South Africa-focused coal-miner Coal of Africa Limited (CoAL) plans to raise £59.6-million to fund a proposed R650-million acquisition of NuCoal Mining, to accelerate capital expenditure (capex) at its Vele and Makhado projects, and to pursue other smaller acquisitions, it announced on Thursday.
The ASX-, Aim- and JSE-listed coal-miner would place up to 59.8-million new ordinary shares, representing about 14.52% of its existing issued ordinary shares, with institutional investors.
JP Morgan Cazenove would act as the global coordinator and sole book runner, while Evolution Securities would act as joint lead manager and Mirabaud Securities as colead manager for the placing.
The acquisition of NuCoal could add, in total, five existing and future mining operations to CoAL’s portfolio, while there was also potential to realise synergies through blending NuCoal product with product from CoAL’s Mooiplaats project, as well as through transporting NuCoal’s product by using CoAL’s rail and port capacity, the coal-miner highlighted.
NuCoal’s thermal coal assets were situated close to the Mooiplaats mine, with the NuCoal Woestalleen Colliery, which produced 2,5-million tons a year of saleable coal for the domestic and export markets, already having offtake contracts in place.
The thermal coal producer also had two beneficiation plants in South Africa, one that was fully operational and the other, which would start producing again by the fourth quarter of this year.
A further two plants were expected to start producing by next year and another one by 2013.
“The proposed placing and acquisition further underpin CoAL’s track record in building a high-quality midtier thermal and coking coal business. The company already benefits from a sizeable resource base, carefully considered logistics and a high-quality and supportive investor base including its proposed offtake partners,” CoAL MD Simon Farrell said in a statement.
If the acquisition is not successful, the coal-miner would use the proceeds to accelerate the expansion of logistics facilities at the Matola terminal and the Maputo port, for alternative acquisitions and for general working capital.
However, if successful, CoAL would use the remainder of the cash raised to increase its logistics capacity, including the first instalment of the capital required to acquire wagons from Transnet Freight Rail, as well as to accelerate capex at its coking coal projects, in Limpopo province.
The coal-miner announced earlier this week that it was likely to receive mining rights for the Vele coking-coal project, in which it owned an 80% stake, before the end of the year.
Production would start within four months of receiving the required legislative approval, with the first phase expected to deliver output of one-million tons a year. This would increase to five-million tons a year of coal in a second phase.
Meanwhile, CoAL also reported on Thursday that it would expand its Makhado coking-coal project area after having entered into an exchange of prospecting rights agreement with joint-venture (JV) companies held by Rio Tinto and the Kwezi Group.
The JV companies Chapudi Coal and Kwezi Mining & Exploration, would give CoAL ownership over certain prospecting rights and interests over certain farms contiguous to the Makhado project, in exchange for other prospecting rights and farms.
CoAL’s subsidiary, Regulus Investment, would pay Chapudi Coal a premium of R12.5-million as part of the farm-swap agreement.
“The rationalisation of Rio Tinto and CoAL’s prospecting rights in Limpopo removes a significant commercial hurdle to the establishment of the Makhado hard coking-coal project. The farm swap, when completed, would result in the creation of a substantial opencast hard coking-coal mining asset,” Farrell noted.
Following the start of production, the project would ramp up over a two-year period to produce five-million tons of saleable hard coking coal.
CoAL would submit an application for new-order mining rights for the project early in 2010.
CoAL further highlighted its intention to migrate from the Aim market of the LSE to the main market, which it hoped would be concluded by the first half of 2010.
“Recognising the growing size of the company and its mining assets, its predominantly London focused institutional investor base and share trading liquidity, a move to the main market of the LSE represents the logical next step in CoAL’s exciting development trajectory,” Farrell commented.
Source: Creamer's Mining Weekly
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