Coal of Africa (CoAL‚ CZA) has entered into a financing package with Investec Bank. The bank will make approximately US$58.7m available to CoAL through a combination of debt and equity funding.
Subject to certain conditions‚ CoAL also has the right to require Investec to subscribe for a maximum of 81 million CoAL shares in tranches over a 12-month period‚ at a 5% discount to the CoAL closing price on the trading day prior to the issue of a subscription notice by Investec.
CoAL CE John Wallington said the debt and equity financing package signalled good support for CoAL’s long-term growth strategy.
“The funds will be used for expenditure on key items for the Makhado project‚ additional funding for the ramp-up of production at the Vele Colliery and for general working capital purposes‚” Wallington said.
“Progress continues to be made at Vele‚ with the coking coal test work and the finalisation of the Phase 1 capital project to enable the achievement of the initial target of 1 million tonnes per annum.
“The public participation process with the communities at Makhado has made significant progress since the formation of a community representative forum that is engaging positively with the company‚” he said.
Under the equity funding arrangement‚ Investec has subscribed for a total of 19.148 million CoAL shares. It will subscribe for 16.850 million shares at a subscription price of 29.21 pence per share and 2.298 million shares at 43.70 cents (Australian) per share‚ representing a 5% discount to the closing price of CoAL shares on AIM of 30.75 pence and the closing price on the ASX of 46.00 cents‚ respectively‚ on July 17.
The aggregate consideration for these shares is approximately US$8.7m.
The maximum number of shares for which Investec can be required to subscribe under the agreement is 81.061 million - the maximum number of shares that CoAL is permitted to issue under its existing 15% authority to allot shares for cash.
CoAL and Investec have also entered into a credit approved term sheet to provide CoAL with a US$50m‚ two-year loan facility‚ which is primarily intended to provide the company with the ability to replace its existing short-term‚ US$40m‚ 364-day revolving finance facility with JPMorgan Chase to a longer tenor of two years and on more favourable terms.
Under the loan term sheet Investec will provide a facility of US$50m‚ which may‚ at CoAL´s discretion‚ be settled in cash or shares over a two-year term. The availability of the loan is subject to a number of conditions.
CoAL said it was also continuing to consider various long-term debt and equity financing options in relation to the expected construction and development costs for the Makhado project following the granting of the mining right‚ and has involved three international investment banks in this process. This funding would be in addition to the potential investment in and co-funding of the Makhado Project by Exxaro‚ pursuant to Exxaro’s option to acquire an interest in up to 30% of the project. - I-Net Bridge