Coal junior Ikwezi Mining has mined first coal at its Newcastle project in South Africa.

Ikwezi (ASX:IKW) will ramp up by selling run of mine coal, but once production has stabilised, it will evaluate the option of bringing the coal wash plant into operation, along with acquiring rail and port access.

A wash plant removes more waste material from the coal, which increases its market value and lowers transportation costs.

The API4 coal index remained in a price range that “supports the commencement of mining and should place the operation in a position to start generating cash from its operations”, the company stated.

The API 4 price assessment is the benchmark price reference for coal exported from South Africa’s Richard Bay coal terminal.

The Ikwezi Mining (ASX:IKW) share price over the past year.
The Ikwezi Mining (ASX:IKW) share price over the past year.

This, together with a short-term loan of $1m from Osho SA Coal, and a planned renounceable entitlement issue will “place the company in a strong financial position going forward”, Ikwezi stated.

To date, Ikwezi has three short-term loans from Osho totalling about $3m to bring its project into production.