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EPIC: ORCP
Market: AIM
52-week High/Low: 3.65p / 2.10p
Sector: General Mining - Coal
Market Cap: 24.85M
Phone: + 44 (0)203 102 4807
Address: 23 Hanover Square, London, W1S 1JB.
Website: www.oraclecoalfields.com
Oracle Coalfields Plc

Oracle Coalfields Plc

Oracle Coalfields is an AIM listed (AIM:ORCP) coal developer.  The company’s primary interest is the Thar Coalfield Block VI licence area located in the Sindh Province, south-eastern Pakistan,  a 1.4 billion tonnes resource with 529 million tonnes JORC mineral resource and 113 million tonnes JORC proven reserves within the mining area of the licence.

Oracle Coalfields is traded in the ISDX Exchange HERE

Oracle Coalfields Plc

www.oraclecoalfields.com

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Big picture - Why invest in Oracle Coalfields Plc


Oracle Coalfields Plc Snapshot

Oracle’s strategy is to invest in energy generation where it has a competitive advantage, in a judicious manner and in line with all relevant professional and international standards. Our initial project is the development and delivery of one of the largest private sector integrated coal mine and power generation projects in Pakistan.

Whilst the Company’s key short term objective is to deliver shareholder returns by completing the current project in Pakistan, in the longer term the Company aims to explore investment opportunities in energy projects both in Pakistan and in other jurisdictions, where its project development expertise can add value, focusing especially on countries with a power shortage where there are available sources of international and domestic finance.

Pakistan continues to be affected by electricity shortages which are reducing the potential for economic growth. The Government of Pakistan’s National Power Policy 2013 states that the current shortfall in generating capacity is 5,500MW and projected to rise. The Government is committed to eradicating this shortfall and to diversifying the electricity supply market with particular support for the development of indigenous fuel sources including the Thar Coalfield, Province of Sindh.

The Company’s current activities are closely allied to the above objective which comes with the responsibility to maintain high standards in delivering the project and subsequently rewarding shareholders. The project is strategically placed in Pakistan’s energy mix and has been included in the ‘approved list’ of the China-Pakistan Economic Corridor (CPEC). The CPEC is a bilateral agreement between China and Pakistan, which provides access to Chinese funding for the development of infrastructure, including energy, in a corridor to be established from Pakistan’s North to the South.

World primary energy consumption is predicted to rise 34% by 2035 and this growth will be almost completely focused on the emerging economies with China and India representing 50%. Little growth in the OECD countries is predicted. Population and income are the main drivers behind increasing demand for energy. More than half of the increase in global energy consumption is predicted to be used for power generation as the long-run trend towards global electrification continues. The share of energy used for power generation is predicted to rise from 42% today to 45% by 2035 (source BP Energy Outlook 2016).

Pakistan will need to address its current generation shortfall as well as provide new generation capacity to grow its economy and serve the increasing population in the coming years. Our project has the potential to make a significant contribution in providing electricity for the country.

Oracle’s Board and management see many interesting investment opportunities in energy generation worldwide as power requirements continue to grow significantly, and believe that the knowledge and experience built up through the development of the project in Pakistan can be profitably applied to other projects, whether in Pakistan or further afield. When considering such opportunities the Company will rigorously assess their commercial attractiveness, their fit with the organisation’s skill set, partnership possibilities, and potential sources of funding, mindful of the principles agreed in the Paris conference on climate change.

Projects and Maps

Coal

The coal at the Block VI licence is of a lignite quality, ensuring that it is most suited to combustion in power generation. Further coal tests have been carried out by TES Bretby Ltd in the UK, Bahria University, Karachi, and the Fuel Research Centre, part of Pakistan Council of Scientific and Industrial Research (PCSIR), Karachi, which confirmed the coal quality is suitable for power generation and industry, especially for the cement sector. Rock samples were tested by Strata Surveys Ltd and additional testing at Scientifics Laboratory of the UK. All testing is done under ASTM standards. It is intended that the company will undertake development of an open pit coal mine.

