TIDMCZA
RNS Number : 9204R
Coal of Africa Limited
14 March 2016
ANNOUNCEMENT 14 March 2016
RESULTS FOR THE 6 MONTHS ENDING DECEMBER 2015
Coal of Africa Limited ("CoAL" or the "Company") is pleased to
provide its Interim Financial Statements for the six month period
ending December 2015. The full report is available on the Company's
website: www.coalofafrica.com.
Highlights
-- No fatalities during the period under review
-- Universal CoAL transaction announced
-- Regulatory progress on both Vele Colliery and Makhado Project
-- Makhado Project funding process underway
Review of Operations
Vele Colliery - Limpopo (Tuli) Coalfield (100% owned)
The Vele coking and thermal coal colliery ("Vele Colliery")
recorded no LTIs during the period.
The original Vele Colliery Integrated Water Usage Licence
("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, a decision to proceed
or not with the PMP will be placed before the board, which will
include an assessment of forecast coal prices.
Makhado Coking Coal Project (74% owned)
As required under South African mining legislation, a minimum
26% black economic empowerment ("BEE") shareholding is required for
mining and exploration projects. CoAL had signed a Memorandum of
Agreement to enable a Broad Based Black Economic Empowerment
consortium comprising seven local communities to acquire a 20%
interest in the Makhado Project and during the period the Company
continued the process of identifying suitable BEE shareholders to
acquire a further 6% interest in the project. These transactions
have been formalised and will ensure that the Makhado Project has
the requisite ownership structure.
Subject to the funding being acquired and all regulatory issues
resolved, Makhado's 26-month construction activities are expected
to begin during late H2 CY2016, with a further four month ramp-up
phase resulting in forecast production of 5.5 million tonnes per
annum ("Mtpa") of saleable product. During Q2 FY2016 the
optimisation study and The Front-End Engineering Design ("FEED")
was awarded to the international engineering 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. This
FEED work is expected to be completed during May 2016.
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 Company's 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 at this time that the process will
affect Makhado's progress.
Greater Soutpansberg Project (MbeuYashu) (74% owned)
The MbeuYashu Project recorded no LTIs during the period.
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
potential purchasers and is assessing options regarding a
transaction at the colliery.
Corporate
Baobab Mining and Exploration (Proprietary) Limited
("Baobab")
During the period the Company entered into a non-binding
Memorandum of Understanding ("MOU") with Qingdao Hengshun
Zhongsheng Group Co Ltd ("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 $113.94 million which implies a Makhado
Project value of at least $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 $400
million, but will be confirmed by the completion of a FEED 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 of directors.
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.
Universal Coal Plc ("Universal")
In November 2015 the Company announced the terms of a
recommended offer to be made by CoAL for the acquisition of
Universal Coal Plc ("Universal"). The Company had 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.
Yishun Brightrise Investment PTE Limited ("Yishun")
In September 2015, Yishun subscribed for 183,231,261 shares in
Coal for GBP9,4($14.5 million). The Company and Yishun have also
entered into a Loan Agreement in terms of which Yishun has agreed
to lend the Company $10 million. The loan bears no interest and is
repayable in certain circumstances.
Financial review
The loss for the six months under review was $14.3 million, or
0.76 cents per share compared to a loss of $0.8 million, or 0.07
cents per share for the prior corresponding period.
The loss for the period under review of $14.3 million (H1 2014:
$0.8 million) includes:
-- net foreign exchange loss of $9.4 million (2014: profit of
$14.3 million) arising from the translation of inter-group loan
balances, borrowings and cash due to changes in the ZAR:USD and
AUD:USD exchange rates during the period;
-- employee benefit expense of $2.0 million (2014 expense: $2.5
million) due to the issue of share options
-- other expenses of $3.2 million (2014: $10.8 million) was
lower due to exceptional expenses incurred in the prior period for
the liquidation of EVOC and Greenstone which resulted in a $3.7
million write-off of loans due to CoAL and penalties incurred of
$0.6 million for the EnviCoal legal case;
-- depreciation of $0.2 million (2014: $0.3 million) and
amortisation of $0.4 million (2014: $0.5 million).
As at 31 December 2015, the Company had cash and cash
equivalents of $30.0 million compared to cash and cash equivalents
of $17.8 million at 30 June 2015.
Authorised and issued share capital
CoAL had 1,927,001,328 fully paid ordinary shares in issue as at
31 December 2015. The holders of ordinary shares are entitled to
one vote per share and are entitled to receive dividends when
declared.
Dividends
No dividends were declared or paid during the six months.
Highlights and events after the reporting period
Regulatory Progress
In January 2016, the IWUL for Vele Colliery in the Limpopo
Province was renewed for a further twenty years and the IWUL for
the Makhado Projected was granted for a period of 20 years.
Transaction Progress
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