Wrap Text
Full Year Results for the period ending 30 June 2017
Coal of Africa Limited
(Incorporated and registered in Australia)
Registration number ABN 008 905 388
ISIN AU000000CZA6
JSE/ASX/AIM share code: CZA
ANNOUNCEMENT 29 September 2017
FULL YEAR RESULTS FOR THE PERIOD ENDING 30 JUNE 2017
Coal of Africa Limited ("CoAL" or "the Company") is pleased to provide its audited financial statements for the
year ended 30 June 2017 (the "Period"). All figures are denominated in United States dollars unless otherwise
stated and the full report is available on the Company's website, www.coalofafrica.com.
Highlights
- No lost-time injuries ("LTIs") recorded during the year (FY2016: none) – a third consecutive year of zero
LTIs.
- Acquisition of a cash generating asset with the purchase of the Uitkomst Colliery for R275 million ($21.1
million) of which R25 million ($1.9 million) is deferred.
- Debt facility for up to R240 million ($18.0 million) secured from the Industrial Development Corporation of
South Africa ("IDC") for the development of the Makhado Coking and Thermal Coal Project ("Makhado
Project" or "Makhado") and drawdown of initial tranche of R120 million ($9.2 million).
- Repayment of the final $18.2 million owing to Rio Tinto for the acquisition of the Greater Soutpansberg
Project ("GSP") assets.
- Conversion of the Yishun Brightrise Investment PTE Limited ("YBI") $10.0 million loan to equity.
- Successful placement of $2.0 million by M&G Investment Management Ltd for working capital purposes.
- The suspension of the Integrated Water Use Licence ("IWUL") for the Makhado Project was lifted by the
South African Minister of the Department of Water and Sanitation ("DWS").
- Mooiplaats Thermal Coal Colliery ("Mooiplaats Colliery") and the Vele Coking and Thermal Coal Colliery
("Vele Colliery") remained on care and maintenance.
- Granting of an Environmental Authorisation (“EA”) in terms of the National Environmental Management
Act (Act 107 of 1998) and the Environmental Impact Assessment Regulations (2014) to Vele Colliery for a
stream diversion and associated infrastructural activities.
- Sale of Holfontein Investments Proprietary Limited ("Holfontein") to Taung Gold Secunda Proprietary
Limited (“Taung Gold”).
- Encouraging coking and thermal coal price movements over the Period, principally due to market supply
constraints.
- Decrease in the loss for the year to $10.2 million (2016: $13.1 million) while the Company reflected a
positive net working capital balance of $11.6 million (FY2016: $9.6 million net current liability).
Financial review
- No revenue generated during the year as result of all operations being on care and maintenance
(FY2016: $nil).
- Non-cash charges of $9.3 million (FY2016: $12.8 million) including:
o Impairment of the intangible asset of $10.6 million;
o Unrealised foreign exchange gain of $2.0 million (FY2016: $9.6 million loss) as a result of the
South African rand strengthening against the United States dollar;
o Depreciation and amortisation of $0.4 million (FY2016: $1.2 million); and
o Share based payment expense of $0.3 million (FY2016: $0.2 million).
- Total unrestricted cash balances at year-end, including cash held by operations available for sale, of $9.6
million (FY2016: $19.5 million).
Review of Operations
Uitkomst Colliery (91% owned)
CoAL continued to restructure its balance sheet and evaluated a number of potential cash generating assets
during the period. This resulted in the acquisition of 100% of the shares in and claims against Pan African
Resources Coal Holdings Proprietary Limited, the owner of 91% of the Uitkomst Colliery, for R275 million
($21.1 million), of which R25 million ($1.9 million) is deferred.
The Uitkomst Colliery is a high grade thermal export quality coal deposit with metallurgical applications,
comprising an existing underground coal mine and a planned life of mine extension. Uitkomst currently
employs approximately 520 employees (including contractors) and has well-established infrastructure
including water and power supplies, buildings, workshops, weighbridge and management facilities. The
colliery was acquired on 30 June 2017 and for the 12 months prior to this date, produced 508,510 tonnes of
saleable coal consisting of 458,350 mined tonnes and 50,160 bought in tonnes and management anticipate
that similar volumes will be generated in FY2018.
