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COAL OF AFRICA LIMITED - Notice of General Meeting and Explanatory Memorandum to Shareholders

Release Date: 26/08/2014 15:13
Code(s): CZA     PDF:  
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Notice of General Meeting and Explanatory Memorandum to Shareholders

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")

ABN 98 008 905 388


NOTICE OF GENERAL MEETING AND EXPLANATORY MEMORANDUM TO SHAREHOLDERS


Date of Meeting
25 September 2014

Time of Meeting
10 a.m. (London time)

Place of Meeting
Tavistock Communications
8th Floor
131 Finsbury Pavement
London EC2A 1NT


A Proxy Form is enclosed
Please read this Notice and Explanatory Memorandum carefully.
If you are unable to attend the General Meeting please complete and return the enclosed Proxy Form
in accordance with the specified directions.



Coal of Africa Limited                                                      Constitution means the Company's constitution, as
ABN 98 008 905 388                                                          amended from time to time.

NOTICE OF GENERAL MEETING                                                   Corporations Act means the Corporations Act 2001
                                                                            (Cth).
Notice is hereby given that a General Meeting of
Shareholders of Coal of Africa Limited ABN 98                               Director means a director of the Company from
008 905 388 will be held at 10 a.m. (London time)                           time to time.
on    25     September     2014    at   Tavistock
Communications, 8th Floor, 131 Finsbury                                     Explanatory Memorandum means the explanatory
Pavement, London EC2A 1NT for the purpose of                                memorandum accompanying this Notice.
transacting the following business referred to in
this Notice of General Meeting.                                             GBP means pounds sterling.

                                                                            Listing Rules means the Listing Rules of the ASX.
AGENDA
ITEMS OF BUSINESS                                                           Notice means this Notice of General Meeting.

                                                                            Resolution means a resolution contained in this
                                                                            Notice.
1.        Resolution 1 – Approval of issue of
          Shares
                                                                            Shares means fully paid ordinary shares in the
                                                                            capital of the Company.
To consider and, if thought fit, to pass the following
resolution as an ordinary resolution:
                                                                            By order of the Board
"That, for the purpose of Listing Rule 7.1 and all other
purposes, the Company approves the allotment and issue
of up to 695,000,000 Shares at an issue price of
GBP0.055 per Share, as more particularly described in
                                                                            Tony Bevan
the Explanatory Memorandum accompanying the
                                                                            Company Secretary
Notice."

 The Company will disregard any votes cast on Resolution 1 by               Dated: 26 August 2014
 any person who may participate in the proposed issue and any
 person who might obtain a benefit, except a benefit solely in the
 capacity of a holder of ordinary shares if the resolution is passed,
 and any person associated with those persons.
 However, the Company need not disregard a vote if:
 •    the vote is cast by a person as proxy for a person who is
      entitled to vote, in accordance with the directions on the
      proxy form; or
 •    it is cast by the person chairing the meeting as proxy for a
      person who is entitled to vote, in accordance with a
      direction on the proxy form to vote as the proxy decides.




OTHER BUSINESS
To deal with any other business which may be
brought forward in accordance with the
Constitution and the Corporations Act.

For the purposes of this Notice of General Meeting,
the following definitions apply:

ASX means ASX Limited ABN 98 008 624 691 and,
where the context permits, the Australian Securities
Exchange operated by ASX Limited.

Board means the board of Directors of the
Company.

Company means Coal of Africa Limited ABN 98 008
905 388.




