Coal of Africa Limited (CoAL), the triple-listed emerging coal exploration, development and mining company has entered into subscription and loan agreements with Singapore-registered Yishun Brightrise Investment PTE, which will see Yishun acquire a 9.5% stake in CoAL for £9.4 million, or about US$14.7 million.
Under the subscription agreement, Yishun has agreed to acquire up to 183.23 million ordinary shares at a price of 5.15 pence per share.
The subscription proceeds will be used to finance pre-construction costs at the Makhado coking and thermal coal project in the Limpopo province of South Africa and for general working capital.
The subscription agreement is conditional to CoAL shareholder approval, which will be sought at an extraordinary general meeting to be held within the next 60 days.
Further, Yishun has also expressed an intention to acquire a strategic interest in the Makhado project and the parties have agreed to enter into discussions in due course.
The package being discussed includes an equity investment in the Makhado project, the provision of a shareholder loan on commercial terms providing the debt required for the development of the colliery and, the award of the Makhado project engineering, procurement and construction (EPC) contract on commercial terms.
In connection with these matters, CoAL and Yishun have also entered into a loan agreement pursuant to which Yishun has agreed to lend CoAL £6.4 million, or about $10 million, conditional upon the company’s shareholders approving the issue of the subscription shares.
The loan will bear no interest and is only repayable if:
- Yishun has not received the subscription shares by the date which is five business days after the 90th day (or a later date as agreed) after the subscription agreement was signed;
- an unrelated third party makes an equity investment in the Makhado project on or prior to 30 June 2016;
- on or prior to 30 June 2016, CoAL or Baobab Mining & Exploration, the company’s subsidiary that owns the Makhado project, decides not to proceed with the sale of an equity interest in Baobab, to Yishun or its associates;
- on or prior to 30 June 2016, Baobab or CoAL is put into administration, liquidation or similar proceedings are commenced;
- on or prior to 30 June 2016, Baobab ceases to be the holder of the new order mining right for the Makhado project or the Makhado project is prohibited from being mined as a result of a permanent regulatory prohibition.
The loan will further be repayable if the parties did not enter into a Makhado EPC contract on commercial terms; or if they did not enter into an agreement for Yishun to provide a shareholder loan on commercial terms to provide the debt required for the development of the project.
“Yishun’s investment in CoAL, combined with the $10 million loan represents a significant step forward in the process to identify a strategic partner for the Makhado project.
“The Company looks forward to progressing negotiations with Yishun or its related parties in order to further their potential investment in the project. The CoAL board supports Yishun’s investment and shareholders will be updated as negotiations between the parties progress,” says CoAL CEO David Brown.