CoAL raises funds for projects

Shares placed with select investors at a discount of 10,5% to the Wednesday price on London’s AIM, funds to be used for growth projects

Friday, 4 November, 2011

COAL of Africa (CoAL) has raised about $106m in a share placement yesterday, giving it the money to buy the Chapudi thermal and coking coal prospect from Rio Tinto, advance its Makhado project and bring its Vele mine into production early next year.

The shares were placed with select investors at R6,50 each, a 7% discount to Wednesday’s close of R7 on the JSE. The discount was 10,5% to the Wednesday price on London’s AIM. The placing price was set at 51p. The shares closed down 6c at R6,94.

CoAL CEO John Wallington said the funds would be split between the growth projects the company has in its portfolio.

"This funding buys us the time to carry out the projects I’ve referred to, but it also gives us the time to make the right strategic decisions over the next six to 12 months," he said.

Management would restructure the business over the next year to avoid having to come to the market for funds again, he said.

CoAL has allocated $25m to starting Vele, paying the first tranche of $43m to Rio Tinto and a year of exploration work at Chapudi worth $15m. It has set aside $17m, which will be used to pay a deposit to Transnet.

CoAL could not come to the market any earlier because of difficulty obtaining permits for its Vele coking coal project in Limpopo. There were objections from environmentalists because of its proximity to the Mapungubwe World Heritage site. CoAL has now secured all the permits it needs to reactivate the Vele project and bring it into production early next year.

The market had been expecting the share placement. "No huge surprise given the poor sets of results and recent successes in permitting," Numis Securities said in a note.

Merrill Lynch said the placement would dilute earnings per share, but it maintained a "buy" rating on the share.

(sourced BusinessDay)