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MOU for Makhado Project
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
1 December 2015
MOU for Makhado Project
Coal of Africa Limited ("CoAL" or the "Company") is pleased to announce the signing of a non-binding
Memorandum of Understanding (“MOU”) with Qingdao Hengshun Zhongsheng Group Co Ltd (“Hengshun”)
with respect to a proposed equity investment in Baobab Mining and Exploration (Pty) (“Baobab”) a subsidiary
of CoAL. Baobab is the legal owner of the mining rights for the Makhado Project (“Makhado”), a hard coking
coal project located in the Soutpansberg Coalfield, 36km north of Makhado town in South Africa’s Limpopo
province.
Highlights:
1) Hengshun proposes to acquire up to 34% of Baobab at a mutually agreed consideration. The
preliminary terms of negotiation between both parties are based on an indicative cash acquisition
price of approximately US$113.94 million which implies a Makhado Project value of at least US$335
million. The final transaction valuation would be subject to both parties’ negotiation, a valuation report
issued by an internationally reputable accounting firm and the conclusion of a formal subscription and
sale agreement between both parties.
2) The proposed equity investment is subject to an Engineering, Procurement and Construction contract
(“EPC”) being awarded to Hengshun. The value of the EPC contract is approximately US$400 million,
but will be confirmed by the completion of a Front End Engineering and Design which will be
completed in H1 CY 2016.
3) The equity investment is subject to a formal due diligence process as well as approval of the
transaction from both the CoAL and Hengshun boards respectively.
4) The 34% equity investment will entitle Hengshun to nominate a to be agreed number of directors to
the board of Baobab, but the effective management of Baobab and operatorship of the Makhado
project will remain the responsibility of CoAL.
5) A debt package may also be provided by Hengshun on commercial arm’s length terms.
6) Hengshun has the right to match any alternative proposals for the provision of the mining contract.
7) The MOU is a non-binding document which is also subject to CoAL shareholder and any other
necessary regulatory approvals.
The transaction terms are expected to be completed in H1 CY 2016.
We refer to the announcement on 21 September 2015 and 30 October 2015 stating that Yishun Brightrise
Investment PTE Limited (“Yishun”) has expressed an intention to acquire a strategic interest in the Makhado
Project as well as the EPC contract. Yishun remain supportive of the Company (as demonstrated by the
recent commitment to a further equity subscription) however they were not going to be the acquiring party for
the strategic interest in the Makhado project nor entering into the EPC contract.
Hengshun is an industrial conglomerate incorporated in Qingdao, Shandong Province, China and listed on the
Shenzen Stock Exchange.
David Brown commented “The MOU and the proposed investment by Hengshun is another step towards
bringing the Makhado project into production. Together with the imminent receipt of the Water Use License
the formalisation of the MOU into a subscription and sale agreement will greatly assist the Company in
completing the outstanding requirements for the Makhado project and commencing the planned construction
by H2 CY2016.”
AUTHORISED BY:
David Brown
CEO
For more information contact:
David Brown Chief Executive Officer Coal of Africa +27 10 003 8000
De Wet Schutte Chief Financial Officer Coal of Africa +27 10 003 8000
Celeste Riekert Investor Relations Coal of Africa +27 10 003 8000
Tony Bevan Company Secretary Endeavour Corporate Services +61 08 9316 9100
Company advisors:
Matthew Armitt/Ross Allister Nominated Adviser and Broker Peel Hunt LLP +44 20 7418 8900
Jos Simson/Emily Fenton Financial PR (United Kingdom) Tavistock +44 20 7920 3150
Charmane Russell/Olwen Auret 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).
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
Bernard R. Pryor – Chairman, David H. Brown – Chief Executive Officer, De Wet O Schutte
Non-executive directors: Peter G. Cordin, Andrew D Mifflin, Khomotso B. Mosehla ,Thabo F Mosololi, Rudolph H. Torlage
Date: 01/12/2015 05:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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