Waterberg Coal takes turn for the worse as bank recalls R400m loan

THE FORTUNES of coal mining hopeful, The Waterberg Coal Company, have taken a turn for the worse after Standard Bank recalled a R400 million loan along with interest, the company announced yesterday.

Waterberg Coal, which was supposed to start supplying Eskom with 10 million tons of coal this year, has postponed the breaking of ground to the third quarter of next year and is pinning its hopes for survival on securing about $200m (R2.5 bil- lion) to pay off the bank and retain enough for the developmental funding of its mining projects.

The Australian Stock Exchange and JSE-listed company yesterday announced a halt on trading on its portfolio starting yesterday and ending tomorrow or when a relevant announcement regarding the group’s financing update is released to the market.

Waterberg Coal subsidiary Firestone Energy said it had received advice from its parent company and financier, and was also halting trade in its shares.

The Standard Bank loan was granted in March last year and had been postponed at least twice by mutual consent of the parties before the bank put its foot down.

But Waterberg Coal chief executive Stephen Miller, speaking from Australia, said the company was at an advanced stage of negotiations and had reached an agreement in principle with an international mining and engineering, procurement and construction contractor to contribute funding for the group’s working capital requirements.

He said through this agreement, Waterberg Coal would be able to secure funding to pay off the Standard Bank loan and finance the development of the mine up to the production stage in 2016.

He said the Eskom coal supply agreement had not been concluded, but the company was confident it would soon be a done deal.

“That is a matter of form and substance,” he said, adding that a development initiative always needed to raise money up to the stage when production started.

Waterberg Coal has had a shaky time, being cash strapped as far back as 2013 with predictions that it would declare bankruptcy in 2014.

Miller said at the time, in the financial report for the halfyear to December 2013, that if it did not raise money soon “there is significant uncertainty whether the group will continue as a going concern”.

Asked yesterday if the company was in trouble, Miller conceded that it was going through a tough time.

The Australia-based operation was due to break ground this year and had been billed as the next second-biggest coal producer on the continent with 4 billion tons of coal on just two of its 10 farms.

In 2013, its shares hit a healthy A$0.26 (R2.47) when news came out of a 30-year “memorandum of understanding” to provide Eskom with 10 million tons of coal a year from 2015, rising to 17 million tons.

Waterberg Coal, whose chairman is former ANC treasurer Mathews Phosa, had spent much of the past years in corporate brawls. One of these was the hostile takeover of Firestone Energy that saw both companies gagged by the Australian takeovers panel.

Locally, there was an issue with black economic empowerment partners Sekoko Resources and their partners Uzalo Holdings.

Waterberg Coal’s share price was not traded on the JSE yesterday as the company’s shares were suspended.