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Private Placement and Notice of EGM
Coal of Africa Limited
Incorporated and registered in Australia)
(Registration number ABN 008 905 388)
ISIN AU000000CZA6
JSE/ASX/AIM share code: CZA
("CoAL or the "Company" or the "Group")
ANNOUNCEMENT
26 August 2014
PRIVATE PLACEMENT
Coal of Africa Limited ("CoAL" or "the Company") today announces that it has entered into conditional agreements with
certain existing and new investors to raise up to approximately GBP38.225 million (or approximately US$64.9 million) (1)
through the issue of up to 695,000,000 new shares in the Company ("Placement Shares") at an issue price of GBP0.055
per share ("Placement"). The issue price represents a premium of approximately 101.5% to the closing mid-market
price on the AIM market of the London Stock Exchange on 22 August 2014.
CoAL is the holder of multiple large-scale coal assets that are strategically located in close proximity to existing logistics
and infrastructure in the Limpopo province, with a combined resource base in excess of 2 billion minable tonnes in situ,
with hard-coking coal as the primary product. Management has embarked on, and has substantially completed, a
turnaround strategy with five key priorities, of which the final two outstanding are:
• Completing the planned disposal of certain non-core assets (including the Mooiplaats Colliery); and
• Securing funding of, and regulatory clearances for, the Makhado Project.
As further described below, the Company intends to use the bulk of the proceeds from the Placement, together with
the proceeds from the planned disposal of certain non-core assets (including the Mooiplaats Colliery), to unlock the
inherent value in the underlying resources over the short, medium and long term and provide working capital for the
Company over the next 18 months.
Use of Proceeds
Subject to completion, the Company intends to use the expected proceeds from the Placement and from the planned
disposal of certain non-core assets, including the Mooiplaats Colliery, primarily as follows:
Proposed use Amount
(1) Based on an exchange rate as at 19 August 2014 of GBP1:US$1.70
AU: Coal of Africa Limited, Suite 8, 7 The Esplanade, Mount Pleasant, Perth WA 6153, Australia, Tel: +61 8 9316 9100, Fax: +61 8 9316 5475
ZA: South Block, Summercon Office Park, Cnr Rockery Lane and Sunset Avenue, Lonehill, 2191, Tel: +27 10 003 8000 Fax: +27 11 388 8333 Email: adminza@coalofafrica.com
To settle the outstanding acquisition consideration of the tenements US$30 million
comprised in the Company’s Greater Soutpansberg Project.
To implement modifications to the existing plant at the Vele Colliery. US$25 million
To resolve the current contractual exposure resulting from the take or pay US$10 million
provisions of the throughput agreement between the Company, Terminal De
Carvao Da Matola Limitada and Grindrod Corridor Management Proprietary
Limited.
To settle the Investec Bank Limited working capital facility in accordance with US$6 million
its terms.
To fund the Company’s expected working capital requirements for the next 18 US$16 million
months.
David Brown, CEO of CoAL commented,
“In terms of CoAL’s strategy going forward, we have allocated the resources into short, medium and long term growth
projects. It is important for CoAL to raise these funds to commence the value creation process. The short term plan
relates to the plant modification at the Vele Colliery. Vele Colliery is a "brownfields" project, which implies less time and
risk to develop the asset compared to a "greenfields" project, and has the potential to become CoAL’s near term cash
generator. This would enable CoAL to move forward and develop its medium term project, Makhado. The intention is
that this project will be funded at the project level by debt funding and partly through the sale of equity at the asset
level. These short and medium term projects would be the enablers for the longer term growth through the
development of the Greater Soutpansberg Project assets.”
The Placement
The requirement for the Placement has arisen from a number of factors, including: the delay in and reduction in the
expected quantum of consideration for the disposal of the Mooiplaats Colliery; additional costs incurred to complete
the product testing at the Vele Colliery for ArcelorMittal South Africa Limited; the Company only partially mitigating its
take-or-pay obligations under the throughput agreement between the Company, Terminal De Carvao Da Matola
Limitada and Grindrod Corridor Management Proprietary Limited following the placing of the Mooiplaats Colliery on
care and maintenance; and the cessation of production at the Vele Colliery in anticipation of the plant modification.
