|Boodge, the difference is that this time we have the funds for the transactions and not reliant an another deal involving Eskom to complete it. These requirements are more of a box ticking exercise than anything. With the previous deal on people's minds this deal hasn't been priced by the market yet, so we should start to rerate from explorer to producer.Hopefully the regulators will get their fingers out soon and approve Vele and overturn the suspension at Makhado. We could be in good position very soon.|
|amazing that Mr Brown speaks of the " successful acquisition of the Uitkomst Colliery " which as yet has a series of conditions to be fulfilled to qualify it as a successful acquisition , the same which the market is waiting to hear of and which still remains forthcoming , bearing in mind that this project wants to be implemented by June ( makes you wonder June 20what given CZA's history of dates of finishing anything )|
Looking better, but Mr Market hardly beating a path to buy....
Coal of Africa Ltd
REPORT FOR THE QUARTER ENDED 31 MARCH 2017
RNS Number : 6575D
Coal of Africa Limited
28 April 2017
ANNOUNCEMENT 28 April 2017
REPORT FOR THE QUARTER ENDED 31 MARCH 2017
OBTAINING A CASH GENERATOR AND PROJECT FUNDING
Coal of Africa Limited ("CoAL" or "the Company") which operates in South Africa, together with its subsidiaries, hereby provides its update for the quarter ended 31 March 2017. All figures are denominated in United States dollars unless otherwise stated. A copy of this report is available on the Company's website, www.coalofafrica.com.
Salient operational features
· No lost-time injuries ("LTIs") recorded during the quarter (FY2017 Q2: nil).
· Agreements concluded for the acquisition of the Uitkomst Colliery from Pan African Resources Plc ("Pan African") for a purchase price of R275 million (US$20.5million).
· Successful placement of US$2 million by M&G Investment Management Ltd ("M&G") and the conversion of US$9.8 million of the Yishun Brightrise Investment PTE Limited ("YBI") US$10 million loan to equity.
· Successful closure of the sale of Holfontein Investment Proprietary Limited ("Holfontein") to Taung Gold Secunda Proprietary Limited ("Taung Gold").
· Successful completion of a loan agreement for up to R240 million from the Industrial Development Corporation of South Africa ("IDC") for the development of the Makhado Project.
· Granting of an Environmental Authorisation in terms of the National Environmental Management Act ("NEMA") (Act 107 of 1998) and the Environmental Impact Assessment Regulations (2014) to Vele Colliery for stream diversion and associated infrastructural activities.
Corporate and financial features
· Available cash at period end of US$5.1 million and restricted cash of US$0.05million.
Makhado Coking Coal Project ("Makhado Project") - Soutpansberg Coalfield (100% owned - 74% post BBBEE transaction)
The Makhado Project recorded no LTIs (FY2017 Q2: nil) during the quarter.
Makhado's 26-month construction phase is expected to begin as soon as all regulatory approvals are in place (expected during CY2017). This delayed start up reflects the complex environment in which South African mining companies operate. CoAL remains committed to ensuring that the requisite processes are completed as efficiently as possible. Post construction, a further four month ramp-up phase will result in the production of 5.5 million tonnes per annum ("Mtpa") of saleable product.
During FY2016 Q2, the Company was granted a 20-year Integrated Water Use Licence ("IWUL") for the Makhado Project. Following an appeal to the DWS submitted by the Vhembe Mineral Resources Forum and other parties, the IWUL was automatically suspended under Section 148 (2) (b) of the South African National Water Act No 36 of 1998. Representation has been made to the Minister of Water and Sanitation and the Water Tribunal to progress the final conclusion of the appeal.
The interim court interdict to halt any mining or construction activity issued against CoAL in respect of the Makhado Project during Q2 FY2014 remains in place. Subsequent to this, the Environmental Authorisation ("EA") for the Makhado Project was transferred from CoAL to Baobab Mining and Exploration (Pty) Ltd, the operating entity for the Makhado Project in July 2016 by the Department of Mineral Resources ("DMR") and the Limpopo Department of Economic Development, Environment and Tourism. The validity period for the commencement of activities was also further extended for an additional five years. This authorisation is fully executable and will facilitate the commencement of the Makhado Project upon resolution of the IWUL.
CoAL has successfully launched the Makhado Centre of Learning which aims to develop skills within communities to enable access to opportunities offered within the Makhado Project
CoAL remains committed to the sustainable development of the Makhado Project, recognising its potential to drive significant socio-economic transformation. The Company continues to engage with all stakeholders to ensure the on-going implementation of a co-existent model, seeking co-operation between mining, agriculture and heritage land uses.
