[miningmx.com] – CONTINENTAL Coal provided shareholders with a glimmer of hope saying it had made progress on discussions with bondholders regarding the recapitalisation of the company.
The Australian-listed firm, which was due to debut on the Johannesburg Stock Exchange in November, said last week that it would seek a voluntary suspension of its shares while it attempted to hammer out new terms for $15m in convertible bonds which mature between November and February.
In an update to the discussions, in which it said it would continue with the suspension of its share, the company said that it was “optimistic” about a positive outcome.
“The company has made progress in its discussions with holders of convertible notes,
other creditors, royalty holders and various investor groups in relation to a comprehensive recapitalisation of the company and remains optimistic about reaching an agreement between all parties that will allow the company to continue trading as a going concern,” it said.
It acknowledged the “… continued understanding” of its creditors and financiers and said that it would provide a stakeholder update on January 20. It added, however, that failure to recapitalise the company would result in it going into administration.
The disappointing coal market over the last 18 months has pressured Continental Coal, but its cash-flow problems have been compounded by the slow ramp-up of its newly commissioned Penumbra mine in the Mpumalanga province.
The company raised $25m in debt from Absa Capital to build the mine, but it said today that difficulties securing continuous miners at the operation had led to lower-than-expected production. It warned of stress on its working capital requirements.
“Whilst production will be augmented by the implementation of an additional conventional drill and blast production section, the ramp-up of production from this is expected to take several months placing additional pressure on the company’s working capital requirement,” said Don Turvey, CEO of Continental Coal, last week.
The troubles at Continental Coal are a disappointment for JSE-listed Village Main Reef which has a 19.9% stake in the company.
In addition to the convertible notes, and loan to Absa Capital, Continental Coal had deferred revenue owing to trading partner, EDF which it said would be paid in installments from July this year. Total company borrowings were at $82m at the company’s year end on June 30.
