COAL inks $100m deal with Hong Kong firm
Share sale to spur growth
COAL of Africa Limited (CoAL) had entered into a strategic partnership with Hong Kong-based Haohua Energy Resource, the JSE-listed company announced yesterday.
The Chinese firm had offered to inject $100 million (R830m) through a subscription for CoAL shares in two tranches. The joint venture with Haohau follows a disappointing decision by Exxaro, which said it would not exercise its pre-emptive right to a 30 percent interest in the development of CoAL’s Makhado project in Limpopo.
“The news from Exxaro has not come as a surprise because it has a lot of hay on its fork, it is busy with other projects. It looks like the Chinese deal will provide the required funding for CoAL in due course,” Imara SP Reid analyst Stephen Meintjes said yesterday.
Haohau Energy Resource, a subsidiary of Haohua Energy International, would subscribe for $100m at 25p (R3.35) a share, a 64 percent premium to the closing price on Friday, CoAL said in a statement.
A first tranche of $20m, subject to approval by Australia’s Foreign Investment Review Board, would give Haohau a stake of about 5 percent. A second $80m tranche was subject to approval by shareholders and Chinese authorities.
CoAL stock closed 14.69 percent higher at R2.42 after earlier touching R2.51.
Exxaro, which signed a deal to enable CoAL to buy detailed exploration information previously acquired by Iscor in return for a 30 percent equity participation, said it had decided not to take up the Makhado project because it was focusing on projects elsewhere.
Exxaro chief executive Sipho Nkosi said: “We have had to consider the various alternative projects currently in our growth pipeline, and also the current negative sentiments regarding the global and local macro economic growth outlook. We will therefore need to focus on our top priorities.”
Last Wednesday, CoAL shares plunged 18 percent when it was reported that production ground to a halt at its Mooiplaats Colliery after mineworkers embarked on a protected strike demanding a 35 percent salary increase.
The company offered a 22 percent rise, similar to that offered by Lonmin where 34 protesting mineworkers were shot dead at its Marikana unit near Rustenburg by the police on August 16.
CoAL also said it was discussing the ongoing restructuring of its debt facility with Deutsche Bank, and it was in potential discussions with other financial institutions over debt facilities as well.
CoAL said it was extending the payment date for the purchase consideration of $13.6m due to its Rio Tinto mineral development in terms of the Chapudi acquisition in May to October 22, with a view to further discussions on the revised payment plan.
CoAL reported yesterday that it generated $243.8m in revenue in the year to June, down from $261.4m a year earlier, but revenue from coal sales rose 6 percent to $242.5m.
The headline loss a share narrowed marginally to $0.2265 from $0.2291.