TIDMCZA
RNS Number : 2039N
Coal of Africa Limited
28 January 2016
ANNOUNCEMENT 28 January 2016
REPORT FOR THE QUARTER ENDED 31 December 2015
Progress on Regulatory Licenses and the acquisition of Universal
Coal
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 December 2015. 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 (FY2016 Q1: nil).
-- The Integrated Water Use Licence ("IWUL") for its Vele
Colliery in the Limpopo Province has been renewed for a further
twenty years.
-- IWUL for its Makhado Project has been granted by the
Department of Water and Sanitation ("DWS") for a period of 20
years.
-- The South African Minister of the Department of Environmental
Affairs ("DEA"), has dismissed the Appeal against the Environmental
Authorisation ("EA") Amendment for the Vele Colliery in the Limpopo
Province.
-- The Company awarded the Optimisation Study and Front End
Engineering and Design ("FEED") package for Makhado Colliery to DRA
Project South Africa ("DRA").
-- The Company signed a non-binding Memorandum of Understanding
("MOU") with Qingdao Hengshun Zhongsheng Group Co Ltd ("Hengshun")
with respect to a proposed equity investment in Baobab Mining and
Exploration (Pty) ("Baobab") a subsidiary of CoAL. Baobab is the
subsidiary of CoAL that owns the Mining right for the Makhado
Project.
Corporate and Financial Features
-- The Company agreed the terms of a recommended Offer to be
made by CoAL for the entire issued and to be issued share capital
of Universal Coal Plc ("Universal").
-- Available cash at period end was US$31.1million and restricted cash of $1.018 million.
Commenting today, Mr David Brown, Chief Executive Officer said:
"The regulatory progress and project development achievements
during the last quarter have reiterated the Company's commitment to
the execution of its short and medium term strategy. The MOU with
Hengshun is an important milestone in the identification of a
strategic investor for the development of the Company's flagship
Makhado Project. Hengshun has commenced due diligence on the
Makhado Project and has expressed its interest to acquire an
interest in the project and provide facilitated debt. In addition
the potential acquisition of Universal will transform the Company
into a mid-tier producer"
QUARTERLY COMMENTARY
Makhado Coking Coal Project - Soutpansberg Coalfield (100% owned
- 74% post BBBEE transaction)
The Makhado Project recorded no LTIs (FY2016 Q1: nil) during the
quarter.
Makhado's 26-month construction phase is expected to begin
during H2 CY2016, with a further four month ramp-up phase resulting
in the production of 5.5 million tonnes per annum ("Mtpa") of
saleable product. During the quarter the Optimisation study and
FEED was awarded to the International engineer and project delivery
group DRA. The study follows on the original works performed by DRA
during the Definitive Feasibility Study completed in 2013 and
includes the infrastructure components of the project, and also the
integration of the work of a number of specialist consultants.
The Company has officially been granted an IWUL for a period of
20 years concluding all regulatory approvals for the Makhado
Project. The award of the IWUL for Makhado further signifies
government's commitment to the flagship project, and its potential
to foster socio economic transformation.
An interim court interdict seeking to halt any mining or
construction activity was issued against the Makhado Project during
Q2 FY2014. The matter was heard in the North Gauteng High Court on
3 December 2015 with judgement handed down on Tuesday 8 December
2015 on two matters. The first relates to the condition to compel
CoAL to conduct a Strategic Regional Impact Assessment and secondly
a review of the Environmental Authorisation. The condition
compelling CoAL to conduct a Strategic Regional Impact Assessment
has been set aside. The interim interdict against the Environmental
Authorisation remains in place pending the review of the
authorisation.
CoAL does not anticipate that the process will affect Makhado's
construction timetable.
Mooiplaats Colliery - Ermelo Coalfield (74% owned)
The Mooiplaats thermal coal colliery was placed on care and
maintenance during the September 2013 quarter and recorded no LTIs
during the period (FY2016 Q1: nil).
During the quarter the Company continued discussions with other
potential purchasers and is assessing options regarding a
transaction at the colliery.
