TIDMCZA
RNS Number : 8416W
Coal of Africa Limited
06 February 2012
ANNOUNCEMENT 6 FEBRUARY 2012
COAL OF AFRICA ANNOUNCES BEE OWNERSHIP STRUCTURE FOR CHAPUDI
PROJECT
Broad-based transaction includes local communities
Coal of Africa Limited ("CoAL" or "the Company") is pleased to
advise that it has entered into definitive agreements with Rothe
Investment Proprietary Limited ("Rothe"), a newly established
company owned by Terracotta Processing (Pty) Ltd (reg. no.
2009/016422/07) ("Terracotta") and Vibrant Veterans Minerals
Resources (Pty) Ltd (Reg. no. 2007/013039/07) ("Vibrant Veterans"),
both Black Economic Empowerment ("BEE") companies, and King Makhado
Holdings (Pty) Limited, (reg. No. 2009/016422/07) ("King Makhado")
a company representing all the local communities in close proximity
to the project, ("the Communities"), to acquire a 26% shareholding
in the wholly-owned CoAL subsidiary, Keynote Trading &
Investment 108 Proprietary Limited ("Keynote"). Keynote is expected
to hold the Chapudi Coal Project and related exploration properties
(collectively, the "Chapudi Coal Project") upon completion of its
acquisition from Rio Tinto Minerals Development Limited and Kwezi
Mining Proprietary Limited (the "Vendors").
Terracotta and Vibrant Veterans each own 30% of the entire
issued share capital of Rothe with the remaining 40% being held by
King Makhado. The directors of Rothe are Tirhan Joseph Mathebula,
Vhutshilo Theopilos Muthurana and Mashudu Ramano.
In line with CoAL's strategy, the transaction with Rothe is
aligned with the requirements of the Mining Charter and the
Minerals Resource and Petroleum Development Act ("MPRDA"), to
ensure that participation through a wider grouping of stakeholders
in terms of the principles of Broad-Based Black Economic
Empowerment is achieved and that historically disadvantaged South
Africans hold 26% of the issued shares in Keynote, which is a
legislated requirement for 2014. The conclusion of this transaction
at an operational level ensures closer alignment with important
stakeholders, including the communities that live in the immediate
proximity of the project area, and avoids any dilution typical of a
BEE shareholding held at the parent company level.
The Company's Chief Executive Officer, Mr John Wallington,
commented: "We are very pleased to have made further progress
towards the development of our asset portfolio in the Limpopo
region. We recognise that the development of our projects needs to
generate real and meaningful benefits for the local communities,
the local economy and socio-economic transformation in general. We
welcome our new partners in the transaction and look forward to
working with them and the communities in the development of the
various projects in the years to come."
Speaking on behalf of Rothe, Mr Mashudu Ramano, said: "We are
delighted to be working with Coal of Africa in the Limpopo Province
and look forward to developing our project whilst being mindful of
our commitment to environmental and resource stewardship, economic
and social responsibilities and, more importantly, that we mine
with the consent of the public and the communities in which we will
be operating."
Background
On 26 November 2010, CoAL confirmed the conclusion of a Sale and
Purchase Agreement for the acquisition of the Chapudi Coal Project
from joint venture companies held by the Vendors for US$75
million.
At the time of entering into the Sale and Purchase Agreement,
CoAL confirmed that it intended to use the acquisition to continue
and further build upon its broad based BEE partnerships at the
operational level. Specifically, CoAL noted that it planned to
develop the Chapudi Coal Project and potential independent power
producer arrangements in collaboration with its proposed BEE
partners, the local constituents of the Communities, together with
Terracotta and Vibrant Veterans.
Completion of the Chapudi Coal Project acquisition remains
subject to the fulfillment of the conditions precedent by 30 April
2012, including section 11 approval of the transfer in terms of the
MPRDA and South African Reserve Bank exchange control approval for,
inter alia, payment of the purchase price. The application for the
section 11 approval is required to be supplemented by Keynote's BEE
credentials which can now occur following the signature of the
agreements with Rothe. CoAL is required to arrange for the Vendors
to be released from their guarantees in relation to existing
rehabilitation guarantees posted as part of the original
prospecting rights and related exploration program. The replacement
guarantees, to be established on an insurance guarantee basis, are
in the process of being finalised and will only be implemented when
the section 11 approval is granted.
Chapudi comprises both thermal and coking coal development
projects and the acquisition of the Chapudi Coal Project provides
CoAL with an additional estimated 1,040Mt JORC resource (of which
90Mt is Measured, 220Mt Indicated and 730Mt Inferred, as defined in
the 2004 Edition of the 'Australasian Code for Reporting of
Exploration Results, Minerals Resources and Ore Reserves' ("JORC
Code")), which is contiguous with its Makhado Coking Coal Project
("Makhado Project").
Transaction Structures
The Company has entered into a Subscription Agreement with Rothe
and Keynote pursuant to which Rothe and the Company will subscribe
for shares in Keynote such that following implementation thereof,
Rothe will hold 26% of the ordinary shares in Keynote. The
subscription is at par value as Keynote does not currently hold the
Chapudi Coal Project.
The Company, Keynote and Rothe have also entered into a
Shareholders Agreement to regulate their relationship. The material
terms of the Shareholders Agreement are set out in Annexure A.
CoAL bears the funding risk for the acquisition of the Chapudi
Coal Project from the Vendors for US$75 million and the initial
costs up to bankable feasibility study on the Chapudi Coal Project.