How to vote                                                      •   Shareholders who return their proxy forms with a
Shareholders can vote by either:                                     direction how to vote but do not nominate the
                                                                     identity of their proxy will be taken to have
•   attending the meeting and voting in person or by
                                                                     appointed the Chairman of the meeting as their
    attorney or, in the case of corporate shareholders,
                                                                     proxy to vote on their behalf. If a proxy form is
    by appointing a corporate representative to attend
                                                                     returned but the nominated proxy does not attend
    and vote; or
                                                                     the meeting, the Chairman of the meeting will act
•   appointing a proxy to attend and vote on their                   in place of the nominated proxy and vote in
    behalf using the proxy form accompanying this                    accordance with any instructions.            Proxy
    Notice and by submitting their proxy appointment                 appointments in favour of the Chairman of the
    and voting instructions in person, by post or by                 meeting, the secretary or any Director that do not
    facsimile.                                                       contain a direction how to vote will be used where
                                                                     possible to support each of the resolutions
Voting in person (or by attorney)                                    proposed in this Notice, provided they are entitled
Shareholders, or their attorneys, who plan to attend the             to cast votes as a proxy under the voting exclusion
meeting are asked to arrive at the venue 15 minutes                  rules which apply to some of the proposed
prior to the time designated for the meeting, if possible,           resolutions. These rules are explained in this
so that their holding may be checked against the                     Notice.
Company's share register and attendance recorded.                •   To be effective, proxies must be lodged by 10 a.m.
Attorneys should bring with them an original or                      (London time) on 23 September 2014. Proxies
certified copy of the power of attorney under which                  lodged after this time will be invalid.
they have been authorised to attend and vote at the              •   Proxies may be lodged using any of the following
meeting.                                                             methods:
                                                                     -   by returning a completed proxy form in
Voting by a corporation                                                  person or by delivery or post using the pre-
A shareholder that is a corporation may appoint an                       addressed envelope provided with this
individual to act as its representative and vote in                      Notice to:
person at the meeting. The appointment must comply                       Coal of Africa Limited
with the requirements of section 250D of the                             Suite 8, 7 The Esplanade,
Corporations Act. The representative should bring to                     Mt Pleasant
the meeting evidence of his or her appointment,
                                                                         Western Australia 6153
including any authority under which it is signed.
                                                                         Australia
Voting by proxy                                                      -   by faxing a completed proxy form to the
                                                                         facsimile number provided on the Proxy
•   A shareholder entitled to attend and vote is                         Form accompanying this Notice.
    entitled to appoint not more than two proxies.
    Each proxy will have the right to vote on a poll
    and also to speak at the meeting.                                The proxy form must be signed by the shareholder
                                                                     or the shareholder's attorney. Proxies given by
•   The appointment of the proxy may specify the
                                                                     corporations must be executed in accordance with
    proportion or the number of votes that the proxy
                                                                     the Corporations Act. Where the appointment of a
    may exercise. Where more than one proxy is
                                                                     proxy is signed by the appointer's attorney, a
    appointed and the appointment does not specify
                                                                     certified copy of the power of attorney, or the
    the proportion or number of the shareholder's
                                                                     power itself, must be received by the Company at
    votes each proxy may exercise, the votes will be
                                                                     the above address, or by facsimile, and by 10 a.m.
    divided equally among the proxies (i.e. where
                                                                     (London time) on 23 September 2014. If facsimile
    there are two proxies, each proxy may exercise
                                                                     transmission is used, the power of attorney must
    half of the votes).
                                                                     be certified.
•   A proxy need not be a shareholder.
•   The proxy can be either an individual or a body
                                                                 Shareholders who are entitled to vote
    corporate.
                                                                 In accordance with Regulations 7.11.37 and 7.11.38 of
•   If a proxy is not directed how to vote on an item of         the Corporations Regulations 2001, the Board has
    business, the proxy may generally vote, or abstain           determined that a person's entitlement to vote at the
    from voting, as they think fit.                              General Meeting will be the entitlement of that person
•   Should any resolution, other than those specified            set out in the Register of Shareholders as at 10 a.m.
    in this Notice, be proposed at the meeting, a proxy          (London time) on 23 September 2014. Changes in the
    may vote on that resolution as they think fit.               register of shareholders after this time will be
•   If a proxy is instructed to abstain from voting on           disregarded in determining the rights of any person to
    an item of business, they are directed not to vote           attend and vote at the meeting.
    on the shareholder's behalf either on a show of
    hands or on the poll and the shares that are the
    subject of the proxy appointment will not be
    counted in calculating the required majority.





