www.conticoal.com
Continental Coal Ltd (ASX:CCC) is a South African coal exploration and development company with current JORC resources of over 300Mt. Continental holds interests in a number of early stage and advanced stage exploration assets in various established South African Coal mining regions.
CCC was formed to take advantage of the robust domestic and global demand for coal, with particular focus on South Africa, Botswana, Mozambique and Zimbabwe.
Continental Coal raises US$65 million ahead of its COOL flotation on AIM
South African coal miner Continental Coal (ASX:CCC) has raised US$65 million ahead of next week’s planned arrival of the company’s shares on London’s Alternative Investment Market, where their designated EPIC code will be ‘COOL’.
The bulk of the funds will be used for the development of Continental’s third coal mine in South Africa. This mine, known as the Penumbra Coal Project, is forecast to increase its run-of-mine production to a targeted annual rate of 750,000 tonnes of coal in the third quarter of next year.
The principal earthworks contractor for the project has begun civil and construction earthworks, including initial ground breaking at the site.
The financing has come from ABSA Capital, which is a division of one of South Africa’s largest financial services providers: ABSA Bank (a subsidiary of Barclays Bank). Continental announced today that it had received final credit approval and that due diligence had been finished, with legal documentation nearing completion.
The financing agreement includes a seven-year term loan facility of US$35 million to be made available to fund the development of the Penumbra mine, as well as a three-year term loan facility of US$15 million to be made available to refinance existing secured indebtedness under the coal prepayment deal that Continental has with EDF Trading. It also includes a secured annually-renewable working capital facility of ZAR100 million (approximately US$15 million) to fund general corporate working capital requirements.
“The development of the Penumbra Mine, our third coal mine in South Africa, is of strategic importance for our overall growth plans and therefore to have secured funding for this project is very important to the company and its shareholders,” said Don Turvey, Continental’s chief executive officer. “The fact that we received two very attractive financing offers for this mine is testament to the feasibility studies we conducted and the subsequent mine development plan chosen.”
The firm’s two existing mines, Vlakvarkfontein and Ferreira, produce approximately two million tonnes of coal per annum for both export and domestic markets Continental has stated that it also has a portfolio of nine additional coal development and advanced exploration projects, and that it intends to develop two further themal coal mines this year.
In its 2010/2011 financial year, Continental produced 1,290,000 tonnes of run-of-mine thermal coal, which included 962,187 tonnes of domestic-quality thermal coal and 327,962 tonnes of export-quality coal. The firm is targeting run-of-mine production from 2013 of seven million tonnes per annum.
South Africa is a country that is well-known for having issues with electricity supply, and blackouts are commonplace. So, Continental is increasing its coal production in an environment where increasing use of coal-fired power stations is not only tolerated, but encouraged.
For example, last year the go-ahead was given for one of the world’s biggest coal-fired power stations to be built in the country in spite of protests from green groups citing environmental concerns.
The company said its flotation on AIM, planned for September 19, is designed to increase its access to global financial markets, further diversify the firm’s shareholder base and (together with its existing listing on the Australian Securities Exchange) provide a stronger platform from which to consider acquisition opportunities.