The Company is in the process of securing the surface rights for the Makhado Project. This process in highly complicated as current surface rights are subject to land claims and the Company needs to ensure that due process is followed. The Project is located over five farms.
Mooiplaats Colliery - Ermelo Coalfield (74% owned)
The Mooiplaats thermal coal colliery ("Mooiplaats Colliery") was placed on care-and-maintenance during Q1 2014, and recorded no LTIs during the period (FY2017 Q2: nil).
Due to the increase in coal pricing over the six months, the Company has experienced renewed interest in the Mooiplaats Colliery by potential buyers. Interested parties are at various stages of financial assessment and completion of the due diligence process. The Company is committed to delivering a successful completion of the sale as soon as possible.
Vele Colliery - Limpopo (Tuli) Coalfield (100% owned)
The Vele coking and thermal coal colliery ("Vele Colliery") recorded no LTIs during the quarter (FY2017 Q2: nil).
The IWUL for the Vele Colliery has been renewed for a further 20 years and has also been amended in line with the requirements for the colliery's Plant Modification Project ("PMP").
The DMR has recently granted an EA in terms of the National Environmental Management Act (Act 107 of 1998) and the Environmental Impact Assessment Regulations (2014) for Vele Colliery for the diversion of a stream and associated infrastructural activities.
CoAL awaits the granting of an IWUL by the DWS, which is the final approval required to complete the regulatory approvals for the stream diversion in respect of the PMP. Once all regulatory approvals are in place, the Company will be in a position to consider current market pricing and off-take agreements to conclude on an investment decision favourable to the Company.
Greater Soutpansberg Project (MbeuYashu) (74% owned)
The MbeuYashu Project recorded no LTIs (FY2017 Q2: nil) during the period.
No other significant matters to report.
Acquisition of the Uitkomst Colliery
During the quarter, the Company announced the successful completion of an agreement with Pan African in which CoAL will acquire 100% of the shares in and claims against Pan African Resources Coal Holdings Proprietary ("PAR Coal") for a purchase price of R275 million (US$20.5 million). PAR Coal holds a 91% shareholding in Uitkomst Colliery Proprietary Limited ("Uitkomst").
Uitkomst is a high grade thermal export quality coal deposit with metallurgical applications, which is situated in the Utrecht coalfields in KwaZulu Natal. Uitkomst consists of an existing underground coal mine and a planned life-of-mine extension. The operating mine is easily accessible and well-established. Existing infrastructure such as power supply, water supply, buildings, workshops, weighbridge, water storage and management facilities are all in place. Uitkomst currently employs approximately 520 employees (including contractors).
Uitkomst had a net asset value of R209 million and made operating profits of R21.3 million for the 6 months ended 31 December 2016 as disclosed in the interim financial statements of Pan African.
The acquisition price of R275 million will be settled as follows:
· R125 million (US$9.3 million) payable in cash ("cash consideration");
· R25 million (US$1.8 million) deferred consideration ("the deferred consideration"). The deferred consideration can be repaid by CoAL at any time prior to the 24 month anniversary of the effective date of the acquisition. The deferred consideration will bear interest at the prime rate, and shall be repaid on the second anniversary of the effective date. CoAL shall be entitled to prepay any amounts in respect of the deferred consideration. If not settled after 24 months, the balance outstanding can be settled through the issue of new CoAL shares at the 30-day volume weighted average price as traded on the JSE on the date immediately prior to the date on which Pan African gives its election. To the extent that certain coal bu- in opportunities are not secured by, or with the assistance of Pan African, within two years from the effective date, which would result in CoAL suffering a lower economic benefit, the deferred consideration may be reduced, subject to a maximum of R15 million; and
· 261 287 625 newly issued CoAL shares (equivalent to R125 million) equating to approximately 9.3% of CoAL's total issued share capital.
The Company will fund the cash consideration through internal cash resources and proceeds of an aggregate US$13 million equity investment from Summer Trees Pte Ltd and M&G at a subscription price of R0.52 (US$0.03878) per CoAL share, resulting in the issue of 335 250 000 shares pursuant to agreements with CoAL.
