Coal to liquids plant spawns big new Exxaro/Sasol coal mine

Shares in both companies rose as South Africa's Exxaro Resources said it had formed a jv with Sasol to build a new coal mine to supply the latter's proposed new coal-to-liquids project.

JOHANNESBURG - 

South Africa's Exxaro Resources said on Wednesday it had formed a joint venture with Sasol to build a new coal mine to supply Sasol's proposed 80,000 barrels per day coal-to-liquids project.

Following the news, shares in diversified miner Exxaro and Sasol extended their gains to more than 4 percent.

Sasol, the world's largest maker of motor fuel from coal, plans to build the new project named Mafutha in South Africa's Limpopo province, which is known to have substantial coal reserves located in the Waterberg region.

Sasol has said sampling coal for the proposed project in would start before the end of 2009.

Exxaro, South Africa's biggest coal supplier to utility Eskom , said in a statement the new mine was in the pre-feasibility stage.

Should the project proceed, it would require a new coal mine, the company said.

Exxaro said about 170,000 tonnes of coal will be mined for large-scale testing at Sasol's Secunda synthetic fuels facility.

Exxaro's shares rose 3 percent to 78 rand by 1031 GMT, while Sasol's stock rose 4.65 percent to 282.30 rand, against a 2.5 percent increase on the blue chip Top-40 index.

"The market reacted quite favourably to the Exxaro announcement, I think it was positive news for both shares," Andrew Todd of BoE Private Clients said.

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