Coal of Africa Limited
ABN 98 008 905 388


EXPLANATORY MEMORANDUM
This Explanatory Memorandum is intended to provide shareholders with sufficient information to assess the
merits of the Resolution contained in the accompanying Notice of General Meeting of Coal of Africa Limited
(“CoAL” or the “Company”).

Certain abbreviations and other defined terms are used throughout this Explanatory Memorandum. Defined
terms are generally identifiable by the use of an upper case first letter. Details of the definitions and abbreviations
are set out in the Glossary to this Explanatory Memorandum.


BACKGROUND TO RESOLUTION 1

Key terms of the Placement

On 26 August 2014, the Company announced it was proposing to undertake a private placement 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 (“Placement Shares”) at an issue price of GBP0.055 per Share (“Placement”). A copy of this
announcement is attached as Annexure A to this Explanatory Memorandum.

The Placement Shares are proposed to be issued in two separate stages:
    •   the issue of 251,000,000 Shares (“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 (“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 entities set out in the table below (“Placees”), pursuant to
subscription agreements entered into between the Placees and the Company on or about 26 August 2014
(“Subscription Agreements”):


                                         Number of         Number of      Total         Issue
                                         Stage 1           Stage 2        number of     price per      Currency of
    Placees
                                         Placement         Placement      Placement     Share          settlement
                                         Shares            Shares         Shares        (GBP)

    Haohua Energy International
    (Hong Kong) Resource Co.
                                                                                                    US$, based on the
    Limited (“HEI”), a                    98,000,000        117,000,000   215,000,000     0.055
                                                                                                    Exchange Rate
    subsidiary of Beijing Haohua
    Energy Resource Co. Limited
    TMM Holdings (Proprietary)                                                                      Rand, based on
                                          26,000,000        189,000,000   215,000,000     0.055
    Limited (“TMM”)                                                                                 the Exchange Rate
    M&G Investment
    Management Limited                    97,000,000         88,000,000   185,000,000     0.055     GBP
    (“M&G”)
    Investec Asset Management
                                                                                                    Rand, based on
    (Proprietary) Limited                 30,000,000         50,000,000    80,000,000     0.055
                                                                                                    the Exchange Rate
    (“IAM”)
    Total Placement Shares to
                                          251,000,000       444,000,000   695,000,000       -               -
    be issued


1
    Based on an exchange rate as at 19 August 2014 of GBP 1: US$1.70




 Total amount to be raised          13.805          24.420          38.225
                                                                                      -                -
 (GBP)                              million         million         million

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 Resolution 1 at the Meeting;
   •    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.

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.

CoAL has given certain limited warranties to the Placees under the Subscription Agreements (“Warranties”), and
each Placee has the right to terminate its participation in the Placement if it becomes aware that there has been a
breach of any Warranty, or any fact or circumstance has arisen which would render any of the Warranties untrue
or inaccurate or misleading in any respect which, in the reasonable opinion of the relevant Placee, is material in
the context of its investment in CoAL, in each case as if the Warranties were repeated at all times between the
date of the Subscription Agreements and completion of the relevant stage of the Placement. If a Placee terminates
its Subscription Agreement before the Stage 1 Placement has completed, then each other Placee will also have the
right to terminate its Subscription Agreement and the number of Placement Shares may decrease accordingly or
the Placement may not proceed at all. If a Placee terminates its Subscription Agreement after the Stage 1
Placement has completed, then each other Placee will have the right to terminate its Subscription Agreement, but
only insofar as it relates to their participation in the Stage 2 Placement and CoAL will be entitled to retain the
proceeds from the Stage 1 Placement.

The Company has been informed by each of HEI and M&G that they have sought approval from the Foreign
Investment Review Board (“FIRB”) for the acquisition of their respective Placement Shares. The Company has
also been informed by HEI that it has submitted the necessary applications for the regulatory approvals required
to satisfy the Stage 1 Conditions.