The implementation of the acquisition is both subject to and conditional on the fulfilment of conditions precedent customary for a transaction of this nature and includes, inter alia, the following:
· CoAL obtaining all of the requisite shareholder, AIM, JSE and ASX approvals to implement the acquisition and ancillary transactions;
· Uitkomst entering into a supply of coal agreement on terms acceptable to CoAL;
· Uitkomst being released, in writing, from its obligations as a guarantor in terms of Pan African facility agreements;
· Pan African beeing released from its obligations as guarantor from the financial provisions provided to the DMR and the guarantee been replaced in a manner and form acceptable to CoAL;
· Pan African and CoAL entering into a transitional services agreement;
· The approval by the Competition Authorities under the Competition Act; and,
· Any exchange control approval which might be required from the Exchange Control Authorities, in terms of the Exchange Control Regulations being obtained.
During the quarter, the Company has entered into a loan agreement with the IDC and Baobab Mining and Exploration Proprietary Limited ("Baobab"), a subsidiary of CoAL and owner of the mining right for the Makhado Project, in terms of which the IDC shall advance loan funding of up to R240 million (approximately US$17.6million) to Baobab for the Makhado Project. The Loan Funding will be used to advance the operations and implementation of the Makhado Project.
The loan funding is subject to the following conditions:
· The IDC advancing to Baobab in two equal tranches of R120 million (approximately US$9.2million) upon written request from Baobab;
· Each Tranche having a three-year repayment period and accruing interest at a real after-tax rate of 16% per annum;
· Subject to the provisions of the Loan Agreement, CoAL standing surety for Baobab's obligations to ensure repayment of the loan amount in instances in which Baobab defaults on such payments;
· CoAL issuing to IDC h warrants (in respect of CoAL shares) pursuant to each advance date as soon as the relevant shareholder approval for the issue has been received. More details regarding the warrants will be provided in due course;
· Baobab and CoAL providing the IDC with warranties, representations and undertakings which are customary in a loan funding agreement of this nature;
· IDC having the right to appoint one director to the Boabab board and to be a member of Makhado Project steering committee during the loan repayment period; and
· Upon each advance date, Baobab issuing new ordinary shares in Baobab to the IDC, equivalent to 5% of the entire issued share capital of Baobab at such time. CoAL's shareholding in Baobab will be diluted accordingly. Notwithstanding such dilution, CoAL will retain a majority shareholding in Baobab.
During the period under review, the Company concluded the previously announced sale of 100% of the issued share capital in Holfontein Investments (Pty) Ltd to Taung Gold and received the final settlement of R25 million post quarter-end. The Section 11 transfer of the mineral rights was granted by the DMR in late March 2017.
The Company also received confirmation that Fifth Season (Pty) Ltd is in the process of funding its full and final settlement of the outstanding balance to CoAL regarding the disposal of the previously announced Opgoedenhoop Mining Right. The Company remains confident that the outstanding balance will be received in due course. The capital balance outstanding is approximately R15million, including VAT, but excluding accrued interest.
CoAL has continued to restructure its balance sheet and ensure that it is well positioned to unlock shareholder value through its flagship Makhado Project. As part of this restructuring, the Company recognised that limited cash flow will be generated during the Makhado pre-production phase over the next three to four years. Therefore the Uitkomst acquisition represents a highly compelling and attractive value proposition that CoAL believes to be value accretive and which will provide cash flows to support CoAL as the Company continues to progress the Makhado Project. CoAL believes that Uitkomst will complement the Makhado Project and development project pipeline by:
· Creating a sustainable, multi-product mining group, with a skilled team and excellent resources adding to the development profile;
· Providing positive cash flows from Uitkomst;
· Enlarging CoAL's asset base, which provides a stronger proposition to access the necessary funding required to pursue the development of the enlarged group's growth opportunities; and,
· Positioning CoAL as a potential industry consolidator, with a management team capable of delivery
As part of the continued balance sheet restructuring, the Company has acquired additional funding from an anchor shareholder, M&G. An amount of US$2 million was invested during the period and will be used for working capital. The Company has also successfully converted the majority of the US$10 million loan to shareholder YBI to equity during the period under review. This conversion has a positive impact on the Company's balance sheet and eliminates a large potential future cash outflow. These two transaction resulted in the issue of an aggregate 289 050 199 shares at an issue price of US$0.04081 per share. The remainder of the YBI loan will be converted to equity following shareholder approval at the upcoming EGM,
At the end of March 2017, the Company had an outstanding balance owing to Rio Tinto of US$8.4 million, excluding interest. The Company had a cash balance of US5.1 million, excluding the Holfontein receipt of R25 million (US$1.9 million) as this was only received post quarter-end. The Company is in the process of concluding its first drawdown of the IDC loan funding which should yield approximately US9.2 million.