Makhado Coking Coal Project (95% owned - 69% post Broad Based Black Economic Empowerment
transaction)
Baobab Mining and Exploration Proprietary Limited ("Baobab"), a subsidiary of CoAL, is the operating entity
for the Makhado Project and holds, in addition to the IWUL, the EA and the mining right. During FY2016 the
Makhado Project IWUL was appealed by the Vhembe Mineral Resources Forum and other parties resulting in
the IWUL being automatically suspended. During the Period this suspension was lifted by the South African
Minister of the DWS and representation has been made to the Water Tribunal to progress the final conclusion
of the appeal and the Company anticipates that this, as well as surface rights access, will be finalised during
H1 FY2018.
The original Makhado Project development plan included a 26 month construction phase followed by a four
month ramp up to achieve a production rate of 5.5 million tonnes per annum ("mtpa") with a capital
requirement of $281 million. While the Company progressed regulatory matters, it has reviewed Makhado's
development plan and re-assessed its strategy, resulting in an amended plan requiring reduced capital
expenditure, a shorter construction period and earlier than planned production. This revised strategy
anticipates that the Makhado Lite Project will be constructed in 12 months, costing an estimated $75 million to
$85 million and, allows for the future expansion of mining and production. The Makhado Lite Project will
produce approximately 1.7 mtpa of saleable coal, comprising 0.7 mtpa to 0.8 mtpa of hard coking coal and 0.9
mtpa to 1.0 mtpa of export quality thermal coal. The Company anticipates that a substantial portion of the hard
coking coal produced will be sold locally with the balance sold on international markets. The table below
compares the results of the original Makhado Project with Makhado Lite.
Original Makhado Project Makhado Lite*
RoM production 12.6 Mtpa 4 Mtpa
LoM 16 years 29 years
Hard coking coal (HCC) production 2.3 Mtpa 0.7 to 0.8 Mtpa
Thermal coal production 3.2 Mtpa 0.9 to 1.0 Mtpa
Project capital expenditure $406 million $75 million to $85 million
Construction period 26 months 12 months
HCC average price $206.16 $120.00
ZAR:US$ exchange rate used R9.75 R13.50
Original Makhado Project Makhado Lite*
Long term HCC price/t $206.16 $120.00
Discount rate (real) 8.0% 10.0%
IRR 30.1% 30% to 50%
NPV $697 million $135 million to $260 million
*Makhado Lite parameters are based on internal CoAL estimates and assumptions
The Makhado Project costs in the 2013 Definitive Feasibility Study (“DFS”) were updated for the assumptions
and estimates for Makhado Lite. This entailed the Company obtaining proposals for full mining services from
four contract mining companies while turnkey processing plant construction and operating quotes were
obtained from three potential service providers. The Makhado Lite model anticipates hard coking coal yields of
19.0% (DFS: 18.8%) and thermal coal yields of 25.1% (DFS: 25.8%). The estimated peak funding required to
develop Makhado Lite will between $90 million and $110 million with a project payback period of four years.
Mooiplaats Thermal Coal Colliery (74% owned)
The Mooiplaats Colliery was placed on care and maintenance in 2013 and is recognised as an available for
sale asset in the FY2017 financial statements. The colliery formed part of a formal sale process during the
Period and this is at an advanced stage. The Company will keep shareholders appraised of further progress in
this regard.
Vele Coking and Thermal Coal Colliery (100% owned)
The Vele Colliery remained on care and maintenance throughout the Period and CoAL awaits the granting of
an IWUL by the DWS, the final approval required for the stream diversion in respect of the Plant Modification
Project (“PMP”). Once all regulatory approvals are in place, the Company will be in a position to consider
prevailing market pricing and conclude an investment decision for the PMP. The IWUL for the Vele Colliery
has been renewed for a further 20 years and has also been amended in line with the requirements for the
colliery's PMP.