Shareholdings in the Company

As at the date of this Explanatory Memorandum, the following Placees were substantial shareholders in the
Company:

Placee                                    Number of Shares held                   Percentage shareholding
HEI                                       247,417,579                             23.60%
M&G                                       161,128,850                             15.37%
IAM                                       61,951,031                              5.91%

If the Placement proceeds, the shareholdings of the Placees in the Company are expected to be:

Placee                                    Number of Shares held                   Percentage shareholding
                                          Following       Following               Following        Following
                                          Stage 1         Stage 1                 Stage 1          Stage 1
                                          Placement       Placement and           Placement        Placement and
                                                          Stage 2                                  Stage 2
                                                          Placement                                Placement
HEI                                       345,417,579     462,417,579             26.58%           26.53%
M&G                                       258,128,850     346,128,850             19.87%           19.85%
TMM                                       26,000,000      215,000,000 2           2.00%            12.33% 3
IAM                                       91,951,031      141,951,031             7.08%            8.14%


Use of Placement proceeds

Subject to completion, the Company intends to use the proceeds raised from the Placement primarily as follows:

      •   To settle the outstanding acquisition consideration of the tenements comprised in the Company’s
          Greater Soutpansberg Projects;
      •   To implement modifications to the existing plant at the Vele Colliery;
      •   To resolve the current contractual exposure resulting from the take or pay 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 its terms; and
      •   To fund the Company’s expected working capital requirements for the next 18 months.

In addition to the Placement, the Company is seeking to secure funding from the planned disposal of certain non-
core assets, including the Mooiplaats Colliery, within the next 18 months, and is reliant on that funding as well as
the Placement proceeds to be able to achieve all of the uses stated above. While the Directors are confident of
completing one or more of these planned disposals, 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.

If the Placement is not approved at the Meeting 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 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. While the Company is confident of being able to obtain
substitute funding if the planned disposal of certain non-core assets including the Mooiplaats Colliery does not
go ahead, it would be significantly more challenging to obtain alternative funding if the Placement proceeds are
not received in full, 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 to the
continued operation of the Company that shareholders vote in favour of Resolution 1 at the Meeting.




2
    Assumes TMM subscribes for Shares under the Stage 2 Placement.
3
    Assumes TMM subscribes for Shares under the Stage 2 Placement.



If Stage 2 Placement does not proceed

In the event that TMM is not able to obtain sufficient funds to purchase its Stage 2 Placement Shares, the
Company has the right to terminate TMM’s participation in the Stage 2 Placement and is confident that
alternative methods could be implemented to obtain the funds that would otherwise have been provided by
TMM.

In particular, 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 needed.
Additionally, the Company has the ability to issue up to 15% of the Company’s total issued share capital without
requiring further shareholder approval, which could be utilised if the Stage 2 Placement does not proceed.

The Directors only intend to progress these alternative funding options if the Placement cannot proceed as
currently planned. There is no current intention to obtain additional funding beyond the Placement proceeds and
the proceeds of planned asset disposals as described above.

RESOLUTION 1 – APPROVAL OF ISSUE OF PLACEMENT SHARES

Resolution 1 seeks shareholder approval to the issue of a maximum of 695,000,000 Shares at an issue price of GBP
0.055 per Share.

Listing Rule 7.1 requires shareholder approval for the proposed Placement. Listing Rule 7.1 broadly provides,
subject to certain exceptions, that a listed company must not, without prior approval of its shareholders, issue
securities if the number of securities issued, or when aggregated with the number of securities issued by the
company during the previous 12 months, exceeds 15% of the number of securities on issue at the commencement
of that 12 month period.

Given the issue of the Placement Shares under the Placement will exceed this 15% threshold and none of the
exceptions in Listing Rule 7.2 apply, shareholder approval is required in accordance with Listing Rule 7.1.

The effect of Resolution 1 will be to allow the Company to issue the Placement Shares during the period of 3
months after the date of the Meeting (or a longer period if allowed by ASX), without using the Company’s 15%
annual placement capacity, if the other Placement conditions are satisfied or waived (if applicable).

