CoAL converts $10m loan into equity
Solvency ratio strengthens
COAL of Africa Limited (CoAL) shares jumped nearly 10 percent on Friday after the junior miner said said it would convert a US$10 million (R130.14m) loan from Singapore-based Yishun Brightrise Investment (YBI) into equity in a move to strengthen its solvency ratio.
The shares opened at 52 cents on the JSE to close 9.62 percent higher at 57c as CoAL said that the non-interest bearing loan would be converted at US$0.04081 (53c) per share.
It said more than 245 million shares would be issued, giving YBI a 19.28 percent interest in its company.
CoAL assets include the Vele colliery in Limpopo and the Tshipise Energy Gas Exploration project, coal bed-methane project, also in Limpopo. In September 2015 YBI loaned the money to CoAL. “During May 2016 (CoAL) and YBI amended the terms of the loan to specify the conditions that would trigger the repayment of the loan. The long stop date for the conditions was agreed as of December 31, 2016, and if none of these trigger events occurred prior to the long stop date then the loan would become convertible to equity.
“None of the trigger events have been effected and the company will now convert the loan to equity at the agreed price of US$0.04081 per share,” said CoAL.
The company said the conversion of the loan to equity held great value for its prospects as it removed a large potential cash outflow from its cash flow projections.
It said the conversion also strengthened the solvency ratio as it allowed for the focus of its expenditure on the development of its assets instead of repaying debt.
“This leaves the company with only one outstanding settlement to Rio Tinto by June 2017,” CoAL chief executive David Brown said on Friday.
“The outstanding balance to Rio Tinto relates to the acquisition of the Greater Soutpansberg Assets in the Limpopo province and forms part of the company’s long-term development strategy. The conversion of the loan once again shows the strong support of CoAL’s shareholders to the long-term value of its assets and its commitment to their development.”
CoAL has been on the lookout for a cash generative asset in order to augment its existing operations and projects. Its pursuit of fellow South Africa-focused miner Universal Coal fell through last year.
The Universal transaction fitted CoAL ambition to have a cash generating assert in its fold, Brown said in the company’s 2016 annual report. “We continue, however, to look at a number of acquisition opportunities which could include Universal,” he said.
The deal fell through because of uncertainty over the cash generating potential of Universal’s New Clydesdale Colliery assets in Mpumalanga.