Such funding will be advanced by CoAL on an interest free basis for
an initial three year period. Thereafter, this amount bears
interest at the publicly quoted prime rate of interest levied by
The Standard Bank of South Africa Limited from time to time. Any
other amounts loaned to Keynote by the Company for other projects
undertaken by Keynote, shall be interest bearing.
Upon successful completion of the bankable feasibility study,
Rothe will undertake to fund its pro rata portion of the funding
costs and acquisition cost of US$75 million (such portion being
twenty six percent thereof) at its face value from CoAL and will be
required to arrange financing for its pro-rata portion of the
Chapudi Coal Project, post bankable feasibility, either through
equity or debt (which would be on a project basis with CoAL). The
loans will be repaid as and when Keynote has available funds and
shall rank behind funding from external third parties and post
bankable feasibility loans. Should Rothe be unable to raise the
necessary financing, the Shareholders Agreement will facilitate the
introduction of a new BEE shareholder/s in Keynote.
Authorised by
SHANNON COATES
Company Secretary
For more information contact
John Wallington Chief Executive Officer Coal of Africa +27 11
575 4363
Wayne Koonin Financial Director Coal of Africa +27 11 575
4363
Shannon Coates Company Secretary Coal of Africa +61 893 226
776
Chris Sim/ Jeremy Ellis/Neil Elliot Nominated Adviser Evolution
Securities +44 20 7071 4300
Jos Simson/Emily Fenton Financial PR (United Kingdom) Tavistock
+44 207 920 3150
Reuben Govender JSE Sponsor J.P. Morgan Equities Limited +27 11
507 0430
Charmane Russell/James Duncan Financial PR (South Africa)
Russell &
Associates +27 11 880 3924
+27 82 372 5816
www.coalofafrica.com
About CoAL:
CoAL is an AIM/ASX/JSE listed coal exploration, development and
mining company operating in South Africa. CoAL's key projects
include the Vele Colliery (coking and thermal coal), the Makhado
Project (coking coal) and the Mooiplaats and Woestalleen Collieries
(both thermal coal).
The Mooiplaats Colliery commenced production in 2008 and is
currently ramping up to produce 2 Mtpa. The Woestalleen Colliery,
acquired through the acquisition of NuCoal Mining (Pty) Limited in
January 2010, currently processes approximately 2.5Mtpa of saleable
coal for domestic and export markets. The Woestalleen Complex also
incorporates three beneficiation plants with a total processing
capacity of 350,000 run of mine feed tonnes per month.
CoAL's Vele Colliery is expected to start production in Q1 2012.
During the initial phase, the operation is targeting 2.7 Mtpa ROM
production to produce 1.0Mtpa of saleable coking coal. The Makhado
Project, CoAL's flagship project in the Soutpansberg coalfield, is
well into the feasibility stage, with a Definitive Feasibility
Study nearing completion. An application for a New Order Mining
Right for the Makhado Project was submitted in January 2011.
In November 2010, CoAL agreed to acquire the Chapudi coal
project and several other coal exploration properties in the
Soutpansberg coal basin in South Africa from the previous owners,
including Rio Tinto. Upon completion, the acquisition of these
projects will significantly extend the scale and scope of certain
of CoAL's existing projects in the region and will more than double
the resource of the existing Makhado Project.
ANNEXURE A
Material terms of Shareholders Agreement
Condition precedent: The provisions of the Shareholders
Agreement are subject to the simultaneous execution of the
Subscription Agreement.
Appointment of Directors: CoAL has the right to appoint a
director for each 15% of the issued share capital held by it and
Rothe has the right to appoint 3 directors for every 26% of the
issued share capital held by it, or 1 director for every completed
7 percent if its holding falls below 26% provided that Keynote is
not in breach of the Empowerment Criteria.
BEE status: Rothe is to retain its BEE status for so long as
Empowerment Criteria are applied by the DMR and in the event of a
default CoAL can call on Rothe's share at fair market value as
agreed or as determined by an independent expert on the basis as
set out in the Shareholders Agreement.
Chairman: The first chairman will be appointed for a period of
one year and thereafter there will be an annual rotation.
Financing:
CoAL undertakes to finance the Chapudi Acquisition costs of
US$75 million and the pre-feasibility cost which shall be credited
as a loan account from CoAL to Keynote ("the Initial Costs"). The
loan portion which relates to the Chapudi Project only shall not
attract interest for the first 3 year period (being the time period
that it is estimated may be required to get to bankable
feasibility).
On bankable feasibility, CoAL shall dispose of 26% of the
Initial Costs to Rothe at its face value. Rothe will then have a
claim against Keynote for 26% of the Initial Costs ("the Rothe
claim") and a corresponding obligation to CoAL for the acquisition
of the claim. CoAL's loan account vis-a-vis Keynote will be for 76%
of the Initial Costs ("the Coal claim"). The Rothe claim, the CoAL
claim and CoAL's claim against Rothe for the acquisition of its
portion of the Initial Costs, will all be interest bearing. Rothe
is obliged to settle CoAL when Keynote settles it.
After bankable feasibility, Keynote will endeavour to find third
party funding. If funding cannot be raised, externally, the
shareholders are required to fund pro rata to their
shareholding.
The shareholder loans are repaid after all third party funding
has been repaid and after the post bankable feasibility loans have
been repaid.
Dividend Policy: the Shareholders Agreement provides that
dividends are only payable once the loans to Shareholders have been
repaid in full and having regard to the Company's cash
requirements. The policy shall be agreed unanimously by CoAL and
Rothe. In the event that agreement cannot be reached, the Auditors
shall determine same acting as an expert.
The Shareholders Agreement contains other provisions common for
these types of agreements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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