Wrap Text
Acquisition of the Uitkomst Colliery
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")
ACQUISITION OF THE UITKOMST COLLIERY
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION (IN WHOLE OR PART) IN, INTO OR
FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE
RELEVANT LAWS OF SUCH JURISDICTION
1. Introduction
Shareholders are advised that on 4 April 2017 CoAL entered into a sale of shares and claims
agreement (“the Agreement”) with Pan African Resources Plc (“Pan African”) to acquire 100%
of the shares in and claims against Pan African Resources Coal Holdings Proprietary Limited
(“PAR Coal”) for a purchase price of R275 million (US$ 20.5 million) (the “Purchase Price”)
(“the Acquisition”).
PAR Coal holds a 91% shareholding in Uitkomst Colliery Proprietary Limited (“Uitkomst”) with
the remaining 9% held by broad-based trusts (including employees and communities) and a
strategic entrepreneur’s trust.
2. CoAL’s Rationale for the Acquisition
CoAL has continued to restructure its balance sheet to align its project pipeline and ensure
that it is well positioned to unlock shareholder value through its flagship Makhado development
project. As part of this restructuring, the Company recognised that limited cash flow will be
generated during the Makhado pre-production phase over the next three to four years and
therefore the Company has been focussed on acquiring a cash generating asset. The
Uitkomst Acquisition represents a highly compelling and attractive value proposition that CoAL
believes to be value accretive and which will provide cash flows to support CoAL as the
Company continues to progress its flagship Makhado project.
CoAL believes that Uitkomst will complement CoAL's flagship Makhado project and
development project pipeline:
- Creating a sustainable, multi-product mining group with a skilled team with excellent
resources adding to the development profile;
- Providing positive cash flows from Uitkomst;
- Enlarging the asset base which provides a stronger proposition to access the
necessary funding required to pursue the development of the enlarged group's growth
opportunities; and,
- Positioning CoAL as a potential consolidator with a management team capable of
delivery.
3. Background Uitkomst
Uitkomst is a high grade thermal export quality coal deposit with metallurgical applications,
which is situated in the Utrecht coalfields in KwaZulu Natal. Uitkomst consist of an existing
underground coal mine (Uitkomst - South Mine) and a planned life of mine extension into the
northern area (Klipspruit - North Mine). The South Mine is an easily accessible and well-
established operating mine. Existing infrastructure such as power supply, water supply,
buildings, workshops, weighbridge, water storage and management facilities are all in place.
Uitkomst currently employs approximately 520 employees (including contractors).
For the 6 months ending 31 December 2016 the operation processed 236 011 tonnes and
sold, including acquired coal, 327 202 tonnes of metallurgical quality coal which generated a
revenue of R225 million with an EBITDAi of R38 million. Uitkomst had a net asset value of
R209 million and made operating profits of R21.3 million for the 6 months ended 31 December
2016 as disclosed in the interim financial statements of Pan African.
4. Terms of the Acquisition
Under the terms of the Agreement the Purchase Price is to be settled on the effective date as
follows:
- R125 million (US$9.3 million) payable in cash (“Cash Consideration”); and
- A R25 million (US$1.8 million) deferred consideration (“the Deferred Consideration”).
The Deferred Consideration can be repaid by CoAL at any time prior to the 24 month
anniversary of effective date of the Acquisition. The Deferred Consideration will bear
interest at the prime rate, and shall be repaid on the second anniversary of the effective
date. CoAL shall be entitled to prepay any amounts in respect of the Deferred
Consideration. If not settled after 24 months the balance outstanding can be settled
through the issue of new CoAL shares at the 30 day volume weighted average price
as traded on the JSE (“CoAL VWAP”) on the date immediately prior to the date on
which Pan African gives its election;
o To the extent that certain coal buy in opportunities are not secured by or with
the assistance of Pan African, within two years from the effective date, which
would result in CoAL suffering a lower economic benefit, the Deferred
Consideration can be reduced by such value, subject to a maximum of R15
million; and
- 261 287 625 newly issued CoAL shares (equivalent to R125 million) equating to
approximately 9.3% of the total issued share capital of CoAL (“Share Consideration”).
The deemed issue price of the Share Consideration is based on an 8% discount to the
CoAL VWAP as at 31 March 2017, being R0.52.
There will be no change to the CoAL Board of directors as a result of the Acquisition.