Oracle Coalfields
 
MOUs / agreements
 
Karachi Electricity Supply Company (KESC)
 
Oracle signed MOU with KESC in December 2009, the third largest electricity producer in Pakistan. The power plant is expected to be built in phases with a total capacity up to 1,100 MW with initial phase to be 300 MW. Oracle has formed a committee with KESC to progress a joint development of the power station and mine.
 
Lucky Cement
 
Oracle signed MOU in December 2009 with Pakistan’s major cement producer.
 
Thar Coalfield Block VI
 
Oracle CoalfieldsThe Thar Coalfield is located 380 kilometres from Karachi, and covers a total area of 9,100 square kilometers, with a total lignite coal resource in excess of 175 billion tonnes. The coalfield is in close proximity to good infrastructure, with ongoing development of a road and power network in the region.
 
The China North East Geological Survey Bureau ("CNGB") drilled 35 boreholes at Block VI, totalling 9,852 metres, of which 5,986 metres has been cored. From the drilling, 273 lignite samples were analysed for quality. The drilling indicated that Block VI is focused on a seam with a cumulative thickness of between 16-30 meters at a depth of less than 150 metres. The quality of the lignite coal gives an average heating value of 3,182 kcal/kg, with a high moisture, low ash and sulphur content of less than 1 percent. The depth of the coal seam makes Block VI amenable to opencast mining.
 
Oracle Coalfields established an MOU with KESC for when the coal mine would be able to produce 1.75 million tonnes of coal per annum for a 300MW coal-fired mine-mouth power plant, which could be increased to 1,100MW, over time. A seven borehole drilling programme was undertaken by the company to validate all historical drilling results of CNGB, and enabled the company’s UK-based independent coal consultants, Dargo Associates Ltd, to define a 1.4 billion resource covering an area of 66.1 km²  of licensing area.  
 
Oracle CoalfieldsSince May 2008 Oracle has been working on a strategy to take the licence forward toward production. Accordingly Oracle is working towards the completion of a Bankable Feasibility Study. Work for the BFS commenced with subcrop drilling, followed by hydrogeology and geotechnical and geophysical reports, the environmental and social impact assessment of the licensed area is currently being undertaken by Wardell Armstrong International. SRK Consulting has been appointed to undertake the BFS and supervise the drilling programme. The additional drilling programme was initiated in September 2010 for the purpose of a full feasibility study and definitive mine design and was completed in February 2011. 27 geological boreholes were drilled, these comprising four fully cored boreholes, fourteen part cored boreholes and nine open holes. All boreholes and water wells have been geophysically logged using Gamma, Long and Short Spaced Density, Spontaneous Potential (SP) and Single Point Resistance (SPR) logs. Rock core samples were collected from the fully and part cored boreholes for geotechnical testing at the Structural Soils Laboratory in Bristol, UK and for geochemical analysis at Scientifics Laboratory, UK All testing is under ASTM standard. The results of the recent drilling programme indicate cumulative thickness of 16-39m, with a continuous lignite section ranging from 5.6m to 22.9m. In total, 13 discreet lignite horizons have been recorded. Total 6157.99 meters of drilling was completed. Some 500 selected ground points, borehole locations and water well locations have being surveyed for position and elevation, in order to give a realistic topographic profile and datum points for borehole depths.
 
The hydrogeological programme was devised and overseen by RPS Aquaterra of Australia and local contractor was engaged for the hydrogeology drilling programme. Four test wells and four observation wells were constructed. These wells were tested to determine the hydrogeological characteristics of the upper, middle and lower aquifers, with special reference to the volumes of water required to be pumped out to allow mining, and to variations in groundwater flow within the designated mine area. Samples of the groundwater have been tested at Bahria University laboratory in Karachi for chemical analysis.
 
Furthermore, eleven Standard Penetration Test (SPT) holes and five trial pits were drilled to determine the exact strength and cohesion of the soils/rocks that will immediately underlie the out of pit dump area and form the top part of the mine walls.
 
We look forward to keeping investors regularly updated on the progress of the BFS.
 
