CoAL winds up colliery acquisition for R275m

SHARES of Coal of Africa (CoAL), the Australian-based junior coal producer, dropped 8.33 percent to close at 44 cents a share on the JSE yesterday, following news that it had completed the R275 million acquisition of Uitkomst Colliery from Pan African Resources.

CoAL said that it would assume ownership, control and management of the KwaZuluNatal colliery from Friday.

“We look forward to incorporating the Uitkomst Colliery into CoAL, which we believe represents a transformative opportunity to provide cash flow to support CoAL as the company continues to progress its flagship Makhado project,” CoAL’s chief executive, David Brown, said.

Share issue

In a separate statement, Pan African Resources said yesterday that it would receive R125m in cash as part of the deal and R125m through the issue of more than 261 million new ordinary shares in CoAL on Friday.

It also said the balance of R25m was expected to be made through a deferred payment, with interest, any time before the second anniversary of the effective date.

“If the deferred consideration, and any interest accrued thereon, is not paid to Pan African by the second anniversary of the effective date, Pan African may elect to have the amount due to it settled through the issue of new CoAL ordinary shares at a price per share equal to the 30-day volume weighted average price of a CoAL ordinary share as traded on the exchange operated by the JSE prevailing on the last trading day immediately prior to the date that such election is made,” the company said.

CoAL has been a disappointment for investors on the JSE, with its share price losing 21 percent in the year to date.

Although CoAL has a pipeline of projects that will support it for many years, it has said it would be unable to generate revenues from its projects over the next two to three years.

The company said that it needed to acquire a cash-generating asset, particularly after its plan to acquire Universal Coal had fallen through last year.

CoAL said that the main reason its plans to acquire Universal had lapsed was the significant uncertainty over the cash-generating potential of Universal’s New Clydesdale Colliery. It was reported at the end of 2015 that between 30 percent and 40 percent of the value of Universal was contained in New Clydesdale, which is in Mpumalanga.

Eskom contract

CoAL said in its 2016 annual report that Clydesdale’s contract with Eskom was due to have been signed during 2015, with production expected by the first half of last year.

“Unfortunately, by the time we came to closing out the transaction, this Eskom matter had not been resolved. This would have impacted on our ability as an enlarged group to redeem the loan notes as and when they were due,” the annual report said.

CoAL which has a market cap of R1.15 billion, has been a disappointment for investors on the JSE, with its share price losing 21 percent in the year to date.