This announcement was made by Coal of Africa CEO David Brown in a statement outlining the company’s operational status for its June 2016 quarter.
The necessity to incorporate a cash-producing mine into Coal of Africa’s portfolio, Brown notes, is to boost company cash flow during the construction period of the Makhado project, in Limpopo, which is expected to begin sometime in 2017 as soon as all regulatory approvals for the project are in place.
While the lapse of the Universal Coal offer is disappointing to both parties involved, it is crucial for any acquisition made by Coal of Africa to be sustainable and accretive, Brown adds.
Coal of Africa, in November 2015, announced its intention to acquire the entire issued and to be issued share capital of Universal Coal for A$126.4 million.
Following numerous delays and extensions with regards to the closing of the acquisition, Coal of Africa was unable to extend the closure date the offer any further that 15 July 2016. Due to the fact that certain conditions remained unfulfilled on this date the offer subsequently lapsed and all contracts resulting from acceptances of the offer by Universal shareholders were void and had no effect.
Despite this, Coal of Africa continues to evaluate various opportunities to acquire a cash generating asset, including the possibility of a revised offer for Universal Coal, the company said in a statement.
During the quarter ended 30 June 2016, the Makhado project capital estimate was updated as part of the Front End Engineering and Design (FEED) deliverables completed by engineering and project delivery group DRA Project South Africa.
The total capital cost of US$406 million quoted in the June 2013 definitive feasibility study (DFS) was reduced to $280 million which equates to a reduction of 31%.
While the company is pleased with the reduction in the capital cost in US$ terms, the majority of the saving is due to the weakening of the rand since June 2013.
In addition to this, Coal Of Africa was granted a 20 year Integrated Water Use Licence (IWUL) for the Makhado project.
Following an appeal to the Department of Water and Sanitation (DWS) submitted by the Vhembe Mineral Resources Forum and other parties this IWUL was suspended.
This appeal had been anticipated, and CoAL has submitted urgent representation to the Minister of Water and Sanitation to request that the IWUL remain in full force and effect pending the final conclusion of the appeal by the Water Tribunal – the discussion of which remains ongoing.
Meanwhile, Coal of Africa’s 74%-owned Mooiplaats colliery, which was placed on care and maintenance during the September 2013 quarter, remains the topic of continued discussions with potential purchasers. The company is in various stages of due diligence with interested parties.
Furthermore, at Vele Colliery, the company reported that the project’s IWUL had been renewed for a further 20 years, which has also been amended in line with the requirements for the Plant Modification Project (PMP) at the colliery.
During the second half of 2015, the company commenced a process to obtain approval relating to a non-perennial stream diversion. This decision is anticipated in the second half of 2016.
Once this regulatory approval in respect of the colliery has been received, the final decision to proceed with the PMP will be placed before the board; such decision will include an assessment of forecast global coal prices.
Coal of Africa also reported that its available cash at end-June was $20.0 million, with restricted cash of $0.5 million.