TIDMCZA
RNS Number : 1641S
Coal of Africa Limited
29 September 2017
ANNOUNCEMENT 29 September 2017
FULL YEAR RESULTS FOR THE PERIODING 30 JUNE 2017
Coal of Africa Limited ("CoAL" or "the Company") is pleased to
provide its audited financial statements for the year ended 30 June
2017 (the "Period"). All figures are denominated in United States
dollars unless otherwise stated and the full report is available on
the Company's website, www.coalofafrica.com.
Highlights
-- No lost-time injuries ("LTIs") recorded during the year
(FY2016: none) - a third consecutive year of zero LTIs.
-- Acquisition of a cash generating asset with the purchase of
the Uitkomst Colliery for R275 million ($21.1 million) of which R25
million ($1.9 million) is deferred.
-- Debt facility for up to R240 million ($18.0 million) secured
from the Industrial Development Corporation of South Africa ("IDC")
for the development of the Makhado Coking and Thermal Coal Project
("Makhado Project" or "Makhado") and drawdown of initial tranche of
R120 million ($9.2 million).
-- Repayment of the final $18.2 million owing to Rio Tinto for
the acquisition of the Greater Soutpansberg Project ("GSP")
assets.
-- Conversion of the Yishun Brightrise Investment PTE Limited
("YBI") $10.0 million loan to equity.
-- Successful placement of $2.0 million by M&G Investment
Management Ltd for working capital purposes.
-- The suspension of the Integrated Water Use Licence ("IWUL")
for the Makhado Project was lifted by the South African Minister of
the Department of Water and Sanitation ("DWS").
-- Mooiplaats Thermal Coal Colliery ("Mooiplaats Colliery") and
the Vele Coking and Thermal Coal Colliery ("Vele Colliery")
remained on care and maintenance.
-- Granting of an Environmental Authorisation ("EA") in terms of
the National Environmental Management Act (Act 107 of 1998) and the
Environmental Impact Assessment Regulations (2014) to Vele Colliery
for a stream diversion and associated infrastructural
activities.
-- Sale of Holfontein Investments Proprietary Limited
("Holfontein") to Taung Gold Secunda Proprietary Limited ("Taung
Gold").
-- Encouraging coking and thermal coal price movements over the
Period, principally due to market supply constraints.
-- Decrease in the loss for the year to $10.2 million (2016:
$13.1 million) while the Company reflected a positive net working
capital balance of $11.6 million (FY2016: $9.6 million net current
liability).
Financial review
-- No revenue generated during the year as result of all
operations being on care and maintenance (FY2016: $nil).
-- Non-cash charges of $9.3 million (FY2016: $12.8 million) including:
o Impairment of the intangible asset of $10.6 million;
o Unrealised foreign exchange gain of $2.0 million (FY2016: $9.6
million loss) as a result of the South African rand strengthening
against the United States dollar;
o Depreciation and amortisation of $0.4 million (FY2016: $1.2
million); and
o Share based payment expense of $0.3 million (FY2016: $0.2
million).
-- Total unrestricted cash balances at year-end, including cash
held by operations available for sale, of $9.6 million (FY2016:
$19.5 million).
Review of Operations
Uitkomst Colliery (91% owned)
CoAL continued to restructure its balance sheet and evaluated a
number of potential cash generating assets during the period. This
resulted in the acquisition of 100% of the shares in and claims
against Pan African Resources Coal Holdings Proprietary Limited,
the owner of 91% of the Uitkomst Colliery, for R275 million ($21.1
million), of which R25 million ($1.9 million) is deferred.
The Uitkomst Colliery is a high grade thermal export quality
coal deposit with metallurgical applications, comprising an
existing underground coal mine and a planned life of mine
extension. Uitkomst currently employs approximately 520 employees
(including contractors) and has well-established infrastructure
including water and power supplies, buildings, workshops,
weighbridge and management facilities. The colliery was acquired on
30 June 2017 and for the 12 months prior to this date, produced
508,510 tonnes of saleable coal consisting of 458,350 mined tonnes
and 50,160 bought in tonnes and management anticipate that similar
volumes will be generated in FY2018.
Makhado Coking Coal Project (95% owned - 69% post Broad Based
Black Economic Empowerment transaction)
Baobab Mining and Exploration Proprietary Limited ("Baobab"), a
subsidiary of CoAL, is the operating entity for the Makhado Project
and holds, in addition to the IWUL, the EA and the mining right.
During FY2016 the Makhado Project IWUL was appealed by the Vhembe
Mineral Resources Forum and other parties resulting in the IWUL
being automatically suspended. During the Period this suspension
was lifted by the South African Minister of the DWS and
representation has been made to the Water Tribunal to progress the
final conclusion of the appeal and the Company anticipates that
this, as well as surface rights access, will be finalised during H1
FY2018.