The final payment for the acquisition of the assets comprised in the Greater Soutpansberg Project, which represent
access to more than 1.6 billion minable tonnes in situ, is also now payable. The Company has been negotiating to defer
this payment until it is cash generative, but agreement on this has not yet been reached and the payment is now due.
The Placement Shares are proposed to be issued to the following investors (collectively, "the Placees") pursuant to
subscription agreements entered into between the Placees and the Company ("Subscription Agreements"):
• Haohua Energy International (Hong Kong) Resource Co. Limited ("HEI");
• M&G Investment Management Limited ("M&G");
• Investec Asset Management (Proprietary) Limited ("IAM"); and
• TMM Holdings (Proprietary) Limited ("TMM").
The Placees are existing substantial shareholders of the Company, other than TMM, who will be a new substantial
shareholder. TMM was established in 2003 and is the umbrella company for a number of specialised entities that offer
a variety of industry specific integrated security solutions. One of TMM’s objectives is to seek out investment
opportunities in any business sector which presents sustainable growth opportunities.
The Placement Shares are proposed to be issued in two separate stages:
• the issue of 251,000,000 shares in the Company ("Stage 1 Placement Shares") to raise a total of approximately
GBP13.805 million, conditional upon the fulfilment of the Stage 1 Conditions as defined below ("Stage 1
Placement"); and
• the issue of 444,000,000 shares in the Company ("Stage 2 Placement Shares") to raise a total of approximately
GBP24.420 million, conditional upon the fulfilment of the Stage 2 Conditions as defined below ("Stage 2
Placement").
The Placement Shares are proposed to be issued to the Placees as set out in the table below:
Placees Number of Stage 1 Number of Stage 2 Total number of
Placement Shares Placement Shares Placement Shares
HEI 98,000,000 117,000,000 215,000,000
TMM 26,000,000 189,000,000 215,000,000
M&G 97,000,000 88,000,000 185,000,000
IAM 30,000,000 50,000,000 80,000,000
Total Placement Shares to 251,000,000 444,000,000 695,000,000
be issued
Total amount to be raised 13.805 million 24.420 million 38.225 million
(GBP)
Under the Subscription Agreements, the Stage 1 Placement is conditional upon the following conditions ("Stage 1
Conditions"):
• the approval by the Company’s shareholders of the Placement as required by the ASX Listing Rules at an
extraordinary general meeting of the Company ("EGM");
• HEI and M&G each having received confirmation from the Treasurer of the Commonwealth of Australia under
the Foreign Acquisitions and Takeovers Act 1975 (Cth) that it has no objection to the acquisition by HEI and
M&G of their respective Placement Shares; and
• HEI having received all necessary regulatory approvals within the People's Republic of China for it to acquire its
Placement Shares.
The Stage 1 Placement Shares will be issued and paid for within three business days of the date on which CoAL notifies
the Placees that each of the Stage 1 Conditions has been satisfied.
If any of the Stage 1 Conditions has not been satisfied by 23 November 2014, or such later date as the Company and the
Placees agree (not to be later than the Stage 2 Cut-Off Date, as defined below), the Subscription Agreements will
automatically terminate and the Placement will not proceed.
Under the Subscription Agreements, the Stage 2 Placement is conditional upon the following conditions ("Stage 2
Conditions"):
• completion of the Stage 1 Placement having taken place ("Stage 1 Completion Condition"); and
• TMM having obtained sufficient funds to purchase its Stage 2 Placement Shares or the Company having found
a substitute investor or investors to subscribe for TMM’s Stage 2 Placement Shares and each such investor
having entered into a subscription agreement with the Company in respect of some or all of TMM’s Stage 2
Placement Shares on substantially similar terms to the Subscription Agreements ("TMM Condition").
The Stage 2 Placement Shares will be issued and paid for within three business days of the date on which CoAL notifies
the Placees that the TMM Condition has been satisfied (unless the TMM Condition is satisfied before the Stage 1
Completion Condition has been satisfied, in which case the Stage 2 Placement Shares will be issued and paid for at the
same time as the Stage 1 Placement Shares).
