased to report that in 2014 the maturity of our Health, Safety, Environment and Community Relations (HSECR) System advanced according to plan, ensuring we will meet our 2016 targets. Efforts to integrate Health, Safety and Environment under a single Integrated Management System resulted in Ciénega becoming the first business unit to achieve a joint certification in Occupational Health and Safety Management System 18001 / ISO 14001, followed by Fresnillo and Penmont, which achieved the certification later in the year.

"Such certifications are important, of course, but it is the people behind the policies and practices who are most important. We have made much progress in safety matters, yet I am deeply saddened to report one fatality during the year; this led to extensive internal reviews with management and contractors. Safety must always be our number one priority, deeply embedded in our culture.

"With regards to the Board, in 2014 we welcomed Bárbara Garza Lagüera, Jaime Serra Puche and Charles Jacobs to the Board. Their diverse backgrounds and significant experience will greatly support the Company and the Board, and I look forward to continued collaboration with all my Board colleagues, whose insights and engagement I value greatly.

"I remain committed to our proven strategy in precious metals. Our priority, for 2015 and beyond, is firmly set on value creation. Thus, management must continue to focus on managing ore grades, optimising capacity and volume of ore processed, bringing on new projects, and extending the profitable growth pipeline, all while continuing to contain costs, enhance sustainability practices, and uphold our commitment to stakeholders.

"I remain confident that Fresnillo has the operational and financial strength to address the challenges we may face. Our financial flexibility, combined with management's ability to tailor mine plans, development expenditures and exploration parameters in accordance with external market conditions, ensures that we optimise performance in the current environment. At the same time, the quality of our asset base, our robust balance sheet and our commitment to sustainable growth offer a long-term value creation opportunity as we continue to invest through the cycles."

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Highland Gold Mining [LON:HGM] has announced Russian-compliant reserves (C1+C2 category) of 62.1 tonnes (1.99 million oz) of gold at its Kekura project after receiving approval from the State Committee on Reserves (GKZ).

The company says the ruling represents significant progress in mine development, facilitating the drafting of detailed project design according to Russian mining regulations.

A GKZ expert panel approved an updated TEO study inclusive of a C1+C2 category reserve calculation, which the Company submitted for review at the beginning of this year. At a cut-off grade of 1.0 g/t, open-pit mineable C1+C2 reserves at Kekura amount to 45.6 tonnes (1.47 million oz) of gold with an average ore grade of 9.12 g/t, while C1+C2 reserves destined for underground mining are 16.5 tonnes (0.53 million oz) of gold at an average ore grade of 12.26 g/t and a cut-off grade of 2.0 g/t. The Company expects to receive official documentation on reserve registration in the coming weeks.

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The sector's biggest fallers were Amuir Minerals [LON:AMC] and Kalimantan Gold [LON:KLG] - down by more than 8.8% and 8.2% respectively in late trading.



At 3:49pm:

[LON:AMC] Amur Minerals Corporation share price was -1p at 10.25p

[LON:AQP] Aquarius Platinum Ltd share price was -0.05p at 9.06p

[LON:BEM] Beowulf Mining PLC share price was 0p at 1.4p

[LON:BKY] Berkeley Resources Ltd share price was -0.25p at 12p

[LON:CEY] Centamin PLC share price was +1.93p at 67.78p

[LON:CHL] Churchill Mining PLC share price was +5.25p at 22p

[LON:CZA] Coal of Africa Ltd share price was +1.96p at 6.63p

[LON:FDI] Firestone Diamonds PLC share price was 0p at 27p

[LON:FRES] Fresnillo PLC share price was +37.25p at 789.25p

[LON:GEMD] Gem Diamonds Ltd share price was -2.75p at 144.25p

[LON:HGM] Highland Gold Mining Ltd share price was +0.13p at 50.63p

[LON:HOC] Hochschild Mining PLC share price was -0.25p at 108.5p

[LON:KLG] Kalimantan Gold Corporation Ltd share price was -0.13p at 1.4p

[LON:KMR] Kenmare Resources PLC share price was +0.15p at 4.06p

[LON:VED] Vedanta Resources PLC share price was -11.25p at 663.75p



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