Media coverage
1 OCTOBER 2012
CoAL enters $100m placement deal with Beijing group
Source: www.miningweekly.com
Author: Idéle Esterhuizen
JOHANNESBURG (miningweekly.com) – JSE–, ASX– and Aim–listed Coal of Africa Limited (CoAL) said on Monday it had agreed a $100–million placement deal with a Chinese group, bringing in Beijing Haohua Energy Resources as a strategic partner.
CoAL entered a binding offer letter with a subsidiary of the Shanghai–listed coal producer, Haohua Energy International (HEI), to subscribe for $100–million of its shares at £0.25 apiece.
The placement would be HEI’s first investment outside China and served to facilitate the formation of a long–term strategic partnership between the South Africa–focused coal miner and HEI.
“The placement would expedite the development of CoAL’s projects, lead to the formation of a strategic partnership and provide direct exposure to the world’s largest coking coal market. The exchange of financial, technical and operational expertise will facilitate the growth and development of CoAL and the coking coal industry in South Africa,” CoAL CEO John Wallington said.
The news of the $100–million injection comes as South African diversified miner Exxaro opted out of the Makhado coking coal project, which is CoAL’s most advanced exploration–stage development project.
Exxaro said it would rather focus on its other “top priorities” than exercise its option over 30% of Makhado.
The HEI placement has been structured in two tranches, including an initial placement of $20–million at a price of £0.25 per CoAL share that is conditional upon HEI receiving approval from the Australian Foreign Investment Review Board (FIRB).
Should HEI obtain FIRB approval, it would subscribe for the initial placement before the end of January, which would afford it a stake of between 4.8% to 5.2% in CoAL.
In addition to the initial placement, HEI has agreed to subscribe for an additional $80–million worth of shares at £0.25 apiece. This was conditional upon receiving the requisite approvals, including those required from the relevant authorities in the People’s Republic of China.
CoAL surged 30% in Sydney, 18% in London and 16% in Johannesburg on the news. On the JSE, the company’s stock fetched R2.45 a share.
FINANCIAL, OPERATIONAL PERFORMANCE
Meanwhile, CoAL reported a 6% increase in its revenue for the year ended June 30 to $243.8–million, from $261.4–million in the previous financial year and reported a net loss of $139.9–million, compared with $219–million in 2011.
Sales of thermal coal decreased by 2% from 3.45–million tons in the 2011 financial year to 3.37–million, owing primarily to the reduction of third–party run of mine (RoM) and saleable coal available for purchase in the second half of the financial year.
CoAL stated that the change in the sales mix was offset by a 27% decline in export coal spot prices from about $119/t in June 2011, to about $87/t in June.
Total gross profit for the year fell to $33.4–million from 2011’s $37.9–million, while the gross margin percentage of 14% was 1% lower year–on–year. This was as a result of the gross margin from coal sales increasing by 4% to $33.6–million brought on by the change in sales prices and mix, offset by higher logistics costs.
During the reporting period, CoAL produced 4.93–million RoM tons of coal from the Vuna, Mooiplaats and Vele collieries, up from 4.41–million RoM tons of coal the previous year, marking a 12% year–on–year increase.
Wallington said the company accomplished significant milestones during the 2012 financial year, notwithstanding the turbulent economic, market and labour conditions.
Market conditions for export–quality thermal coal deteriorated significantly during the reporting period, with spot prices falling by about 27% year–on–year and the decline particularly evident during the last quarter when coal prices fell by about 10% to the $85/t level.
Coking coal prices fell from $310/t in June 2011 to about $220/t at the end of June this year, falling below $150/t by September.