TORONTO (miningweekly.com) – South Africa-focused coal producer Buffalo Coal has secured $4-million from lending partner Resource Capital Fund (RCF) to make capital investments for general working capital and to implement a restructuring process at its Dundee-based operations.
Buffalo said on Monday that it would need more capital to improve operating efficiencies, support the company's working capital requirements during a proposed restructuring period, and return to profitability to ensure that the company remained sustainable into the future.
The TSX- and JSE-listed producer, which held a 70% interest in Zinoju Coal, which, in turn, held the Magdalena bituminous mine and the Aviemore anthracite mine, had been hit hard by low coal prices in the last two years, prompting it to implement restructuring initiatives during 2013 and 2014, and to secure loans from RCF.
Despite the previous restructuring initiatives, the current market conditions and operational performance had compelled the company to consider further restructuring.
Under the terms of the latest loan, the $4-million would be advanced as a bridge loan and, subject to regulatory and shareholder approvals, would roll over into Buffalo's existing $25-million convertible loan with RCF under the same terms and conditions, except for proposed amendments to the interest rate and conversion price.
Buffalo noted that no establishment fees would be charged on the bridge loan but a termination fee of 5% of the bridge loan would be payable should the transaction not close.