CEO says company will not go back to the market to keep wheels rolling
Thu, Mar 17, 2011 06:53:32 AM
By Allan Seccombe, Business Day
COAL of Africa (CoAL) will announce details of a new debt structure in coming days ahead of a $20m debt repayment to JPMorgan on March 24, plus raise extra cash to give the company "headroom" for its other projects, CEO John Wallington said yesterday.
CoAL has seen its cash reserves dwindle to A23m ($22,6m) by the end of December last year from A$101m at the end of June last year and the group has put in strict cash control measures to rein in spending. Work on the new debt facilities are about 98% complete and are awaiting final signatures, Mr Wallington said.
"If it’s a rollover (of the $20m debt) or replacing it with another facility, one of them will happen. It’s in place. With that facility in place it will also soothe the unfortunate market fears that this company will have to go back to the market to keep the wheels rolling, which it won’t have to do," he said.
A combination of cost controls, revenue increases from rising coal prices, and the new debt facility will enable CoAL to continue "without any issues for the rest of the year", he said.
CoAL would consider an equity issue only as one of a number of fund-raising mechanisms to raise more than $500m to build its Makhado coking coal project in Limpopo, he said. The hurdles that need to be cleared first are securing mining rights and completing a definitive feasibility study after the testing of 4400 tons of coal at ArcelorMittal’s Vanderbijl park steel mill.
The new debt package will be more than $20m, Mr Wallington said. "We want to give ourselves the headroom to cater for bringing Vele back into production. That will need cash for two or three months until the coal revenues start flowing.
"We also need cash to continue exploration and complete the Makhado feasibility," he said.
CoAL has spent about R600m on Vele, a coking coal mine near the Mapungubwe national heritage site, but the mine was stopped in its tracks just months before commissioning. It received a compliance notice from the Department of Environmental Affairs in August last year.
CoAL had adhered to all the requirements in the notice as well as all legislative matters, Mr Wallington said. The mine could resume "imminently", he said, without being drawn on any more specific time line.
"There is a campaign for the government to have a clearer policy about mining and industrial development in areas that are considered environmentally sensitive. Vele has become a test case for that," he said.
CoAL needs to spend R80m more to complete the mine, which will produce up to a million tons a year of soft to medium-hard coking coal suitable for steel mills. It may produce only half that to start with because it has been unable to secure agreements with Transnet on rail allocation, he said.
CoAL has seen its cash reserves dwindle to A23m ($22,6m) by the end of December last year from A$101m at the end of June last year and the group has put in strict cash control measures to rein in spending. Work on the new debt facilities are about 98% complete and are awaiting final signatures, Mr Wallington said.
"If it’s a rollover (of the $20m debt) or replacing it with another facility, one of them will happen. It’s in place. With that facility in place it will also soothe the unfortunate market fears that this company will have to go back to the market to keep the wheels rolling, which it won’t have to do," he said.
A combination of cost controls, revenue increases from rising coal prices, and the new debt facility will enable CoAL to continue "without any issues for the rest of the year", he said.
CoAL would consider an equity issue only as one of a number of fund-raising mechanisms to raise more than $500m to build its Makhado coking coal project in Limpopo, he said. The hurdles that need to be cleared first are securing mining rights and completing a definitive feasibility study after the testing of 4400 tons of coal at ArcelorMittal’s Vanderbijl park steel mill.
The new debt package will be more than $20m, Mr Wallington said. "We want to give ourselves the headroom to cater for bringing Vele back into production. That will need cash for two or three months until the coal revenues start flowing.
"We also need cash to continue exploration and complete the Makhado feasibility," he said.
CoAL has spent about R600m on Vele, a coking coal mine near the Mapungubwe national heritage site, but the mine was stopped in its tracks just months before commissioning. It received a compliance notice from the Department of Environmental Affairs in August last year.
CoAL had adhered to all the requirements in the notice as well as all legislative matters, Mr Wallington said. The mine could resume "imminently", he said, without being drawn on any more specific time line.
"There is a campaign for the government to have a clearer policy about mining and industrial development in areas that are considered environmentally sensitive. Vele has become a test case for that," he said.
CoAL needs to spend R80m more to complete the mine, which will produce up to a million tons a year of soft to medium-hard coking coal suitable for steel mills. It may produce only half that to start with because it has been unable to secure agreements with Transnet on rail allocation, he said.
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