Under the Subscription Agreement with TMM, if TMM has not obtained sufficient funds to purchase its Stage 2
Placement Shares by 1 December 2014, then the Company has the right to terminate TMM’s participation in the Stage
2 Placement. In that case, the Company may seek to find one or more other investors to take up TMM’s Stage 2
Placement Shares at the issue price of GBP0.055 per share and otherwise on substantially similar terms. The company
has already engaged with third parties who, for timing reasons, have been unable to participate in the Placement and
who could possibly absorb TMM’s Stage 2 Placement Shares.
If the Stage 1 Completion Condition has been satisfied, but the TMM Condition has not been satisfied, by the earlier of
(1) 24 December 2014 and (2) the date which is three Business Days earlier than three months after the date of the
EGM (the "Stage 2 Cut-Off Date"), then the Stage 1 Placement will proceed but the Stage 2 Placement will not proceed.
The Company will notify ASX as and when it receives notice that a condition has been fulfilled.
If the Placement is not approved at the EGM or does not proceed in whole or in part for any other reason, including as a
result of any of the other Placement conditions not being satisfied, or if the Company is not able to achieve the planned
disposal of certain non-core assets, including the Mooiplaats Colliery (whether at all or for the expected amount),
within the next 18 months, the Company will need to seek funding from other sources to meet its future capital
expenditure and working capital needs. As has been previously disclosed, the Company is committed to the disposal of
certain of its non-core assets, including the Mooiplaats Colliery, and the directors of the Company are confident of
completing one or more of these disposals. However, there can be no guarantee that any of these initiatives will be
successful. Further, even if successful, these planned disposals would not provide all the funding required to satisfy the
Company's needs without the Placement proceeds. The Company would therefore need to immediately seek funding
from other sources, and there can be no guarantee that such funding will be available at all or that, if available, it will
be on terms which are commercially acceptable to the Company. It is therefore vitally important for the continued
operation of the Company that the Placement be approved by shareholders at the EGM.
The Company will apply for admission of the Placement Shares on ASX, on AIM and on the JSE. Upon issue, the
Placement Shares will be fully paid ordinary shares in the capital of the Company and rank equally in all respects with
the existing fully paid ordinary shares on issue.
Under the AIM Rules for Companies, M&G and HEI are related parties of the Company as a result of the current level of
their shareholding in the Company of approximately 23.6% and 15.37%, respectively. HEI’s subscription for a total of up
to 215 million Placement Shares (98 million Stage 1 Placement Shares and 117 million Stage 2 Placement Shares) and
M&G’s subscription for a total of up to 185 million Placement Shares (97 million Stage 1 Placement Shares and 88
million Stage 2 Placement Shares), are therefore considered related party transactions under the AIM Rules. The
directors of the Company consider, having consulted with the Company’s Nominated Adviser, Investec Bank plc, that
the terms of each of these related party transactions are fair and reasonable in so far as the Company's shareholders
are concerned.
The EGM
th
The EGM is expected to be held at 10 a.m. (London time) on 25 September 2014 at Tavistock Communications, 8
Floor, 131 Finsbury Pavement, London EC2A 1NT. The Company intends to dispatch the Notice of EGM and Explanatory
Memorandum to shareholders later today.
Authorised by
David Brown
Chief Executive Officer
26 August 2014
For more information contact:
David Brown Chief Executive Officer Coal of Africa +27 10 003 8000
Michael Meeser Chief Financial Officer Coal of Africa +27 10 003 8000
Celeste Harris Investor Relations Coal of Africa +27 10 003 8000
Tony Bevan Company Secretary Endeavour Corporate Services +61 08 9316 9100
Company advisors:
Jos Simson/Emily Fenton Financial PR (United Kingdom) Tavistock +44 20 7920 3150
Chris Sim/George Price/Jeremy Ellis Nominated Adviser Investec Bank plc +44 20 7597 5970
Charmane Russell/Jane Kamau Financial PR (South Africa) Russell & Associates +27 11 880 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 Vele
Colliery (coking and thermal coal), the Greater Soutpansberg Project /MbeuYashu, including CoAL’s Makhado Project (coking and thermal coal).
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