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COAL OF AFRICA LIMITED - Finance Facilities

Release Date: 05/04/2017 09:00
Code(s): CZA     PDF:  
Wrap Text
Finance Facilities

 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                                                                     5 April 2017



                                         FINANCE FACILITIES


Coal of Africa Limited (“CoAL” or “the Company”) is pleased to announce that the Company has entered into
a loan agreement (the "Loan Agreement”) with the Industrial Development Corporation of South Africa*
(“IDC”) and Baobab Mining and Exploration Proprietary Limited ("Baobab"), a subsidiary of CoAL and owner
of the mining right for the Makhado Project, in terms of which the IDC shall advance loan funding up to
R240 million (two hundred and forty million rand) (approximately US$17.6million) to Baobab for use in the
Makhado Project ("Loan Funding"). The Loan Funding will be used to advance the operations and
implementation of the Makhado Project, CoAL’s flagship project.
Salient Features


   -   The IDC will advance to Baobab in two equal tranches of R120 million (one hundred and twenty
       million rand) (approximately US$8.8million) upon written request from Baobab;

   -   Upon the third anniversary of each advance from IDC to Baobab, Baobab will be required to repay to
       IDC the amount advanced to it plus the amount equal to a real after tax internal rate of return equal to
       16% of the amount of each advance to Baobab (collectively the "Required Amount");

   -   Baobab shall be permitted to request of IDC that it prepay some or all of the Required Amount before
       the scheduled repayment date;

   -   Subject to the provisions of the Loan Agreement CoAL shall stand as surety for Baobab's obligations
       to make payment of the Required Amount in instances in which Baobab defaults on such payments;

   -   CoAL shall issue IDC with warrants (in respect of CoAL shares) pursuant to each advance date as
       soon as the relevant shareholder approval for the issue of such warrants occurs, in accordance with
       the following salient terms:

    A. Following advance of the first tranche of the Loan Funding, the Company shall issue to IDC
       warrants over ordinary shares equating to 2.5% of the entire issued share capital of CoAL as at 5
       December 2016;

    B. Following advance of the second tranche of the Loan Funding, the number of warrants to be
       issued to IDC shall be equal to 2.5% of the entire issued share capital of CoAL as at the date of
       the second advance;

    C. The price at which IDC shall be entitled to purchase the CoAL shares (in terms of which the
       warrants shall be 'converted' into ordinary shares in the issued share capital of Coal of Africa),
       shall be an amount equal to a 30% (thirty percent) premium to the 30 day Volume Weighted
       Average Price of the CoAL shares as traded on the JSE as at 5 December 2016, equating to
       R0.60 per share; and

    D. IDC shall be entitled to exercise the warrants for a period of 5 years from the date of their issue
       (as contemplated in (A) and (B) above).

-   Upon each advance date, Baobab shall be required to, issue new ordinary shares in Baobab to IDC
    which shall be equivalent to 5% of the entire issued share capital of Baobab at such time; and such
    CoAL's shareholding in Baobab will be diluted accordingly. Notwithstanding such dilution, CoAL will
    retain a majority shareholding in Baobab;

-   If the second advance of R120million is not required by Baobab, and therefore not advanced by the
    IDC, the IDC may elect to exercise one of the following rights:

    A. Baobab shall issue new ordinary shares in Baobab equivalent to 5% of the entire issued share
       capital of Baobab to IDC for an aggregate subscription price of R60million (sixty million rand)
       (approximately US$4.4million); or,

    B. Baobab shall issue ordinary shares in Baobab equivalent to 1% of the entire issued share capital
       of Baobab to IDC for an aggregate subscription price of R1 (one rand); or,

    C. a penalty fee of R12 million (twelve million rand) (approximately US$880k)shall be paid to the
       IDC;

-   If some or all of the repayment amount is not paid by Baobab to the IDC when due, IDC may elect to
    exercise one of the following rights, in full discharge of its right to receive the then outstanding portion
    of the Required Amount:

    A. IDC may be issued further shares in Baobab (and CoAL's shareholding in Baobab shall be diluted
       accordingly); or,
    B. IDC may exercise its rights against CoAL under a suretyship agreement;

-   Baobab and CoAL will provide IDC with warranties, representations and undertakings which are
    customary in a loan funding agreement of this nature; and
              
    For so long as the Required Amount is payable to the IDC, IDC shall be entitled to nominate 1 (one)
    person for appointment to the board of directors of Baobab and to be a member of the project steering
    committee of the Makhado Project.



David Brown, Chief Executive Officer of CoAL, commented:
“Whilst final agreements have now been executed, the transaction with the IDC was initially agreed in
December 2016, and is reflective of the Company’s position at that time. The funding of pre-project activities
at Makhado is welcomed as we progress the project towards a construction start subject to regulatory and
funding requirements. We continue to focus on the upliftment and dismissal of the appeal against the
Integrated Water Use Licence and securing the remaining surface rights of the project. This is a defining step
towards the bringing the project to reality. We welcome the IDC as a supportive shareholder in the Makhado
project who will work with CoAL to promote future success.”


*The IDC is a national development finance institution set up to promote economic growth and industrial
development. They are owned by the South African government under the supervision of the Economic
Development Department




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 van Tonder                                             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).

This announcement is inside information for the purposes of article 7 of EU Regulation 596/2014.

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, Shangren Ding

Date: 05/04/2017 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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