China gives approval for $100m CoAL investment

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Australian junior mining firm Coal of Africa Limited (CoAL) was boosted yesterday by news that China had given regulatory approval to proceed with a transaction to place shares valued at $100 million (R859m) with Haohua Energy International (HEI).

The Chinese state-owned company was given the green light ahead of schedule to subscribe to the CoAL shares at 25p (R3.43) each.

CoAL closed 3.93 percent up at R2.91 on the JSE yesterday following the announcement.

“The share should strengthen further once the deal with HEI has been finalised, and also when production at Vele continues,” Imara SP Reid analyst Stephen Meintjes said yesterday.

The deal announced in October last year is almost complete, with the final hurdle being a shareholders meeting to be held on January 25.

The transaction has been structured in two tranches. The initial $20m portion was conditional on approval by the Australian Foreign Investment Review Board (FIRB). This will be followed by a second investment of $80m conditional on approval by shareholders and regulatory authorities.

The approval from the FIRB and the first $20m tranche were received late in November.

CoAL faced major challenges in the second half of last year, including the decline of the coal and commodities markets and a strike at Mooiplaats colliery, a marginal mine that is in the process of restructuring. The company dismissed 178 employees after the illegal strike, but later reinstated them.

CoAL chairman David Brown said: “I am pleased that the remaining approvals required by HEI to complete the transaction have been received ahead of the shareholder meeting on January 25. Upon the conclusion of this transaction, CoAL will be well placed to execute its vision for the future development of the company.”

The subscription is expected to turn around the company’s operational and financial structure and aid the development of capital projects and mining plans, the development of business policies and operating plans.

HEI, a subsidiary of Beijing Haohua Energy Resource, will provide technical expertise in the development of the Makhado project in the Soutpansberg coalfield in Limpopo.

CoAL is ramping up to an output capacity of 2.7 million tons a year in the second phase of the Vele colliery in Limpopo, near the Mapungubwe World Heritage Site, by next year.

Late last year, the Save the Mapungubwe Coalition withdrew from a memorandum of understanding setting guidelines for sustainable development at Vele, saying that CoAL had breached the terms of the agreement, which aimed to ensure the world heritage site is not harmed by mining activity.


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