5. Funding of the Acquisition
The Cash Consideration of the Acquisition will be funded through internal cash resources and
through the proceeds of an aggregate US$13 million equity investment from Summer Trees
Pte Ltd and M&G Investment Management Limited at a subscription price of R0.52
(US$0.03878) per CoAL Share, resulting in the issue of 335 250 000 shares (“Subscription
Shares”) pursuant to agreements with CoAL.
6. Conditions Precedent
The implementation of the Acquisition is both subject to and conditional on the fulfilment of
conditions precedent customary for a transaction of this nature and include, inter alia, the
following:
- CoAL has obtained all of the requisite shareholder, AIM, JSE and ASX approvals to
implement the Acquisition and ancillary transactions;
- Uitkomst has entered into a supply of coal agreement on terms acceptable to CoAL;
- Uitkomst has been released, in writing, from its obligations as a guarantor in terms of
Pan African facility agreements;
- Pan African has been released from its obligations as guarantor from the financial
provisions provided to the DMR (“the Guarantee”) and the Guarantee has been
replaced in a manner and form acceptable to CoAL;
- Pan African and CoAL have entered into a transitional services agreement;
- The approval by the Competition Authorities in terms of the Competition Act; and,
- Any exchange control approval which might be required from the Exchange Control
Authorities, in terms of the Exchange Control Regulations is obtained.
7. Management and Employees of Uitkomst
Pan African will for a period of six months (which period can be extended by mutual agreement
between the Parties) post the effective date of the Acquisition, assist CoAL with the transition
of the management and marketing of Uitkomst. CoAL places a high value on its people and
views Uitkomst as a well-managed business and believes that retaining key personnel within
Uitkomst will be key for delivering the business' strategy.
8. Posting of Documentation
Details of the Acquisition will be included in the CoAL circular, which will contain, inter alia, a
notice of the CoAL general meeting and a form of proxy (“Circular”). The Circular is expected
to be posted to CoAL shareholders in mid-April. The salient dates and times pertaining to the
Acquisition will be published at the time of posting of the Circular. Although shareholder
approval is not specifically required for the approval of the Acquisition, CoAL will require
shareholders to approve the issue of the Share Consideration and Subscription Shares.
9. Implementation of the Transaction
Subject to the Acquisition becoming unconditional, it is expected to be implemented in June
2017.
10. Presentation and Webcast
CoAL will make a presentation by webcast regarding the Acquisition at 10am (South Africa
Time) on Wednesday, 5 April 2017. The presentation and webcast details are available on the
CoAL website (www.coalofafrica.com).
Johannesburg
5 April 2017
Enquiries
Coal of Africa Limited
David Brown, De Wet Schutte and Celeste van Tonder (Telephone: +27 (0)10 003 8000)
Qinisele Resources (Proprietary) Limited (Corporate Adviser to CoAL)
Robert Philpot and Dennis Tucker (Telephone: +27 (0)11 883 6358)
Peel Hunt LLP (Nominated adviser and Broker to CoAL)
Matthew Armitt, Ross Allister and Chris Burrows (Telephone: +44 (0)20 7418 8900)
Investec Bank Limited (JSE Sponsor for CoAL)
Robert Smith and Tanya Cesare (Telephone: +27 (0)11 286 7000)
This announcement contains information which constitutes inside information within the meaning of
Article 7 of the Market Abuse Regulation (Regulation (EU) No. 596/2014)
Forward-Looking Statements
This Announcement, including information included or incorporated by reference in this
Announcement, may contain "forward-looking statements" concerning CoAL and/or Pan
African that are subject to risks and uncertainties. Generally, the words "will", "may", "should",
"continue", "believes", "expects", "intends", "anticipates" or similar expressions identify
forward-looking statements. These forward-looking statements involve risks and uncertainties
that could cause actual results to differ materially from those expressed in the forward-looking
statements. Many of these risks and uncertainties relate to factors that are beyond CoAL ability
to control or estimate precisely, such as future market conditions, changes in regulatory
environment and the behaviour of other market participants. CoAL cannot give any assurance
that such forward-looking statements will prove to have been correct. The reader is cautioned
not to place undue reliance on these forward looking statements. CoAL and Pan African
assume no obligation and do not undertake any obligation to update or revise publicly any of
the forward-looking statements set out herein, whether as a result of new information, future
events or otherwise, except to the extent legally required.
Statements of intention
Statements of intention are statements of current intentions only, which may change as new
information becomes available or circumstances change.
Exchange rates
The following exchange rates have been applied in this announcement: US$ / ZAR of 13.41.
i
Earnings before interest, taxation, depreciation and amortisation, impairments and profit/loss on disposal of
investments.
Date: 05/04/2017 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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