[miningmx.com] – COAL of Africa (CoAL), the embattled coal exploration and production company, continued its efforts to shore up its balance sheet issuing $44.8m in shares, and said it had revamped its board announcing the appointment of former Impala Platinum (Implats) CEO, David Brown, as its chairperson.
Brown, who has wasted no time accepting a new challenge in a mining industry he recently described as tiring, said all options were on the table in moving CoAL beyond its current position as a struggling junior mining company. Brown announced his resignation from Implats in January and left the company end-June.
“Our key focus will be to re-establish shareholder value and, to facilitate this, all strategic options will be assessed,’ Brown said. “The company is at the critical stage of moving beyond being a junior miner,’ he said.
Brown’s appointment is part of a clean sweep of the broom at CoAL, in consultation with shareholders, in which long-standing chairperson, Richard Linnell, who served on CoAL’s board since 2001, is to leave. Simon Farrell, once CEO of CoAL, and other non-executive directors, Steve Bywater and Mikki Xayiya, also left the board with immediate effect.
Former Anglo American executive, Bernard Pryor, has been appointed a non-executive director of CoAL.
It is unclear whether CoAL’s existing executive management motivated and pushed for board changes, or whether the alterations to key executives was at the bequest of shareholders. Regardless, the changes serve notice that CoAL intends reversing its perilous share price decline in which CoAL’s value has fallen 60% since March. Shares in CoAl increased 3.56% on the JSE and traded last at R3.45/share.
In terms of CoAL’s latest efforts to finance its pipeline of coking coal projects, located in the Soutpansberg coalfields of the Limpopo province, the company is to issue about 17% of its share capital, equal to some 115.5 million shares. CoAL said the issue price was at a 1.96% discount to its “middle market’ price of 25.5 pence on the UK’s Alternative Investment Market (AIM).
CoAL said in June quarter results last week that it needed a further $15.7m to bridge a funding shortfall partly owing to coal price weakness. CoAL received $87/t for coal in the quarter against prices of $110/t in the March quarter.
In July, the company unveiled an equity and debt arrangement with South African bank Investec for some $58.7m which replaced an existing US$40M facility with JP Morgan. The balance sheet distress provides evidence that CoAL needs the support of a major partner to help its transition from a minor thermal coal producer to a well positioned coking coal exploration and production firm.
The proceeds of the share issue will be used to finance the continuing ramp-up of CoAL’s Vele colliery, pre-mining right capital expenditure at the Makhado project and additional drilling at some of CoAL’s other exploration properties.
The financing comes at a time when Exxaro Resources is picking over the details of a potential investment in CoAL’s Makhado project. Exxaro has an option to take a 30% stake in the project and pro-rata capital contributions to its development. However, Exxaro extended the deadline to end-September regarding a decision. More recently, it has been speculated by Miningmx that Exxaro may opt for a much larger stake in Makhado rather than settling for a minority stake.
John Wallington, CEO of CoAL, said the company was weighing up alternative options to finance Makhado which is neighboured by another large coking coal prospect, Chaupdi. CoAL said Makhado will have phase one, run-of-mine production of 10 million tonnes/year (Mtpa) to 14Mpta producing 2.2Mtpa to 2.5Mtpa of hard coking coal and up to 1Mtpa of export grade thermal coal over a 16-year period. “The company continues to evaluate multiple funding options for the project,’ CoAL said in an announcement.
