Indian firms rescue SA coal juniors

[] — YET another coal junior – South African Coal Mining Holdings (SACMH) – is being bailed out of financial difficulties by its new controlling Indian shareholder.

The development marks the growing interest of Indian companies in South Africa’s coal sector, viewed as a source of supply for coal to be imported by new power stations being built on India’s west coast.

SACMH’s results for the year to end-December published on Monday show that controlling shareholder JSW Energy is currently negotiating with Standard Bank over a R128m loan, which is in default.

JSW Energy bought the 49.8% stake previously held in SACMH by Royal Bafokeng Capital in May, and also made an offer to minorities at 30 cents per share.

This follows the steps taken by Indian group GMR Energy to bail Toronto-listed junior Homeland Energy (Homeland) out of problems over its R149m debt with Nedbank.

Homeland had to make a repayment of R12m on that facility to Nedbank on June 30, but was not financially able to do so.

GMR made that payment and “has agreed to provide any additional comfort that is required to ensure that Homeland meets its obligations under the Nedbank facility’.

Homeland already owed C$8m to GMR, to be repaid from a rights issue to raise C$8.75m that closed on June 30.

A Homeland statement issued on June 29 said: “To reduce liquidity and market risk and to address the continued difficulties the company has faced with respect to the Nedbank facility, the company along with support from GMR, is actively pursuing the potential to refinance the loan with Nedbank and improve the company’s capital structure.’

Homeland owns the operating Kendal mine near Ogies as well as the nearby Eloff project.

Homeland shares have dropped from a high of C$0.165 to a current low of C$0.04 during the past 12 months.

JSW is currently in negotiations with Standard Bank to settle SACMH’s outstanding loan. JSW’s proposal is to lend R70m to SACMH, which will be used to pay down the loan and the balance will then be repaid over a five-year period.

JSW has also committed to provide R25m to meet short-term capital expenditure requirements at SACMH, as well as R40m in working capital so that mining operations can restart “in the next few months’.

Auditors Deloitte & Touche have reported an “emphasis of matter’ on the 2009 accounts, pointing out that SACMH’s status as a going concern “is dependent on JSW investing into SACMH, restructuring the Standard Bank loans and recommencing operations’.

Trading in SACMH shares has been suspended since May 2009.