JOHANNESBURG (miningweekly.com) – Triple-listed coal exploration and project development company Coal of Africa Limited (CoAL) has completed the first stage of its equity capital raising exercise.

The South Africa-focused company, which trades its shares in Sydney, London and Johannesburg, said on Thursday that it had received cash of $21.8-million for the sale of 251-million additional shares, divided according to subscription agreements on the Alternative Investment Market in London and on the JSE in Johannesburg.

CoAL CEO David Brown said the receipt of funds from the share placement’s stage-one completion would enable the company to continue its strategy of value creation.

The equity raise’s second stage, worth a further $41.5-million, is conditional on investor TMM Holdings obtaining sufficient funds to buy the second share placement.

Loss-making CoAL, which ended the 12 months to June 30 with cash of only $2.1-million, is raising close to $65-million equity, with $23-million from the disposal of its noncore Mooiplaats colliery expected to provide sufficient working capital for the next 18 months at least.

In an interview with Mining Weekly Online last month, Brown outlined plans to produce at a rate of nearly seven-million tons of saleable coal a year, more than five-million tons of it being import-substituting price-premium hard coking coal used in steelmaking.

CoAL plans to produce semi-soft coking coal and thermal coal from its brownfield Vele project in the short term, and both hard coking coal and thermal coal from its Makhado project and Greater Soutpansberg projects in the medium term and the long term.

Brown said that the company could play a pivotal role in lowering the cost of inputs into local steel production, which is poised to be expanded through the signing of a memorandum of understanding by Hebei Iron and Steel Group of China and South Africa’s State-owned Industrial Development Corporation for the development of new steelmaking capacity in Limpopo province, where CoAL, which is itself backed by Hong Kong-based Chinese company Haohua Energy International Resources, has its projects.

Steelmaker ArcelorMittal South Africa and State electricity utility Eskom have both approved the quality of the coals to be supplied.

Soutpansberg is said to host more than 90% of South Africa’s accessible hard coking coal resources and about 10% of total remaining domestic resources.

The 26-month construction of the $400-million Makhado plant is scheduled to begin in 2016 to allow production in 2018/19, with the proposed Hebei steel plant giving CoAL the potential benefit of having an anchor customer close to its mines.

Equity capital will fund the $23-million plant modification at the dual-product, 50-year Vele, which is expected to ramp up to 2.7-million tons of run-of-mine coal a year from the third quarter of next year.

An incoming strategic partner will hold 20% to 23% of the shares of the Makhado project, where CoAL will retain majority ownership in a part debt structure, and its black economic-empowerment (BEE) shareholder 26%.

While 6% of the BEE holding will be available as an employee share ownership plan, the percentage may also be used to create black industrialists in line with government aims.

The proposed 16-year, opencast Makhado mine is being designed to produce 2.3-million tons of hard coking coal a year and 3.2-million tons of thermal coal a year.

Mooiplaats acquirer Blackspear Holdings Proprietary is expected to pay CoAL for the colliery by the end of November, with the Mooiplaats divestment completed by the end of February.

The Mooiplaats sale forms part of CoAL’s five-point turnaround strategy implemented a year ago, which included the disposal of the Woestalleen colliery, near Ermelo, the Mpumalanga-based Opgoedenhoop mining right, coal explorer Lemur Resources and the Holfontein project, in the Witbank coalfield.

Front-end work on the Vele plant modification project is being engineered by project house Sedgman and the Makhado project has received environmental authorisation under National Environmental Management Act and the environmental-impact assessment (EIA) regulations from the Limpopo provincial government.

In the 12 months to June 30, CoAL repaid the remaining $12.5-million of its bank facility from Deutsche Bank and secured a $21.4-million, 18-month credit facility from Investec Bank, and legacy issues that have plagued its ability to create value for the last few years have been removed.

Shareholders voted overwhelmingly in favour of an equity placement of up to $64.9-million.

CoAL has finalised the public participation for EIA phases for the Generaal, Chapudi and Mopane projects, which form part of the long-term greenfield Greater Soutpansberg project.