As reported by Mining News in February of the desire by JSE-listed diversified miner and exploration company Village Main Reef to enter the coal sector, South African thermal coal production, development and exploration company Continental Coal has announced that it has entered into binding funding agreements with Village Main Reef (VMR), adding that it believes VMR will further strengthen the companys growth strategy and operating credentials in South Africa.
Continental Coal (ContiCoal) has secured a private placement transaction with VMR under which the latter has agreed to subscribe for 100 million ordinary shares in ContiCoal at an issue price of AU$0.08 (R0.76) per share, raising a total of AU$8 million.
The AU$0.08 per share issue price under the placement represents a premium to ContiCoal‘s last traded share price on the ASX and a 30% premium based on the companys 90-day Value Volume Weighted Average Price share price of AU$0.0613.
ContiCoal revealed that completion of the transaction with VMR follows a detailed technical and financial due diligence, which was successfully undertaken and has endorsed the companys growth strategy and its underlying coal mining, development and exploration business in South Africa.
The board recommended unanimously that ContiCoal‘s shareholders approve resolution 3 at the general meeting to be held on 28 March 2013, which will authorise the company to allot and issue the shares under the placement to VMR.
“I am pleased to welcome the strategic investment and partnership that we have now established with VMR. The private placement and purchase of small shareholdings will have a significant impact on our business in the short term,” said ContiCoal CEO, Don Turvey.
The introduction of such a strategic and cornerstone investor to our share register demonstrates the value proposition of our operating coal mining business and our coal project development opportunities. VMR is an established and profitable dividend paying mining company and as this is their first investment in the coal sector, s positively reflecting on the quality of our portfolio. We are pleased to have secured this strategic and long-term relationship with VMR and to have the opportunity to work with its dynamic and successful management team, he explained.
VMR joint CEO Marius Saaiman said: Our investment in ContiCoal reflects VMRs continued diversification strategy while maintaining our requirement to invest in strong, cash generating assets. We think ContiCoal is at an inflection point in terms of its development. The company has a strong portfolio of projects and has demonstrated its ability to develop and operate mines and we look forward to working and supporting the management team as production continues to increase and as greater value is recognised within the company.