The original Makhado Project development plan included a 26
month construction phase followed by a four month ramp up to
achieve a production rate of 5.5 million tonnes per annum ("mtpa")
with a capital requirement of $281 million. While the Company
progressed regulatory matters, it has reviewed Makhado's
development plan and re-assessed its strategy, resulting in an
amended plan requiring reduced capital expenditure, a shorter
construction period and earlier than planned production. This
revised strategy anticipates that the Makhado Lite Project will be
constructed in 12 months, costing an estimated $75 million to $85
million and, allows for the future expansion of mining and
production. The Makhado Lite Project will produce approximately 1.7
mtpa of saleable coal, comprising 0.7 mtpa to 0.8 mtpa of hard
coking coal and 0.9 mtpa to 1.0 mtpa of export quality thermal
coal. The Company anticipates that a substantial portion of the
hard coking coal produced will be sold locally with the balance
sold on international markets. The table below compares the results
of the original Makhado Project with Makhado Lite.
Original Makhado Project Makhado Lite*
------------------------------------ -------------------------- ------------------------------
RoM production 12.6 Mtpa 4 Mtpa
------------------------------------ -------------------------- ------------------------------
LoM 16 years 29 years
------------------------------------ -------------------------- ------------------------------
Hard coking coal (HCC) production 2.3 Mtpa 0.7 to 0.8 Mtpa
------------------------------------ -------------------------- ------------------------------
Thermal coal production 3.2 Mtpa 0.9 to 1.0 Mtpa
------------------------------------ -------------------------- ------------------------------
Project capital expenditure $406 million $75 million to $85 million
------------------------------------ -------------------------- ------------------------------
Construction period 26 months 12 months
------------------------------------ -------------------------- ------------------------------
HCC average price $206.16 $120.00
------------------------------------ -------------------------- ------------------------------
ZAR:US$ exchange rate used R9.75 R13.50
------------------------------------ -------------------------- ------------------------------
Long term HCC price/t $206.16 $120.00
------------------------------------ -------------------------- ------------------------------
Discount rate (real) 8.0% 10.0%
------------------------------------ -------------------------- ------------------------------
IRR 30.1% 30% to 50%
------------------------------------ -------------------------- ------------------------------
NPV $697 million $135 million to $260 million
------------------------------------ -------------------------- ------------------------------
*Makhado Lite parameters are based on internal CoAL estimates
and assumptions
The Makhado Project costs in the 2013 Definitive Feasibility
Study ("DFS") were updated for the assumptions and estimates for
Makhado Lite. This entailed the Company obtaining proposals for
full mining services from four contract mining companies while
turnkey processing plant construction and operating quotes were
obtained from three potential service providers. The Makhado Lite
model anticipates hard coking coal yields of 19.0% (DFS: 18.8%) and
thermal coal yields of 25.1% (DFS: 25.8%). The estimated peak
funding required to develop Makhado Lite will between $90 million
and $110 million with a project payback period of four years.
Mooiplaats Thermal Coal Colliery (74% owned)
The Mooiplaats Colliery was placed on care and maintenance in
2013 and is recognised as an available for sale asset in the FY2017
financial statements. The colliery formed part of a formal sale
process during the Period and this is at an advanced stage. The
Company will keep shareholders appraised of further progress in
this regard.
Vele Coking and Thermal Coal Colliery (100% owned)
The Vele Colliery remained on care and maintenance throughout
the Period and CoAL awaits the granting of an IWUL by the DWS, the
final approval required for the stream diversion in respect of the
Plant Modification Project ("PMP"). Once all regulatory approvals
are in place, the Company will be in a position to consider
prevailing market pricing and conclude an investment decision for
the PMP. The IWUL for the Vele Colliery has been renewed for a
further 20 years and has also been amended in line with the
requirements for the colliery's PMP.
Greater Soutpansberg Project (MbeuYashu) (74% owned)
The exploration and development of the CoAL prospects in the
Soutpansberg coalfield is the catalyst for the long-term growth of
the Company. The Department of Mineral Resources is considering the
Company's mining right applications for the Mopane, Generaal and
Chapudi projects.
General
-- Loan agreement signed with the IDC for up to R240 million
(approximately $18.0 million) to advance the operations and
implementation of the Makhado Project. The Company completed the
first drawdown of R120 million ($9.2 million) during the Period
resulting in the IDC owning 5% of Baobab, reflecting the South
African Government's support for the project and, the second
tranche of R120 million ($9.2million) is available upon written
request from Baobab.
