Media coverage
10 January 2013
Chinese deal boosts CoAL growth plans
Source: www.bdlive.co.za
Author: Monde Maoto
COAL of Africa’s (CoAL’s) plans to develop metallurgical coal mines in Limpopo came closer to realisation on Wednesday after Chinese authorities granted regulatory approval for a $100m investment by Beijing Haohua Energy Resources.
The deal will see the Chinese company acquire 23.6% of CoAL for £0.25 a share. The announcement sent CoAL’s share price up as much as 10.7% to an intraday high of R3.10 on Wednesday. It closed 3.93% higher at R2.91.
Local steel producers ArcelorMittal and Evraz Highveld Steel and Vanadium have traditionally shipped the metallurgical coal they need from Australia because of a lack of rail infrastructure to the regions where the mineral could be mined domestically.
On Monday, CoAL announced that it has appointed Dutch commodities trader Vitol as the exclusive agent for most of its thermal and coking coal for the next eight years. As part of the agreement, the miner will now have access to the Terminal de Carvao da Matola in Maputo, Mozambique, without having to finance part of its construction.
CoAL plans to use the proceeds from Beijing Haohua’s investment to finance further developments at the Vele Colliery, its thermal and metallurgical coal mine close to the Mapungubwe World Heritage Site.
It aims to produce 7-million tons run-of-mine coal a year, of which 1-million tons is coking coal, after it completes the project’s first phase, which is under way.
In a notice issued to shareholders, the miner announced that in addition to developing Vele, it further intended to fund the capital requirements at its other operations.
CoAL CEO John Wallington said funding for the development of the Makhado coking coal project would be done separately from the Beijing Haohua deal. "We will still have to finalise the funding for Makhado once it is approved, and this capital could be raised through various means," Mr Wallington said.
The approval, received from the office of the Beijing Municipal Commission of Development and Reform, is valid for two years.
CoAL has already received $20m of the investment.
Shareholders will vote on January 25 for the conditional placement of shares for the remaining $80m as part of the second phase of the deal.
According to a company spokesman, the deal needs to obtain at least 50% approval of those present and voting at the extraordinary general meeting.
Last year was difficult for CoAL as lower export thermal coal prices and labour unrest prompted the miner to adopt cost-cutting measures at its Mooiplaats thermal coal operation. The mine is now under review.
Although a sale of the mine has not been ruled out, Mr Wallington said the process of evaluating the operations was still under way. The options being considered included the possibility of forming a partnership with its neighbouring operations.
Mr Wallington said that he expected another tough year for commodity prices.
"Although we were hoping for a correction, we envisage the coming six months to be difficult for commodity prices," he said.