[miningmx.com] — COAL of Africa (CoAL) is “at an advanced stage of negotiation” over a new $40m debt facility, according to CEO John Wallington.
Wallington commented in the September quarterly report published on Tuesday that other sources of funding were also being pursed and CoAL’s directors “remain confident of securing further financing”.
The money is needed for the acquisition of the Chapudi assets from Rio Tinto as well as the group’s continuing operations, exploration and development.
Wallington first indicated the need to raise more cash in mid-September when CoAL released its results for the year to end-June. The group’s available cash had dropped to $22.8m at end-June from $72m a year previously.
Available cash had fallen further to stand at $8.8m at end-September while undrawn loan facilities and standby credit arrangements amounted to $20.1m.
“Quarter-on-quarter total cash and available facilities remained in line with management expectations,” said Wallington.
CoAL has to pay the first tranche of $43m to Rio Tinto by end-April while the group also has to start looking at the funding of its next project – Makhado – which could cost up to $500m to develop.
CoAL is considering various options to raise funds, including the sale of its NiMag division and the Holfontein coal project. Wallington said the directors were “confident of completing the sale of one or both of these assets within the next 12 months”.
Other funding could come from Exxaro Resources, which holds an option to buy a 30% stake in the proposed Makhado mine, while an offtake agreement is still to be negotiated with likely major customer ArcelorMittal.
The quarterly report showed a sharp drop in coal exports to 277,499t (June quarter: 492,781t) which Wallington attributed to operational delays at the Matola terminal in Maputo, combined with slower international market conditions.
Turning to the Vele coking coal mine in Limpopo Province, Wallington said development teams were back on site and workers were being re-employed.
This followed the decision by the Department of Environment and Water Affairs (DEA) to lift the suspension of Vele’s integrated water use licence (IWUL) pending the outcome of the appeal to the Water Tribunal.
Wallington said that during the initial phase of development Vele would ramp up to an annual production level of 2.7mt run-of-mine from which 1mt of saleable coal would be produced.
“The signing of the memorandum of understanding with the DEA and SANParks ( SA National Parks) signified a further strengthening of our working relationship with government and our commitment to all our stakeholders,” he said
Development of the Vele mine has been bitterly opposed by a coalition of environmental non-government organisations because of its proximity to the Mapungubwe National Park.
Responding to the decision to lift the suspension of the IWUL the coalition said “the temporary suspension of a water use licence pending an appeal is a key provision of the National Water Act, designed to ensure that scarce water resources are protected pending a decision of the Water Tribunal.
“The further implication of this decision is that permanent, irreversible damage may be done to water resources despite the prospect that the Water Tribunal may set aside the licence in due course.’
CoAL shares staged a sharp recovery from a 12-month low of 540c to 717c on news of the lifting of the IWUL suspension, but eased to 705c in early trading on the JSE on Tuesday.
