PERTH (miningweekly.com) – South Africa-focused Coal of Africa (CoAL) on Tuesday announced that it would raise up to £38.23-million ($64.9-million) under conditional agreements with existing and new investors.
The miner, wihch is listed on the ASX, Aim and JSE, would issue up to 695-million new shares, at a price of 5.5p a piece. The capital would be used to assist in the planned disposal of noncore assets, which include the Mooiplaats colliery, in South Africa.
As part of a “five-point turnaround strategy", CoAL was offloading five noncore thermal assets, namely the Opgoedenhoop mining right, Lemur Resources and its other Mpumalanga-based assets the Woestalleen colliery, the Holfontein project and the Mooiplaats colliery.
The funds would also be used to implement modifications to the Vele colliery, settle the outstanding acquisition consideration for its Greater Soutpansberg project, and to settle a working capital facility.
“In terms of CoAL’s strategy going forward, we have allocated the resources into short-, medium- and long-term growth projects,” said CEO David Brown.
“It is important for CoAL to raise these funds to commence the value creation process.”
The short-term plan for CoAL related to the plant modification at Vele, which had the potential to become the company’s near-term cash generator, allowing CoAL to move forward with the development of its medium-term project Makhado.
“The intention is that this project will be funded at the project level by debt funding and partly through the sale of equity at the asset level. These short- and medium-term projects would be the enablers for the longer-term growth through the development of the Great Soutpansberg project assets,” Brown said.
CoAL has previously warned its shareholders that the company would only be able to continue as a going concern, and to repay its debts, by obtaining additional funding either from financial institutions or the equity markets.
The miner on Tuesday said that the need for the additional funding had arisen as a result of a number of factors, including the delay in and reduction in the expected quantum of consideration for the Mooiplaats colliery, additional costs incurred to complete product testing at Vele, CoAL only partially mitigating its take-or-pay obligations under the company’s throughput agreement and the cessation of production at Vele in anticipation of the plant modification.
The shares would be placed to a number of companies, including Haohua Energy International Resources, M&G Investment Management, Investec Asset Management, and TMM Holdings.
The share placement would take place in two tranches, with the first consisting of 251-million shares, subject to shareholder approval as well as approval from the Australian Treasurer.
The second tranche placement of some 444-million shares would be conditional upon TMM securing sufficient funding, as well as the completion of the first stage of the placement.