Homeland Energy Group Ltd. (TSX: HEG) ('Homeland' or 'the Company') is pleased to announce first coal production from its Kendal Mine in the Witbank area of South Africa, approximately 50km east of Johannesburg. To date, approximately 8,000 tonnes of coal has been mined from the first of three open pit areas. Processing of the coal through the Company's Parnaby wash plant on site should begin this week. Following additional pre-stripping of overburden, currently in progress, Homeland estimates that more than 13,000 tonnes will have been mined by the last week of July 2008, at which time it is expected that the target #2 seam - the coal seam closest to the surface - will have been reached.
"Moving from the development phase to the production phase at Kendal is a significant milestone for Homeland Energy and one we're very proud to have reached," commented Stephen Coates, President and CEO. "While this is just the beginning of production at Kendal, it signifies the culmination of a great deal of management's time, effort and energy. Our dedicated operations team in South Africa, along with the competent on-site mining and processing contractors, have moved all aspects of this project from site preparation through the construction of a plant, application and receipt of a mining licence, initial boxcut in preparation for mining to actual production over the course of 15 months. They have all done an exceptional job."
The Kendal Mine
The Kendal Mine will be managed by Mr. Hilton Papenfus, General Manager, Operations, who joined Homeland in April 2008. Mr. Papenfus is a mining engineer who has over 26 years of experience in the management of opencast and underground coal operations and related projects with such companies as Anglo Coal, Eyesizwe and Exxaro, all of South Africa. Mr. Papenfus will oversee the mining, contracted out to Moolman Mining, South Africa and is responsible for overseeing the processing plant, run by mineral processing firm Fraser Alexander.
The Company is currently in coal sales contract discussions with several parties and anticipates initial contracts for sales by early September. Until that time, the coal produced at Kendal will be sold into the local spot market at current market prices. Cash operating costs for washed coal are expected to be less than US$30/tonne, based on saleable tonnage. Kendal Mine is budgeted to produce 1.8 million run-of-mine tonnes per year (150,000 tonnes per month), resulting in more than 850,000 tonnes per annum of saleable washed coal with the balance being Raw and Discard product.
Homeland, through its South African subsidiary Homeland Mining & Energy South Africa ("HMESA"), operates the Kendal Mine and maintains a 66.6 percent interest. The Company's strategic local partner owns 26 percent and 7.4 percent is attributable to GMR Energy of Bangalore, India by way of GMR's ownership interest in HMESA. The Kendal Mine consists of largely thermal coal.
An independent 43-101 compliant technical report was prepared by SRK Consulting of Johannesburg dated October 5, 2007 which may be found in the "Core Assets" section of the Homeland Energy website at www.homelandenergygroup.com.
Homeland Project Update
Homeland is also making significant progress on several of its other projects. Homeland's half-billion tonne resource, the Eloff Mining Project, near Delmas, South Africa, has completed the initial round of public meetings leading toward the submission of an environmental management program report. This process moves Homeland closer to completing the requirements for a mining permit. A pre-feasibility study is currently underway for the Eloff Mining Project and the Company anticipates completion of this study by September 2008. Following this pre-feasibility study, Homeland intends to move directly into a full Bankable Feasibility Study for Eloff.
In early June 2008, Homeland also announced that it had a letter of agreement giving the Company an exclusive right to negotiate a binding 'purchase and sale agreement' for the purchase of a producing coal operation located in the Central Appalachian Coal Basin of the eastern United States. Homeland is currently conducting full due diligence on the property and continuing the process to complete a binding purchase and sale agreement. The letter of agreement gives Homeland 90 days from inception of this agreement - with an option for an additional 90 days - to complete the due diligence and will issue public information when this process has been brought to a close.
Part of Homeland's southern Africa strategy has always been to acquire prospecting licences in the coal-rich areas of Botswana and continues to pursue opportunities moving the Company closer to success with this objective.
Exploration and mine development programs are carried out under the supervision of Mr. Mike Nell, Chief Operating Officer, Homeland Energy Group Ltd. Mr. Nell, a professional mining engineer and "Qualified Person" as defined under National Instrument 43-101, has reviewed and verified the technical content of this press release.
Homeland Energy Group Ltd. is a producing coal company, traded on the Toronto Stock Exchange under the symbol "HEG". The company is focused on energy exploration and development in Southern Africa. Homeland owns two producing operations - the Kendal Mine near Witbank, South Africa and the Northfield site reclamation project near Dundee, South Africa - an advanced development coal project in South Africa (Eloff coal mining project) and a number of early-stage exploration properties in the provinces of Mpumalanga and Kwa-Zulu Natal. The Company is currently negotiating to acquire interests in a number of additional coal properties in eastern South Africa and neighbouring countries. Homeland is also a significant shareholder in Homeland Uranium Inc., a Canadian uranium exploration and development company focused on projects in Niger and the United States, and has several other global strategic investments. Homeland Energy Group Ltd. began trading on the Toronto Stock Exchange on March 5, 2008 and has 150,079,642 common shares issued and outstanding.