Cape Town – Coal of Africa Limited (CoAL) [JSE:CZA] and its subsidiaries announced on Monday that it will sell all their shares in Mooiplaats thermal coal colliery to a consortium of investors.
In a notice to shareholders, CoAL said the company, along with subsidiary GVM Metals Administration and its black economic partner Ferret, will also dispose of their claims against Mooiplaats and Langcarel.
Mooiplaats is situated in the Ermelo coal fields in Mpumalanga, adjacent to the Camden Power Station.
The shares and claims will be sold to MCH – a consortium of investors – for a purchase price of R179.9m.
MHC consists of Don Turvey, former CEO of Continental Coal, young black professionals, future Mooiplaats employees, To The Point Growth Specialists and communities.
The Last Mile Fund, established by Patrice Motsepe’s Africa Rainbow Capital (ARC), former Harmony CEO Bernard Swanepoel, Sipho Nkosi, president of the Chamber of Mines, and Clinton Halsey from Extract Group, will finance the transaction.
“MCH’s structure is compliant with the proposed requirements of the currently suspended third version of the Mining charter, CoAL said.
The transaction is structured as follows:
- R15m will be paid to Ferret for their 26% interest in the Mooiplaats Colliery; and
- R52m to the CoAL Group for the balance of equity shareholding in Mooiplaats, and the claims against Mooiplaats and Langcarel.
- The balance - R112.9m - will be settled in ten equal quarterly instalments with the first payment anticipated to be due and payable on the last business day nine months after the closing date, which is 1 November 2017.
David Brown, CoAL CEO said the sale of the Mooiplaats Colliery is the final step in the company’s balance sheet restructuring strategy. “[This sets] the course for CoAL to become a self-sufficient mid-tier coal mining company.”
According to Brown, the sale of Mooiplaats will yield annual operational cost savings of approximately $1.4m and the proceeds of approximately R179.9m will be used to among other things provide funding for further development of the flagship Makhado Project or the potential acquisition of a cash generating asset.
“The sale also frees up valuable in-house human resources, facilitating additional focus on the Makhado Project in the Soutpansberg area in Limpopo, ensuring the asset can be brought to production optimally.”
Fin24 reported on Friday that CoAL decided to downscale its plan for Makhado from an initial size of the mine from 12.6 million tonnes per annum Run of Mine coal production to 4 million tonnes per annum.
In terms of the new project, called Makhado Lite, the mine's capital expenditure has now also dropped considerably, from $406m to between $75m and $85m. CoAL now anticipates that the Makhado Lite Project will be constructed in 12 months, as opposed to the original anticipated 26 months.
Brown said at the time that CoAL recognised the limited cash flow that would have been generated during Makhado's pre-production phase and as a result, the Board approved the Makhado Lite Project, ensuring similar returns to the original design with lower capital requirements and a shorter construction phase.
In May this year, CoAL received the green light to start its Makhado Project after Water and Sanitation Minister Nomvula Mokonyane lifted its suspended water use licence.
In April 2016, CoAL’s initial 20-year licence was suspended after the Vhembe Mineral Resources Forum, consisting of concerned citizens and residents of Limpopo province, launched an appeal to the Department of Water and Sanitation.
By noon on Monday CoAL's share price traded more than 4.35% higher at 48 cents.
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