ZYL Ltd has one thing in mind this year - building a project.

Given it suffered no shortage of encouragement transitioning from explorer to project developer, all signs are pointing to a successful 2012, advancing towards first production by mid-year 2013.

Early last month an interim feasibility report offered the latest incentive.

ZYL has high-grade anthracite, 361 million tonnes of it, all located within a ready-made market.

In-fill drilling remains ongoing and ZYL anticipates attractive resource updates.

The highest ranking of the metallurgical coals, anthracite requires no processing and consequently represents a lower-priced reducing agent used in the steel and ferroalloy industries.

ZYL's anthracite is contained within two projects, both in South Africa.

Hosting sizeable ferro-chrome, ferro-manganese and mineral sands processing sectors, South African industry is ripe for anthracite.

Moreover, global demand shortfall is expected to grow to 21.7Mt by 2015 and remain elevated, as more proposed large refining projects come online and competing international production regions experience supply constraints.

Prepared for ZYL's 19,120 hectare, 125Mt Mbila mining right in KwaZulu Natal province, the phase one interim feasibility, released in March 2012, highlighted a healthy $A112-135 per tonne mine gate price against $52/t saleable coal production costs.

"We were quite satisfied with this," ZYL executive chairman Bevan Tarratt told RESOURCESTOCKS.

"This represents a very healthy margin."

Mbila project vendor and ZYL director John Beck had become convinced of the potential success of the project much earlier.

"Mbila has the type of metallurgical coal needed in South Africa," Beck pointed out.

"South Africa has more than 70 per cent of the world's chrome and manganese and is also very rich in mineral sands, so the domestic market will take as much as it can get.

"Anthracite doesn't need processing and the chemical composition of Mbila anthracite, including high fixed carbon, low phosphorus and low calcium, is ideal for use in the large refining industries.

"Hence the reason for the initial domestic market focus."

Most of Mbila's anthracite will be hauled by road and rail to South African destinations but for any specialty export product, capacity is available at the Richards Bay and Durban ports, both of which are also readily accessible by road and rail.

Mbila is initially an underground mining operation and ZYL is envisaging the first phase of production to produce an annual 580,000t of saleable coal.

Additional Mbila encouragement came early, from external sources,in the form of numerous expressions of interest for offtake totalling 2.3Mtpa of the Mbila product.

These covered potential advance payment to commence production at the project and/or an equity investment in ZYL.

The company expects to announce any resulting transactions by mid-year.

Notably, the expressions of interest cover both phases one and two of the planned Mbila production.

During 2012, ZYL will complete the Mbila definitive feasibility, continue geotechnical drilling, and start recruiting mining and operational engineers.

In addition, the company will also progress its Kangwane anthracite project, which hosts low-sulfur coal well suited to export markets, in particular South America and India.

There, anthracite is used to agglomerate iron ore fines into premium-priced pellets or sinter.

Kangwane is located in the Mpumalanga province and comprises two main project areas, a 136Mt central mining right zone, from which production is expected to commence during the September quarter 2014, and a 99.7Mt southern region, subject to a mining right application.

As with the Mbila project, ZYL has received expressions of interest for the Kangwane product totalling 1.7Mtpa and exceeding current full planned saleable production for Kangwane of 1.2Mtpa.

Kangwane Central definitive feasibility will commence during the second half of 2012.

Meanwhile, pre-feasibility indicates a $58 million capital expenditure based on annual 1.2Mtpa saleable coal production for ZYL's 50.13% holding in Kangwane Central.

The project hosts a rail siding, but is also well located for trucking product to Maputo port in Mozambique, being less than 150km from the port.

Rail under construction will ease any regional constraints, adding 15Mt of capacity in time for Kangwane start-up.

Bulk handling terminal capacity is available at Maputo and ZYL has initiated port allocation and stockpiling discussions.

In addition to Kangwane and the Mbila mining right, the company holds the 53,000ha Msebe prospecting right, bordering the Mbila mining right.

Msebe's interim resource totals 29Mt.

ZYL maintains little luck has been involved in finding itself well-placed in metallurgical coal markets.

"We set out to look for low-volume but high-margin projects, where there was some type of differentiationand hence not a myriad competitors," Tarratt said.

Both Mbila and Kangwane have delivered on these criteria to date, Mbila in particular offering an estimated 41% internal rate of return for the initial production phase.

Last year ZYL revamped itself, adding project development and project marketing expertise.

This year the company is focusing on transforming itself from a project business into a mining company, determining Mbila development funding within six months and commencing construction ahead of first production by mid-2013.

Mbila will feed into the ready-made and burgeoning South African domestic anthracite coal market, but ZYL's secondary, coincident endeavour is progressing its follow-up anthracite project, Kangwane Central, ready for first exports by late 2014.

Kangwane South and Msebe are earmarked for later development and further expansion longer term is not out of the question.

Whatever the opportunity, however, it would take some convincing for ZYL to move away from metallurgical coal and out of South Africa.

"ZYL's story now is all about execution, getting the product out of the ground," Beck and Tarratt said.

"Africa is our focus.

"We like the metallurgical coals, in particular anthracite, and thereare not too many other places thatcan compete with South Africa."

*A version of this report, first published in the April/May 2012 edition of RESOURCESTOCKS magazine, was commissioned by ZYL