The hard coking price has once again rallied on the back of short term supply constraints owing to disruptions caused by weather and infrastructure problems. While we do not consider the current prices to be sustainable in the long term, the current price movement underpins the tightness of world supply and, as such, is positive for longer term pricing.
David Brown, CEO commented: "The last quarter has been filled with overdue good news for CoAL: the successful acquisition of the Uitkomst Colliery, securing the IDC funding; and the completion of the Holfontein Mining Right sale/transfer. The Company is making good progress toward re-entering the market as a coal producer, while focusing on the timeous funding and finalisation of the regulatory and surface right requirements for the Makhado Project".|
|It is, and has been a complete disaster tbh, boodge.
What is the investment incentive here?
Without that, there will not be buyers, and without buyers, the shareprice languishes.
I once had a lot of faith and respect for David Brown - but he has delivered nothing to advantage shareholders, other than he has staved off any worst case scenario.
ROI for any long term holders..... what a crock!|
|to be languishing at these levels with Uitkomst almost a certainty creates a huge amount of trepidation , are we going to have to realize Makhado before there is any upward movement of the share price , which conservatively looks like another 4 plus years . secondly is Keaton not being taken over by Wescoal for roughly the same amount with a much better ROI based on the mtpa being produced and financials ?|
|This is now a strong buy:The company should start to re-rate from an explorer to a producer. This should be done by the end of next month once the deal is complete. Following the incompletion of the Universal deal, the market might want to see completion before the share price reacts and in many ways this is understandable. However, in this case we now have the monies available for the purchase and not waiting for the Universal/Eskom deal to come to fruition.This is the first in a number of acquisitions, with another similar one expected in the next 6-12 months. The acquisition of Uitkomst is a positive first step. When this is coupled with the Makhado project and potential restart of Vele then it will represent a complete reinvention of the Company.The overturn of Makhado IWUL suspension and the completion of Vele licences are expected 'soon'. How soon is really out of our hands but the company are pushing hard now to get these done. Previously there was little incentive to get the IWUL overturned as there are on-going costs once this is done.|
|surely the Uitkomst acquisition and the IDC loan facility should be guiding the share price into the upward channel|
|Looking a lot better than it did.
Good to know the II who invested in this have averages of more than 3.5p|
|looking at their acquisition from PAF looks to be a good fit and buy BUT
and it looks like a big BUTT
16% finance charges along with all the fees should mean ordinary shareholders see jack of this deal
ready for the shorting list|
|Yes agree A2584728, but I don't think we will see a surge in the share price as mm's will hold this back being too many pi's will jump ship with a small profit as they have been waiting for so long. Anyone wanting to make bigger money then this might be a good time to add or buy in if not already on board.
Me, I have been here so long that another year or two might be worth the wait
Good Luck All who are going to risk the wait.|
|I think that 2017/18 could be transformational for this stock, I am currently out but recent research makes me think there is a potential huge upside?|
|how long are we going to go on without an appointment of a COO ( not that we need one though ) and all those market updates from the CEO will they ever materialize ?|
|this was no surprise to the board neither could the resignation have been , but their reaction i.e absolute awe and still in shock is not acceptable . a new COO should have been sourced (they've had enough time knowing full well what was going on ) and the position filled by now , so that they can get on with more pressing and company saving issues|
|At the moment I would say more like ....clueless....|
|Sub 3p once more.
Might as well put us out of our misery?|
|surely they should have the funding in order for the acquisition of the cga and with a rapidly dwindling cash balance that should be priority one|
|Cash coming in now.10m Yishun, 10m another inv, Mooiplaats soldPays off Rio etcGet Vele moving. And acquire CGAOptimistic|
|To do what?
They'll have around 17 million USD soon, if they are just going to sit on their hands like they have done last year that should be more than plenty.|
|Cash call coming|
|Universal Coal's NCC has honored its maiden delivery to Eskom ..........what is the missing piece here wrt CZA ?|
|con call and webcast for tomorrow , any wagers on some upside news|
|I would say that marble was still being fused as fine particles into rock, zeons behind.
The tortoise may win though.|
|its worldwide accepted that Rome was not built in a day and that is understandable , but at the rate this board progresses they would still be sourcing the marble for the construction of the Colosseum|
|any knowledge of any developments or progress on our plan of action|