[miningmx.com] – CONTINENTAL Coal is to restructure its executive team with CEO, Don Turvey, and his CFO, Lou van Vuuren, the first casaulties – steps required as conditions to a proposed A$5m bridging loan, and a possible A$28m rights issue.
Empire Equity, a UK-based merchant bank and corporate advisory firm, will provide the bridging finance that can be converted into Continental Coal shares at the same price as the rights issue which is at one Australian cent per share. Non executive directors Mike Kilbride and Johan Bloemsma will also resign from Continental Coal’s board.
The restructure sees the return of Peter Landau who resigned from Continental Coal in 2013. Landau, a shareholder and creditor of the company, will be joined by Paul D’Sylva, a venture partner of Empire Equity, and Mike Gibson, CEO of Genet South Africa, a mineral resources and mining service company. A nominee from the creditor’s group will also be nominated to the board.
Shares in Continental Coal were suspended on January 8 as it emerged that months-long efforts to extend the terms of some $15m in bonds, maturing between November and February, had run into trouble.
In addition, Continental Coal has debt finance totaling $25m with Absa Capital, and deferred revenue owed to trading company, EDF. The company ran into problems after its newly commissioned Penumbra thermal coal mine produced at below forecasts.
This is the second time in less than a month that a junior coal producer operating in South Africa has been restructured. On December 31, Forbes & Manhattan Coal Corporation said it had ousted its CEO, Stephan Theron amid a recapitalisation plan.
The recapitalisation of Continental Coal, if successful, is good news for Village Main Reef, a Johannesburg-listed investment company, which took in 2013 up to 19% in the company at a cost of about R76m.
Ferdi Dippenaar, CEO of VMR, said today no decision had been taken on whether the company would follow its rights. “A number of conditions precedent remain outstanding and a decision would be taken closer to the time,” he said.
First, however, Empire Equity has to secure a 90-day standstill agreement from bondholders, and agreements from creditors. Creditors who don’t agree to standstills can be paid with the proceeds of the A$5m bridging finance.
The bridging finance will require the issue of 7.5 million unsecured convertible promissory notes with a face value of A$1.00 at a discounted issue price of A$0.6667 per note and with a maturity date of four months post closing.
Once this has been completed, Empire Equity will assist Continental Coal in the issue of shares in a rights issue.
Continental Coal produced about 2.2 million tonnes of saleable coal in its last financial year and was hoping to achieve the same output with Penumbra replacing production from the nearly exhausted Ferreira mine.
Continental has one other operation mine in Vlakvarkfontein and a ‘company-making’ project in De Wittekrans, a proposed 1.6mpta mine with a significant export portion but requiring some $120m in capital.
