[miningmx.com] — THE Chinese strategic investor in Coal of Africa
(CoAL), Beijing Haohua Energy Resource Group (BHE), will take a 24% stake in the
South African firm, assuming the parties win approval for the $80m balance of the
$100m proposed investment unveiled on October 1.
However, the investment by the Chinese is unlikely to stop there. That’s because the
development of CoAL’s company-making Makhado coking coal mine will require total
finance of up to $500m. Although CoAL FD Wayne Koonin says BHE will have access to
state-backed debt, further issues of equity will be required.
This raises the prospect that for whatever reason they don’t follow their rights,
shareholders may see themselves become minorities; they may even divest of CoAL,
making the equity placement this week the first step in the takeover of another South
African asset by a Chinese company.
Like it or not, Chinese capital is proving more resiliant than other sources of capital as
plainly evidenced by the takeovers of other juniors listed on the JSE such as Gold One
International and Wesizwe Platinum.
Koonin says shareholders will be provided the option of waiving the mandatory
takeover offers whenever they’re triggered on the respective bourses on which CoAL
is listed. Sydney recognises a 20% threshold as grounds for a possible mandatory
takeover. Koonin says in terms of the $100m placement, shareholders will be given
the option to waive the takeover; it’s a specific exemption that exists.
He also says that a strategic equity partner was always in the pipeline regardless of
whether Exxaro Resources, which had a 30% option over the proposed 2.5 million
tonnes/year Makhado coking coal project, exercised the option. “We have been talking
to a number of potential equity partners with a view to funding Makhado and the
larger Chapudi prospect. They offered the most [£0.25p/share],’ he said.
Analysts did question how much due diligence CoAL had put into BHE, a company not
widely known outside of the People’s Republic of China (PRC) where it has, until the
CoAL transaction, exclusively operated. Koonin says there’s comfort, however: “We
are pretty comfortable with what we saw. We would have liked to spend more time
with them first. But do we have enough comfort with our decision? Yes,’ he says.
Ever since the thermal coal price started contracting last year, CoAL has never had
the luxury of time. Quite frankly, it needed to act quickly to fund its survival. Major
corporate events roll up quickly at CoAL; very quickly. John Wallington, CEO of CoAL,
confirmed that he was told of Exxaro Resources’s decision not to invest in Makhado at
18:00 on Friday evening, a little while following Exxaro’s Board meeting. The Chinese
investment was announced two days later.
