During September 2015, Coal of Africa entered into a loan agreement with YBI, pursuant to which YBI advanced an amount of $10 million to Coal of Africa. The loan bore no interest and only became repayable in limited circumstances.
During May 2016, Coal of Africa and YBI amended the terms of the loan to specify the conditions that would trigger the repayment of the loan. The long stop date for the conditions was agreed as 31 December 2016 and if none of these trigger events occurred prior to the long stop date the loan would become convertible to equity. None of the trigger events have been effected and Coal of Africa will now convert the loan to equity at the agreed price of $0.04081 per share.
The total amount of conversion shares will amount to 245 037 980 and the conversion into equity will occur in two tranches. The Coal of Africa directors have 240 042 603 shares remaining under the general placement authority, according to the ASX Listing rule 7.1 and will be issued with immediate effect.
The second tranche of 4 995 378 shares will be converted into equity once the general placement authority has been replenished by shareholders at the annual general meeting. Post the issue of both tranches of the conversion shares, YBI will have a shareholding of 428 269 241 ordinary shares equating to 19.28% shareholding of Coal of Africa.
Application has been made for the first tranche of 240 042 603 conversion shares to be admitted to trading on the AIM market of the London Stock Exchange.
Admission to trading on AIM is expected to become effective on or around 21 February 2017. The conversion shares will rank pari passu with the company’s existing ordinary shares of nil par value. Application for quotation of the conversion shares will also be made to the Australian Securities Exchange and the main board of the JSE.
Following admission of the first tranche conversion shares there will be 2 216 051 527 shares in issue.
David Brown, CEO of Coal of Africa, commented: “The conversion of the loan to equity holds great value to Coal of Africa. It removes a large potential cash outflow from the company’s cash flow projections and strengthens the solvency ratio as it allows Coal of Africa to focus its expenditure on the development of its assets instead of repaying debt.
“This leaves Coal of Africa with only one outstanding settlement to Rio Tinto by June 2017. The outstanding balance to Rio Tinto relates to the acquisition of the Greater Soutpansberg assets in the Limpopo province and forms part of the Coal of Africa’s long term development strategy.
“The conversion of the loan once again shows the strong support of Coal of Africa’s shareholders to the long term value of its assets and its commitment to their development.”