JOHANNESBURG (miningweekly.com) – Recent developments with regard to dual-listed Continental Coal’s recapitalisation plans would not change JSE-listed Village Main Reef’s diversification strategy, CEO Ferdi Dippenaar said on Monday, adding that Village still believed Continental’s underlying assets offered good value.

Village had, in 2013, as part of its diversification strategy, acquired a 16.24% stake in the coal miner. It also had the option to increase this to 19.9%.

Continental on Monday requested the continuation of a voluntary suspension of its securities on the ASX and the Aim, saying it was continuing efforts to complete a recapitalisation that would allow it to settle its convertible notes, which would mature between November 2013 and February 2014, as well as commitments to other creditors.

Earlier this month, the company noted that its financial position had been negatively affected by the production impact of the availability of continuous miners at its Penumbra operation, in South Africa’s Mpumalanga province.

“While the production will be augmented by the implementation of an additional conventional drill and blast production section, the ramp up of production from this is expected to take several months, placing additional pressure on the company's working capital requirements,” the coal miner explained.

Continental Coal on Monday stated that it had made progress in its discussions with holders of convertible notes, other creditors, royalty holders and various investor groups in relation to the recapitalisation of the company, adding that it remained optimistic about reaching an agreement with all parties that would allow it to continue trading as a going concern.

Dippenaar noted that, while the current Continental corporate structure was not ideally suited for a junior coal exploration and development company, if this could be resolved as part of the recapitalisation programme, Village would see value from Continental in future.

He also pointed out that the impact of the recapitalisation, should Continental manage to achieve this, on Village’s investment would depend on whether or not Village decided to follow its rights as part of the recapitalisation.

“If Village decides to follow its rights as part of the recapitalisation of Continental, we will not see our shareholding diluted; [however], if we decide not to follow our rights, our shareholding will be diluted.

“The extent [of this dilution] can only be determined once the nature and extent of the final recapitalisation package has been agreed on,” he said, adding that Village would, therefore, only take a decision on how to approach Continental going forward once it had seen the recapitalisation proposal.

Meanwhile, Continental warned last week that, should no acceptable restructuring or refinancing arrangement be agreed in the near term, the appointment of a voluntary administrator to the company in Australia could be necessary, as the coal miner would have insufficient funds to meet the repayment obligations on the convertible notes and other creditors.

Dippenaar stated that, should this happen, Village would probably be treated as any other shareholder, based on the decision of the administrator, with regard to selling assets.

“Depending on what is finally realised, we would probably see some return on our investment in Continental,” he said.

Continental Coal expected to be able to make a further announcement on its recapitalisation process by January 20.