 
Indus East Coalfield
 
The area covered by the Exploration Licence is in the Indus East coalfield, situated to the east of the River Indus, 140 km east-northeast of Karachi and 66 km south of Hyderabad in Sindh Province, southern Pakistan. The license is currently held under abeyance.
 
Reserves and Resources
 
Oracle Coalfields following further drilling has taken the Block VI Thar Coalfield project to  529 million tonnes JORC mineral resources covering an area of 20 km² under a two phased programme. Phase I has proven reserve of 113 million tonnes to be proven once mining lease is issued.
 
 
Technical Feasibility Study
 
Overview
 
The Thar Coalfield is located in the Sindh Province of South East Pakistan some 400km east of Karachi. The Thar Coalfield has been divided into blocks and Oracle Coalfields plc has completed the Technical Feasibility Study of Block VI and has submitted an application for a Mining Lease which is to be issued in the near future.
 
The FS has confirmed a JORC compliant reserve of 529Mt of lignite suitable for Power Generation and for use in the cement industry and a detailed mine design has been prepared. The design is based upon detailed geological, geotechnical and hydrogeological investigation and analysis and has demonstrated the feasibility of operating a mine with up to 5Mt pa capacity.
 
Oracle has entered into discussions with an international mining contractor with a view to opening up the mine in a phased development to provide coal for power and the cement industry.
 
A mine mouth Power Plant will be required to take the bulk of the coal and this will be a staged development with an initial 300 MW unit planned and the initial mine production of some 2.5Mt pa programmed to support this capacity. This could be increased to 1100 MW over time with the mine production rising to 5Mt to support the development.
 
 
 
Summary
 
The Technical Feasibility Study has been completed by SRK Consulting and consists of 13 Volumes which detail all the technical and economic parameters assessed to confirm the viability of developing and operating the mine which are summarised below.
 
Project Background
 
The study sets out the history of the development of the Thar coalfield and that Oracle and its subsidiary were awarded an exploration licence for Block VI to enable the FS to be carried out. In addition it sets out the overall power shortfall current and projected in Pakistan as:
 
6577MW in 2010
18320MW in 2015
36462MW by 2020
It also sets out the vision of the Government and the Sindh Government of installing 10,000MW of coal fired capacity from the Thar Coalfield by 2020 and that this will be facilitated by providing guaranteed rates of return and favourable incentives for investors and operators to encourage the strategic development of the Coalfield.
 
Mineral Resource Estimate
 
The study sets out the results of the drilling programmes that have been carried out and the methodology used to calculate the resource in accordance with the JORC Code. The coal qualities are also stated with the average being 3182kcal/kg with moisture of 46.1% and sulphur at 0.91%.
 
The Coal Resource Statement shows a JORC reserve comprising 151Mt of Measured Reserves, 308Mt of Indicated Resources, and 70Mt of Inferred Resources giving a total of 529Mt. The Phase 1 Mining Area contains some 113Mt of proven reserves and covers an area of 6 km² of the 66.1 km² of Block VI.
 
The report also confirms that the coals extend well beyond the Phase 1 area of study and are present throughout the Block VI area. Additional drilling and analysis would be necessary to classify these coals in accordance with the JORC Code.
 
Mining Report
 
The study sets out the detailed pit and dump designs based on the geological and geotechnical information and has calculated the optimum pit boundaries that can be developed at a stripping ratio of less than 10. The initial box cut has been positioned in an area where the stripping ratio is lowest and the cuts advance from northeast to southwest initially with the final cuts advancing from the southeast to northwest to the final Phase 1 boundary. The out of pit dump is located to the north and west of the opening cuts.
 
The mining method will utilise hydraulic excavators and rigid dumptrucks throughout the mine. The material will not require blasting prior to excavating and all excavated materials will be placed in the out of pit dump until sufficient void space is created to allow the waste rock to be placed in the in pit backfill dump.
 
In the 5Mt pa scenario some 40Mm3 of overburden is to be excavated annually and Oracle envisage this will be reduced to 20Mm3 pa in the first phase of operations where a production of 2.5Mt pa is planned. There will be at least 1.5 years of excavation required before coal is produced.
 