Greater Soutpansberg Project (MbeuYashu) (74% owned)
The exploration and development of the CoAL prospects in the Soutpansberg coalfield is the catalyst for the
long-term growth of the Company. The Department of Mineral Resources is considering the Company’s
mining right applications for the Mopane, Generaal and Chapudi projects.
General
- Loan agreement signed with the IDC for up to R240 million (approximately $18.0 million) to advance the
operations and implementation of the Makhado Project. The Company completed the first drawdown of
R120 million ($9.2 million) during the Period resulting in the IDC owning 5% of Baobab, reflecting the
South African Government’s support for the project and, the second tranche of R120 million ($9.2million)
is available upon written request from Baobab.
- The Company paid $18.2 million to Rio Tinto during the Period, settling the historic debt owing for the
acquisition of the GSP assets.
- YBI previously agreed to lend the Company $10.0 million, interest free and repayable in certain
circumstances. During the Period the loan was converted to equity resulting in YBI having the right to
nominate a director to the CoAL Board.
- During the Period the Company sold 100% of the issued share capital in Holfontein to Taung Gold for
R25.0 million ($1.9 million).
- Confirmation that Fifth Season Proprietary Limited is in the process of funding the outstanding balance of
approximately R15.0 million ($1.1 million) including VAT but excluding accrued interest, owing to the
Company for the Opgoedenhoop Mining Right.
Markets
The hard coking price recorded short-term supply constraints owing to weather and infrastructure disruptions
and recent price movements reflect the tightness of world supply and, as such, is positive for longer term
pricing. Thermal coal prices also reflected more positive fundamentals in the short term.
David Brown, CEO commented:
"I am pleased to report on what has been an extremely positive and transformational year for CoAL. A number
of significant milestones have been achieved; with the settlement of significant liabilities during the Period and
the transitioning into a coal producer following the acquisition of the cash generative, Uitkomst Colliery. The
Uitkomst transaction is value accretive and will assist in changing CoAL into a sustainable, multi-product
mining group with excellent resources. The colliery also enlarges the Company’s asset base, providing a
stronger proposition to access funding and positions CoAL as a potential industry consolidator, with a skilled
management team capable of delivery.”
“CoAL continued to ensure that it is well positioned to unlock near-term shareholder value from the flagship
Makhado Project. As part of this, the Company recognised the limited cash flow that would have been
generated during Makhado's pre-production phase and as a result, the CoAL Board approved the Makhado
Lite Project in September 2017, ensuring similar returns to the original design with lower capital requirements
and a shorter construction phase. The Company’s balance sheet was restructured with the acquisition of
Uitkomst, achieved alongside the R240 million IDC loan facility, $10.0 million YBI loan conversion, sale of
Holfontein and the final legacy payment to Rio Tinto. The disposal of the Mooiplaats Colliery is at an
advanced stage and any proceeds from this transaction will be utilised to progress the development of the
Makhado Project. In the interim CoAL is reviewing potential second cash generating prospects, the conclusion
of which will represent another step in the process of becoming self-sufficient.”
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
Stephen Rowse Business Executive 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/Barney Financial PR (United Kingdom) Tavistock +44 20 7920 3150
Hayward
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 Uitkomst Colliery, Makhado Project (coking and thermal coal), Vele Colliery (coking and thermal coal) and the Greater
Soutpansberg Project (MbeuYashu).
Join CEO David Brown for a webcast briefing on the results at midday (South African time) on Friday, 29 September 2017.
Link to the webcast window:
http://themediaframe.eu/links/coalofafrica170929.html
Conference call details:
Participant Telephone Numbers (Assisted)
Johannesburg (Telkom) 010 201 6800
South Africa (toll free) 0 800 200 648
Johannesburg (Neotel) 011 535 3600
USA and Canada (toll free) 1 855 481 5362
Other Countries (Telkom) +27 10 201 6800
UK (toll free) 0 808 162 4061
Other Countries (Neotel) +27 11 535 3600
Conference Replay - Replay access Code: 17120
South Africa: 011 305 2030
UK toll free: 0 808 234 6771
Australia toll free: 1 800 091 250
USA and Canada toll free: 1 855 481 5363
International toll: +27 11 305 2030
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: 29/09/2017 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