The following information in relation to the Placement Shares is provided to shareholders for the purposes of
Listing Rule 7.3:

(a)    the maximum number of Shares the Company will issue is 695,000,000;
(b)    the Company will allot and issue the Stage 1 Placement Shares three Business Days after the date on which
       CoAL is notified that all of the Stage 1 Conditions have been fulfilled and no later than three months after
       the date of the Meeting unless otherwise extended by ASX granting a waiver to the Listing Rules;
(c)    the Company will allot and issue the Stage 2 Placement Shares three Business Days after the date on which
       CoAL is notified that the TMM Condition has been fulfilled (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) and no later than three months after
       the date of the Meeting unless otherwise extended by ASX granting a waiver to the Listing Rules;
(d)    the issue price of the Placement Shares is GBP0.055 per Share;
(e)    the Placement Shares will be issued to the Placees as set out in the section entitled “Key terms of the
       Placement” in this Explanatory Memorandum;
(f)    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;
(g)    the intended use of the Placement funds raised is as set out in the section entitled “Use of Placement
       proceeds” in this Explanatory Memorandum; and
(h)    a voting exclusion statement has been included in the Notice.




BOARD’S RECOMMENDATION

The Board unanimously recommends that shareholders of the Company support the issue of the Placement
Shares and vote in favour of Resolution 1 at the Meeting and those Directors who hold Shares intend to vote their
Shares in favour of Resolution 1.

GLOSSARY

ASX means ASX Limited ABN 98 008 624 691 and, where the context permits, the Australian Securities Exchange
operated by ASX Limited.

Board means the board of Directors of the Company.

Business Day means any day that banks are open for business in London, United Kingdom, and Johannesburg,
Republic of South Africa.

Company means Coal of Africa Limited ABN 98 008 905 388.

Constitution means the constitution of the Company, as amended from time to time.

Corporations Act means the Corporations Act 2001 (Cth).

Director means a director of the Company from time to time.

Exchange Rate means the GBP – Rand or the GBP – US$ (as applicable) midpoint currency spot exchange rate
published by Bloomberg at 17:00 (South African time) on (1) in the case of the first stage of the Placement, the
Business Day immediately preceding the completion date for the issue of the first stage Placement Shares, and (2)
in the case of the second stage of the Placement, the Business Day immediately preceding the completion date for
the issue of the second stage Placement Shares.

FIRB has the meaning given in this Explanatory Memorandum.

GBP means pounds sterling.

Listing Rules means the Listing Rules of the ASX.

Meeting means the General Meeting the subject of the Notice.

Notice means the notice of General Meeting which accompanies this Explanatory Memorandum.

Placees has the meaning given in this Explanatory Memorandum.

Placement has the meaning given in this Explanatory Memorandum.

Placement Shares has the meaning given in this Explanatory Memorandum.

Rand means the South African rand.

Resolution means a resolution proposed pursuant to the Notice.

Shares means fully paid ordinary shares in the capital of the Company.

Stage 1 Placement has the meaning given in this Explanatory Memorandum.

Stage 1 Completion Condition has the meaning given in this Explanatory Memorandum.

Stage 1 Conditions has the meaning given in this Explanatory Memorandum.

Stage 1 Placement Shares means the Shares proposed to be issued under the Stage 1 Placement.

Stage 2 Placement has the meaning given in this Explanatory Memorandum.


Stage 2 Conditions has the meaning given in this Explanatory Memorandum.

Stage 2 Cut-Off Date has the meaning given in this Explanatory Memorandum.

Stage 2 Placement Shares means the Shares proposed to be issued under the Stage 2 Placement.

Subscription Agreements has the meaning given in this Explanatory Memorandum.

TMM Condition has the meaning given in this Explanatory Memorandum.

US$ means United States dollars.

Warranties has the meaning given in this Explanatory Memorandum.





Date: 26/08/2014 03:13:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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