TIDMCZA
RNS Number : 7375W
Coal of Africa Limited
29 April 2016
ANNOUNCEMENT 29 April 2016
REPORT FOR THE QUARTER ENDED 31 March 2016
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 March 2016. 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 Q2: nil).
-- The Company is currently engaged in the due diligence process
regarding the potential equity investment by Qingdao Hengshun
Zhongsheng Group Co Ltd ("Hengshun") in Baobab Mining and
Exploration (Pty) ("Baobab") a subsidiary of CoAL as announced on 1
December 2015. Baobab is the subsidiary of CoAL that owns the
Mining Right for the Makhado Project.
-- The Integrated Water Use Licence ("IWUL") for the Makhado
Project which was announced in January 2016 has been suspended
following an appeal to the Department of Water and Sanitation
("DWS") submitted by the Vhembe Mineral Resources Forum.
Corporate and Financial Features
-- The Company has made significant progress regarding the
recommended Offer for the entire issued and to be issued share
capital of Universal Coal Plc ("Universal");
o as at 22 April 2016 CoAL had received acceptances of the Offer
from Universal shareholders representing approximately 93.2% of the
total number of Universal shares in issue; and
o the closing date for the Offer is currently expected to be 20
May 2016.
-- Available cash at period end was US$27.1 million and restricted cash of US$1.02 million.
Commenting today, Mr David Brown, Chief Executive Officer said:
"The regulatory progress and project development achievements
during the last quarter have reinforced the Company's commitment to
the execution of its 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
coking coal project. Hengshun has commenced its due diligence on
Makhado and has also expressed its interest to acquire a stake in
the project and provide facilitated debt. Lastly, I'm pleased to
report that CoAL has now received 93.2% acceptances from its
shareholders for the potential acquisition of Universal Coal.
Importantly the acquisition will transform the CoAL into a cash
generative mid-tier South African coal producer."
QUARTERLY COMMENTARY
Makhado Coking Coal Project ("Makhado Project") - Soutpansberg
Coalfield (100% owned - 74% post BBBEE transaction)
The Makhado Project recorded no LTIs (FY2016 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 H1 CY2017),
with a further four month ramp-up phase resulting in the production
of 5.5 million tonnes per annum ("Mtpa") of saleable product. The
Optimisation Study and Front End Engineering and Design ("FEED")
for the Makhado Project colliery is currently being performed by
the International engineering and project delivery group DRA
Project South Africa ("DRA") with results expected by the end of
May 2016. 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, alongside
the integration of the work of a number of specialist
consultants.
During the previous quarter (FY2016 Q2) the Company announced
the granting of a 20 year IWUL for the Makhado Project. Subsequent
to the announcement, the IWUL for the Makhado Project has been
suspended following an appeal to the Department of Water and
Sanitation ("DWS") submitted by the Vhembe Mineral Resources Forum.
The appeal automatically suspends the IWUL in terms of Section 148
(2) (b) of the South African National Water Act No 36 of 1998. This
appeal had been anticipated, and CoAL is in the process of
preparing an urgent representation to the Minister of Water and
Sanitation to request that the IWUL remain in full force and effect
pending the final conclusion of the appeal by the Water
Tribunal.
CoAL remains committed to the sustainable development of the
Makhado Project, whilst 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.
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.
Mooiplaats Thermal Coal Colliery ("Mooiplaats Colliery") -
Ermelo Coalfield (74% owned)
The Mooiplaats Colliery was placed on care and maintenance
during the September 2013 quarter and recorded no LTIs during the
period (FY2016 Q2: nil).
During the quarter the Company continued discussions with
potential purchasers and is also assessing alternative options
regarding a transaction at the colliery.
Vele Coking and Thermal Coal Colliery ("Vele Colliery") -
Limpopo (Tuli) Coalfield (100% owned)
The Vele Colliery recorded no LTIs during the quarter (FY2016
Q2: nil).
The IWUL for the Vele Colliery has been renewed for a further 20
years, and has also amended in line with the requirements for the
Plant Modification Project ("PMP").
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 Vele Colliery has been received, the final
decision to proceed with the PMP will be placed before the board.
Such decision will include an assessment of forecast global coal
prices.
Greater Soutpansberg Project ("MbeuYashu Project") (74%
owned)
The MbeuYashu Project recorded no LTIs (FY2016 Q2: nil) during
the period.
No other significant matters to report.
Corporate
The Company is currently assisting Hengshun with its technical
and commercial due diligence with respect to a proposed equity
investment in Baobab. 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 is currently in process.
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 by CoAL for the entire issued and to be issued
share capital of Universal. On 1 February 2016 the Company
published the readmission document in connection with the Offer as
required by the AIM Rules and has subsequently extended the closing
date of the Offer to 20 May 2016. The current status of the
acquisition is as follows:
-- As at 22 April 2016 the Company had received acceptances of
the Offer from Universal shareholders representing approximately
93.2% of the total number of Universal shares in issue, thereby
satisfying the 50% minimum acceptance condition of the Offer. The
40% minimum loan note acceptance condition has also been
satisfied.
-- At the general meeting of CoAL shareholders held on 3 March
2016 the resolutions approving, among other things, the acquisition
of Universal resulting from the Offer and the issue of the
consideration shares to Universal shareholders and the subscription
shares to CoAL shareholders providing funding for the Offer were
all passed.
-- The Company has received the required Competition Commission
approval from the South African Competition Commission and the
necessary contractual consents from Investec Bank Limited and
Mountain Rush Trading 6 Proprietary Limited.
(MORE TO FOLLOW) Dow Jones Newswires
April 29, 2016 02:00 ET (06:00 GMT)
-- The Offer remains subject to certain conditions, including
the subscription agreements pursuant to which funding for the Offer
is being provided becoming unconditional, as set out in the Notice
of Variation of the Offer published by the Company on 22 April
2016.
CoAL has previously communicated its intention to acquire a cash
generating project to boost the Company's cash flow during the
construction of its Makhado Project. The Universal transaction has
been identified as a value enhancing investment which 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.
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
Company advisors:
Matthew Armitt/Ross Nominated Adviser Peel Hunt +44 20
Allister and Broker LLP 7418 8900
Jos Simson/Emily Financial PR +44 20
Fenton (United Kingdom) Tavistock 7920 3150
Charmane Russell/Olwen Financial PR Russell & +27 11
Auret (South Africa) Associates 880 3924
or
+27 82
372 5816
Investec Bank Limited is the nominated JSE Sponsor
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 Greater
Soutpansberg Project /MbeuYashu, including CoAL's Makhado Project
(coking and thermal coal).
This information is provided by RNS
The company news service from the London Stock Exchange
END
MSCLLFVRSRITFIR
(END) Dow Jones Newswires
April 29, 2016 02:00 ET (06:00 GMT)
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