Village Main Reef planned to acquire a 19.9 percent stake in Australian-listed Continental Coal, through a private placement and off-market purchases, the gold producer said yesterday.
The purchase would be subject to shareholder approval at a meeting scheduled for March 28. The deal was also subject to Village receiving approval from the Reserve Bank.
The deal looked very cheap at the current price, Percy Takunda, a gold analyst with Imara SP Reid, said yesterday. “Continental has some significant assets, and has good exploration assets too.”
As part of the deal, Village would would subscribe to a private placement of 100 million ordinary Continental Coal shares for a total consideration of A$8 million (R76 million), or 8 Australian cents each.
Village would also buy back the shares held by shareholders with a market value of less than A$500, and may, up to April 30 next year, acquire further shares on the market at a price of up to 10 Australian cents a share, increasing its shareholding to 19.9 percent of the issued share capital of Continental.
Village said the deal would pump up its diversification strategy of investing in cash generating assets.
“We think Continental is at an inflection point in terms of its development. The company has a strong portfolio of projects and has demonstrated its ability to develop and operate mines, and we look forward to working with and supporting the management team,” Village joint chief executive Marius Saaiman said yesterday.
Don Turvey, Continental’s chief executive, said the private placement and off-market purchase of small shareholdings would boost the firm in the short term. “The introduction of such a strategic and cornerstone investor to our share register, demonstrates the value proposition of our operating coal mining business and our coal project development opportunities,” he said.
Continental has a portfolio of attractive assets. It operates three mines in South Africa – Penumbra, Vlakvarkfontein and Ferreira – producing 2.8 million tons a year of thermal coal, and is on its way to developing a fourth mine.
Continental is targeting a run of mine production rate of 10 million tons a year by the end of 2015.
Village rose 0.91 percent to close at R1.11 yesterday.