Vele Colliery - Limpopo (Tuli) Coalfield (100% owned)
The Vele coking and thermal coal colliery ("Vele Colliery")
recorded no LTIs during the quarter (FY2016 Q1: nil).
The original Vele Colliery IWUL, valid until March 2016, has
been renewed for a further 20 years, and also amended in line with
the requirements for the Plant Modification Project (PMP) at the
Colliery.
During H2 2015, the Company commenced a process to obtain
approval relating to a non-perennial stream diversion. This
decision is anticipated in H2 2016. Once this regulatory approval
in respect of the Colliery has been received, the final decision to
proceed with the PMP will be placed before the board, which will
include an assessment of forecast global coal prices.
Greater Soutpansberg Project (MbeuYashu) (74% owned)
The MbeuYashu Project recorded no LTIs (FY2016 Q1: nil) during
the period.
No other significant matters to report.
Corporate
During the quarter the Company entered into a MOU with Hengshun
with respect to a proposed equity investment in Baobab a subsidiary
of CoAL. Baobab is the legal owner of the mining right for the
Makhado Project. Hengshun is an industrial conglomerate
incorporated in Qingdao, Shandong Province, China and listed on the
Shenzen Stock Exchange.
The current MOU includes the following commercial
considerations:
1) Hengshun proposes to acquire up to 34% of Baobab at a
mutually agreed consideration. The preliminary terms of negotiation
between both parties are based on an indicative cash acquisition
price of approximately US$113.94 million which implies a Makhado
Project value of at least US$335 million. The final transaction
valuation would be subject to both parties' negotiation, a
valuation report issued by an internationally reputable accounting
firm and the conclusion of a formal subscription and sale agreement
between both parties.
2) The proposed equity investment is subject to an Engineering,
Procurement and Construction contract ("EPC") being awarded to
Hengshun. The value of the EPC contract is approximately US$400
million, but will be confirmed by the completion of a Front End
Engineering and Design which will be completed in H1 CY 2016.
3) The equity investment is subject to a formal due diligence
process as well as approval of the transaction from both the CoAL
and Hengshun boards respectively.
4) The 34% equity investment will entitle Hengshun to nominate a
to be agreed number of directors to the board of Baobab, but the
effective management of Baobab and operatorship of the Makhado
project will remain the responsibility of CoAL.
5) A debt package may also be provided by Hengshun on commercial arm's length terms.
6) Hengshun has the right to match any alternative proposals for
the provision of the mining contract.
7) The MOU is a non-binding document which is also subject to
CoAL shareholder and any other necessary regulatory approvals.
In November 2015 the Company announced the terms of a
recommended Offer to be made by CoAL for the acquisition of
Universal Coal. The Company has previously communicated its
intention to acquire a cash generating project to boost the Company
cash flow during the construction of the Makhado Project. The
Universal transaction has been identified as a value enhancing
investment and will provide the enlarged group with immediate coal
production and cash flow as well as a diversified portfolio of
production, development and exploration projects with expected
synergies to the existing CoAL business. Successful completion of
the Offer will create a balanced and focused South African coal
miner.
CoAL has received signed statements of intent to accept the
Offer from Universal Shareholders (including the Independent
Universal Directors) in respect of 202 768 708 Universal Shares,
representing 40.1 per cent. Of Universal's total issued share
capital, including Coal Development Holdings B.V., Universal's
second largest shareholder with an interest of approximately 28.4%
of Universal's total issued share capital. Each of these
Universal Shareholders has also stated their intention to elect
for the Loan Note Alternative in respect of their entire holding of
Universal Shares. The Company has agreed that it requires a minimum
of 50.1% acceptance of the offer in order for the acquisition to be
committed.
Authorised by
David Brown
Chief Executive Officer
For more information contact:
Chief Executive +27 10 003
David Brown Officer Coal of Africa 8000
Chief Financial +27 10 003
De Wet Schutte Officer Coal of Africa 8000
+27 10 003
Celeste Riekert Investor Relations Coal of Africa 8000
Endeavour Corporate +61 08 9316
Tony Bevan Company Secretary Services 9100
(MORE TO FOLLOW) Dow Jones Newswires
January 28, 2016 02:00 ET (07:00 GMT)
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