Continental Coal accelerates payments to acquire outstanding 36pct in Mashala

Monday, 04 Jul 2011

South African focused Continental Coal subsidiary CCL has elected to accelerate payments of an option to acquire the outstanding 35.9% minority interests in Mashala Resources.

Continental said the decision by CCL to move towards 100% ownership of Mashala follows the recent US$65 million debt financing from ABSA Capital.

The decision was also supported by the agreement reached with a Broad Based Black Economic Empowerment Group to acquire the existing 26% Black Economic Empowerment equity interest in CCL and repay around USD 20 million of the existing inter-company loan.

Mashala also includes the underlying Ferreira Export Thermal Coal Mine, Delta Processing Operations and Penumbra and De Wittekrans Export Thermal Coal Projects.

CCL has elected to acquire the outstanding minority interests to ensure that the company holds a minimum 75% interest in Mashala and the key operating mine and development projects prior to the establishment and drawdown of the proposed ABSA Capital debt financing, and the conclusion of the BBBEE transaction scheduled for completion in August 2011.

Continental said the acquisition will improve operating efficiencies and simplify operating and reporting procedures along with greater cash flows. To complete the acquisition of the minority interests, Continental has entered into an agreement with Socius CG II a United States based investment group and a wholly-owned subsidiary of Socius Capital Group for up to a USD 20 million equity investment in the company.

Socius will emerge as the company largest substantial institutional and cornerstone shareholder with an initial shareholding of around 6.86%, increasing to over 12.3%. Continental has completed an initial placement to Socius of 234,962,406 new shares at AUD 0.043 to raise USD 10 million, and issued 117,481,203 unlisted 5 year warrant options at AUD 0.044.

A subsequent tranche will be completed with Socius at a price that will be determined at premium to the market share price at the time of draw down. The proceeds of the first tranche of the placement will allow the company to increase its shareholding in Mashala from the current 64.1% interest to up to a maximum 83.3% interest.