 
 
 
 
Hydrogeology
 
The hydrogeology study examines the effects of surface water and groundwater on the mining site. There are no rivers or significant water courses on the mine site or adjoining lands and there are only significant rains in the monsoon season when surface run off will have to be managed.
 
There are 3 aquifers within the mine site which will require dewatering to enable the mining to proceed to the base of the pit. There is an intermittent aquifer at the base of the upper dune sands which does not contain significant volumes of water.
 
A second aquifer is located in the Bara Formation above the Lignite and extends throughout the coalfield. Again it does not contain significant volumes of water but will require dewatering in advance of excavation to maintain the stability of the pit walls.
 
Below the base of the Lignite and confined by the basal granites at depth there is a major aquifer which again extends throughout the coalfield and requires lowering to below the base of the pit to prevent floor heave and other instabilities at the lower levels of the mine. This deep aquifer contains significant quantities of water and a major system of dewatering wells will be required to reduce the water levels principally in the deep aquifer although the system is designed to dewater all 3 aquifers. Some 95% of all the predicted waters will be from the deep aquifer.
 
All the waters in the aquifers is slightly saline or brackish and would require treatment for drinking or irrigation and a Reverse Osmosis plant will be constructed to provide the same. Untreated water will be suitable for dust suppression and also for cooling water for the power plant.
 
 
 
 
Geotechnical
 
 
The study sets out the details of the site investigation, laboratory testing and geotechnical analyses that have been undertaken to determine the characteristics of the materials to be excavated and thereby enable the pit slopes, out of pit dump and in pit dump slope angles to be determined and used in the mine design. Overall and individual bench heights and slope angles have been designed to maintain stability throughout the life of the mine.
 
The levels to which groundwater must be reduced to maintain slope stability and to prevent floor heave at the base of the pit have also been established and a monitoring regime will be put in place to ensure that the groundwater levels are achieved and maintained during the working of the mine.
 
 
 
Infrastructure
 
The study details the infrastructure design for the mine and the relocated community including the provision of water and power necessary for the operational mine and the community. This includes mine offices and maintenance facilities, worker accommodation, power generation, access roads and water treatment facilities to be installed.
 
Geochemical
 
The study details the collection of samples from boreholes to determine the geochemical behaviour of the materials to be excavated in particular the potential for Acid Rock Drainage and Metal Leachate potential of the various strata contained within the pit.
 
The conclusions of the testing are that the upper dune sands and sands within the lower Bara formation do not exhibit ARDML potential but that the claystones and shales within the Bara formation do. The lignite is classified as low risk for ARDML.
 
The potential for ARDML in the external waste dump can be minimised by ensuring the rocks with potential ARDML are buried within the dump and not exposed on the surface slopes. Within the pit in the in pit dump again these materials should be buried at depth and the process of tipping will naturally compact them to minimise potential water flows on completion of the mine and post closure.
 
Long term kinetic testing has been undertaken to establish if there is an increase in ARDML over time after excavation and these results will be available in about 10 weeks. Overall the ARDML potential for the mine is moderate to low and can be managed by selective excavation and tipping.
 
Other work has also been done to examine the potential radioactivity of the materials to be excavated and this is also not a significant risk.
 
Environmental and Social Impact Assessment
 
The Environmental and Social Impact Assessment ESIA is being carried out by Wardell Armstrong International and Haggler Bailly Pvt of Pakistan and the SRK report summarises the current status of the ESIA.
 
The current findings for the baseline studies have not identified any protected or endangered species or flora that would require specific protection within the Phase 1 mining area.
 
Further work has been undertaken to assess the impacts the mining activities will have on the environment and communities in terms of water regimes, dust, noise and land use and an Environmental and Social Management System will be prepared as part of the ESIA. The report will also examine the Socio-economic effects of the proposed mine on the local communities. This will be in accordance with the IFC Performance Standards.
 
In addition to the ESIA a resettlement plan for the relocation of the local community within the Phase 1 area is to be implemented in accordance with the IFC Performance Standards.
 