-- The Company paid $18.2 million to Rio Tinto during the
Period, settling the historic debt owing for the acquisition of the
GSP assets.
-- YBI previously agreed to lend the Company $10.0 million,
interest free and repayable in certain circumstances. During the
Period the loan was converted to equity resulting in YBI having the
right to nominate a director to the CoAL Board.
-- During the Period the Company sold 100% of the issued share
capital in Holfontein to Taung Gold for R25.0 million ($1.9
million).
-- Confirmation that Fifth Season Proprietary Limited is in the
process of funding the outstanding balance of approximately R15.0
million ($1.1 million) including VAT but excluding accrued
interest, owing to the Company for the Opgoedenhoop Mining
Right.
Markets
The hard coking price recorded short-term supply constraints
owing to weather and infrastructure disruptions and recent price
movements reflect the tightness of world supply and, as such, is
positive for longer term pricing. Thermal coal prices also
reflected more positive fundamentals in the short term.
David Brown, CEO commented:
"I am pleased to report on what has been an extremely positive
and transformational year for CoAL. A number of significant
milestones have been achieved; with the settlement of significant
liabilities during the Period and the transitioning into a coal
producer following the acquisition of the cash generative, Uitkomst
Colliery. The Uitkomst transaction is value accretive and will
assist in changing CoAL into a sustainable, multi-product mining
group with excellent resources. The colliery also enlarges the
Company's asset base, providing a stronger proposition to access
funding and positions CoAL as a potential industry consolidator,
with a skilled management team capable of delivery."
"CoAL continued to ensure that it is well positioned to unlock
near-term shareholder value from the flagship Makhado Project. As
part of this, the Company recognised the limited cash flow that
would have been generated during Makhado's pre-production phase and
as a result, the CoAL Board approved the Makhado Lite Project in
September 2017, ensuring similar returns to the original design
with lower capital requirements and a shorter construction phase.
The Company's balance sheet was restructured with the acquisition
of Uitkomst, achieved alongside the R240 million IDC loan facility,
$10.0 million YBI loan conversion, sale of Holfontein and the final
legacy payment to Rio Tinto. The disposal of the Mooiplaats
Colliery is at an advanced stage and any proceeds from this
transaction will be utilised to progress the development of the
Makhado Project. In the interim CoAL is reviewing potential second
cash generating prospects, the conclusion of which will represent
another step in the process of becoming self-sufficient."
For more information contact:
Chief Executive +27 10 003
David Brown Officer Coal of Africa 8000
Chief Financial +27 10 003
De Wet Schutte Officer Coal of Africa 8000
+27 10 003
Stephen Rowse Business Executive Coal of Africa 8000
Endeavour Corporate +61 08 9316
Tony Bevan Company Secretary Services 9100
Company advisors:
Matthew Armitt/Ross Nominated Adviser Peel Hunt +44 20
Allister and Broker LLP 7418 8900
Jos Simson/Emily
Fenton/Barney Financial PR +44 20
Hayward (United Kingdom) Tavistock 7920 3150
Charmane Russell/Olwen Financial PR Russell & +27 11
Auret (South Africa) Associates 880 3924
or
+27 82
372 5816
Investec Bank Limited is the nominated JSE Sponsor
About CoAL:
CoAL is an AIM/ASX/JSE listed coal exploration, development and
mining company operating in South Africa. CoAL's key projects
include the Uitkomst Colliery, Makhado Project (coking and thermal
coal), Vele Colliery (coking and thermal coal) and the Greater
Soutpansberg Project (MbeuYashu).
Join CEO David Brown for a webcast briefing on the results at
midday (South African time) on Friday, 29 September 2017.
Link to the webcast window:
http://themediaframe.eu/links/coalofafrica170929.html
Conference call details:
Participant Telephone Numbers (Assisted)
Johannesburg (Telkom) 010 201 6800
South Africa (toll free) 0 800 200 648
Johannesburg (Neotel) 011 535 3600
USA and Canada (toll free) 1 855 481 5362
Other Countries (Telkom) +27 10 201 6800
UK (toll free) 0 808 162 4061
Other Countries (Neotel) +27 11 535 3600
Conference Replay - Replay access Code: 17120
South Africa: 011 305 2030
UK toll free: 0 808 234 6771
Australia toll free: 1 800 091 250
USA and Canada toll free: 1 855 481 5363
International toll: +27 11 305 2030
This information is provided by RNS
The company news service from the London Stock Exchange
END
ACSQVLFLDKFZBBD
(END) Dow Jones Newswires
September 29, 2017 02:00 ET (06:00 GMT)
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