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)

Nippon Steel, S'tomo Metal pick merger advisers -sources

Mon Feb 28, 2011 4:59am GMT

TOKYO Feb 28 (Reuters) - Nippon Steel Corp (5401.T: Quote) has picked Mizuho Securities (8606.T: Quote), Mitsubishi UFJ Morgan Stanley, JP Morgan (JPM.N: Quote) and Bank of America Corp's (BAC.N: Quote) Merrill Lynch to advise it on its planned merger with Sumitomo Metal Industries (5405.T: Quote), sources told Reuters.

Sumitomo has hired Nikko Cordial Securities, a unit of Sumitomo Mitsui Financial Group (8316.T: Quote), Daiwa Securities Group (8601.T: Quote), Goldman Sachs Inc (GS.N: Quote) and Deutsche Securities (DBKGn.DE: Quote) to advise it on the planned union, five sources familiar with the matter said. (Reporting by Emi Emoto; Writing by Tim Kelly,sourced:Thomson Reuters)

Tags: Daiwa Securities group, advice for planned mergers, Nikko Cordial Securities, Sumitomo Mitsui Financial Group, Daiwa Securities Group, Goldman Sachs Inc, Deutsche Securities

Asian Thermal Coal Contracts May Rise 36% to Record After Rains

By Ben Sharples - Feb 14, 2011
Asian utilities begin negotiations with coal producers this week and may be forced to pay as much as 36 percent more for their fuel after heavy rain in Australia, Indonesia, South Africa and Colombia disrupted output.

Prices for the year starting April 1 may increase to between $125 and $133 a metric ton, analysts from Bank of America Merrill Lynch, UOB-Kay Hian Ltd., Citigroup Inc. and National Australia Bank Ltd. said. Japanese utilities agreed to pay Xstrata Plc $98 a ton for the 12 months starting April 1, 2010, the company said in August.
“There are still lingering supply concerns around the place, not just in Australia,” Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne, said by telephone. The bank has forecast contract prices may rise to $125 a ton.

Heavy rain has crimped output in Colombia, Indonesia and Australia, where flooding in December and January shut mines and damaged rail lines in Queensland, the nation’s biggest coal-producing state. Prices more than doubled to a record $125 a ton in 2008 after floods disrupted supply from the state. Contract negotiations start this week, according to Citigroup.
While prices of the fuel for immediate delivery “have eased back” after increasing to a two-year high last month, “the focus will be on the longer-term outlook,” Citigroup analysts said in a Feb. 11 note. “We still see strong demand growth and expect contract prices to be settled at record highs.” The bank forecast contract prices at $130 a ton.

Newcastle Price The price for thermal coal at the port of Newcastle in New South Wales, the benchmark for Asia, rose to $138.50 a metric ton in the week ended Jan. 14, the highest since September 2008, according to IHS McCloskey, a Petersfield, U.K.-based provider of data. It was at $120.75 in the week ended Feb. 11.
Queensland exports about 50 million tons of thermal coal each year, according to Macquarie Group Ltd. Shipments of the power station variety may be reduced by more than 5 million tons after a landslide shut a rail network that serves mines operated by Peabody Energy Corp. and New Hope Corp., Citigroup analysts, led by Daniel Hynes, said in the Feb. 11 report.
Merrill Lynch analysts led by Sydney-based Alex Tonks said contract prices may rise to $125 a ton, and National Australia Bank Ltd. minerals and energy economist, Ben Westmore, said they may increase to $130 a ton. UOB-Kay Hian Hong Kong-based analyst Helen Lau said they may reach $133 a ton.
Annual accords between mining companies and customers may be agreed “by mid-to-late March,” Australia & New Zealand Banking Group’s Pervan said. “Xstrata has become the number one player in the market. It’s their deal with a Japanese utility, usually Tokyo Electric,” that sets the benchmark for prices.
(sourced:bloomberg)
Tags: Asian Thermal coal contracts, heavy rains, Bank of America Merrill Lynch, UOB-Kay Hian Ltd., Citigroup Inc., National Australia Bank Ltd, Xstrata Plc, Newcastle coal, Tokyo

Coking coal may reach USD 400 for April quarter - Merrill Lynch

Wednesday, 26 Jan 2011

According to Bank of America Merrill Lynch, steelmakers in Asia may be forced to pay as much as 78% more for hard coking coal after floods in Australia disrupted output in the biggest exporter of the fuel.
Merrill Lynch analysts led by Sydney based Mr Alex Tonks in a report said that Australian free on board prices may increase to AUD 400 a tonne for three month contracts starting April 1, from AUD 225 a tonne this quarter.

This compares with the bank’s January 11 forecast of AUD 330 a tonne for the second quarter.
According to IHS McCloskey, Australian hard prime coking coal used by steelmakers sold for AUD 320 a tonne on average last week, up from AUD 280 the week before. That’s the highest level for the data going back to the week ended November 5.(Sourced from Bloomberg)

Coking coal soars on export prospects - Energy Publishing

Tuesday, 18 Jan 2011
Energy Publishing Inc said that coking coal prices surged in the US as Australian flooding presents export opportunities for producers.
Tennessee based data provider said that spot prices for low volatility coking coal increased USD 26.25, or 9.4% to USD 306.25 a tonne in the week ended. High volatility coal rose USD 41.42, or 18% to USD 266.42.
Energy Publishing said that “US producers wait for Australian spot deals to develop before committing coal to the market. That’s not difficult because port and transportation issues prevent more than a smattering of US spot coal being exported in any case before the end of the first quarter or very early in the second quarter.”
According to Bank of America Merrill Lynch, Queensland supplies 50% of the world’s seaborne metallurgical coal or about 140 million tonnes a year. The flooding in that region has affected an area larger than Texas and California combined.
Metallurgical coal is used to produce steel, while thermal forms of the fuel are needed by power plants to generate electricity.
Energy Publishing said that it surveys buyers and sellers of coal to determine pricing.
Sourced from Bloomberg