Legal Opinion
 
This study confirms that Oracle and its subsidiary are properly constituted and that an Exploration Licence has been issued and that Oracle has carried out the exploration and reporting in accordance with the terms of the licence and that the application for the Mining Lease has been made.
 
The next stage is to be granted a Mining Lease for 30 years which can be extended at the end of the period for another 30 years.
 
Capital and Schedule Estimate
 
This study sets out the capital expenditure required to bring the mine into production including all excavation costs, the infrastructure costs, the dewatering costs and the resettlement costs. The costs include for all the mining equipment being acquired by Oracle for a 5Mt pa production profile.
 
The discussions with a mining contractor may well alter the requirements on mine site infrastructure and significantly change the expenditure profile prior to production.
 
Operating Cost Report
 
This report sets out the projected Operating Costs for the mine with 5Mt pa production where Oracle own and operate the mining equipment. The estimated production cost is $42.21/t.
 
Economic Analysis
 
The Economic Analysis study sets out the sales price required to achieve the government guaranteed IRR of 20.5% in three scenarios:
 
A base case on a 5Mt production with all sales to a mine mouth power plant
As the base case with no corporate income tax or social levies
As the base case with no corporate income tax or social levies and additionally no royalty payments.
For the three scenarios a coal sales price and an operating cost have been calculated to achieve the IRR of 20.5%.
 
There is a basic sensitivity analysis of the figures and a statement regarding further opportunities to reduce the overall costs by refining the infrastructure costs, potential engagement of a mining contractor and additional sales to the cement industry.
 
The Technical and Economic model is also included in this section.
 
For information on Environmental and Social Impact Assessment (ESIA) please click here 
 
 
 

 

Anthony Scutt
Chairman and Senior Independent Non-Executive Director

Mr Scutt is a qualified Chartered Secretary and a Certified Internal Auditor with the US Institute of Internal Auditors. He has over 30 years of financial management experience with Shell International Petroleum and has worked in many parts of the world, including the Malagasy Republic, East and Central Africa, South Vietnam, Cambodia, the Philippines, Gabon and latterly as the Chief Internal Auditor of Shell UK. Mr Scutt then went on to become an investment analyst, writer and investor. Mr Scutt is a Non-Executive director of AIM-listed Starvest plc.

 

Shahrukh Khan

Shahrukh Khan
Chief Executive Officer

Mr Khan was educated in the USA and UK. He was awarded a BA in Business administration and Economics at Richmond, the American International University in London. He has specialist expertise in large and complex projects, including project valuation and investment appraisal, feasibility studies and other project finance related services. Mr Khan has project finance experience in the natural resource and infrastructure related sector, predominantly in the Middle East, South Asia and China.

 

Yves Mordacq
Director

Mr Mordacq is the founder and manager of ECYM, an advisory boutique based in France.  Prior to this, he was Managing Director of Fairview Asset Management, overseeing its small-cap multi-thematic fund, focused on sectors including natural resources, biotech and renewables. From 2002 to 2010, Mr Mordacq was the Deputy Head of the European Equity team at Generali Investments France with assets under management of up to €5 billion.  Prior to his role at Generali Investments France, Mr Mordacq managed ING Investment Management’s natural resources fund. Mr Mordacq has a Masters in Agriculture from Montpellier SupAgro and an MBA from ESSEC, France and Fundamental Geology degree from Conservatoire National des Arts et Métiers (CNAM). He is a member of the Société Francaise des Analystes Financiers and was a visiting professor at the Ecole des Mines de Paris.

 

Significant Shareholders

Major Shareholder Amount % Holdings
Power Equity Investments Ltd 153,846,154 15.4%
OWG PLC 76,923,059 8.4%
Generali Investments Europe 72,553,846 7.96%
Nazario Consultancy Ltd 62,159,230 6.8%
Brandon Hill Capital Ltd 43,846,154 4.8%
Mr S Khan 33,630,482 3.69%
Mr N Griffith 31,181,232 3.42%
Mr P Richards 30,000,000 3.3%
Sunvest Corporation Limited 30,000,000 3.3%

Last updated 1 April 2016

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