Junior miner Coal of Africa (CoAL’s) share price on the Johannesburg Stock Exchange (JSE) jumped on the back of news that it reached an agreement with four investors to inject up to $64.9 million in its operations.
CoAL will issue up to 695-million shares to Haohua Energy International, M&G Investment Management, Investec Asset Management (IAM) and TMM Holdings in two stages at £0.055 each, a 101.5% premium to the 22 August share price, reports Business Day.
Premium share placing
CEO David Brown said the reason CoAL was able to place shares at a premium was that three of these investors (Haohua, M&G and IAM) had held stakes in the company for a long time and had already invested considerable sums of money.
The company’s long-term fundamentals were good, although in the short term it was in a difficult position because it had no cash-generating operations and coal prices were subdued.
At the end of June, CoAL held $8.7 million in cash, of which $6.7 million was restricted.
No revenue in June
The company generated no revenue in the June quarter as the processing plant at its Vele mine in Limpopo Province needs to be modified. Its cash outflow in the September quarter was projected at $4.7 million.
One-third of the funds will be raised in the first step and the remainder in a second step.
After both stages of the placement were completed, Haohua’s stake in CoAL would rise to just more than 26% from 23.6% at present; M&G’s stake to 19.9% from 15.4%; IAM’s to 8% from 6%; and TMM would hold 12.3%, stated Brown.
“Successful completion of this will be a significant step forward for the company, leaving it completely unencumbered of outstanding liabilities and providing it with the funds to start realising the inherent value of its projects,” Investec Securities said.
CoAL has been raising funds through the sale of various non-core assets. But it has been negotiating for some time to sell its Mooiplaats colliery.