HomeEnergy MineralsCoAL in debt and equity deal with Investec

CoAL in debt and equity deal with Investec

Drilling underway at
the Makhado coal
Johannesburg, South Africa — 19 July 2012 – Investec is to pump US$58.7 million into emerging coal producer Coal of Africa (CoAL) through a combination of debt and equity funding.

Miningmx reports that CoAL may also ask Investec to subscribe for a further 81 million shares over the next 12 months. This equates to around R330 million, based on CoAL’s current share price of R4.10, minus a 5% discount of the prevailing price at the time.

"”This debt and equity financing package signals good support for our long-term growth strategy,” said CoAL CEO John Wallington. “The funds will be used for expenditure on key items for the Makhado project, additional funding for the ramp-up of production at the Vele colliery and for general working capital purposes.”

Under the equity funding arrangement, Investec has subscribed for just more than 19.1 million CoAL shares at a 5% discount of the company’s closing price of 30.75 pence (AIM) on Tuesday, equating to around US$8.7 million.

CoAL also has a right, for a 12 month period, to require Investec to subscribe for additional shares in tranches, in each case at a time and in an amount to be agreed between CoAL and Investec, at a 5% discount to the company’s closing price on the trading day prior to the issue of a subscription notice.

Investec has also granted CoAL a US$50 million two-year loan facility that will replace the company’s existing US$40 million revolving facility with JP Morgan Chase. Among the conditions agreed to, CoAL has a right to settle the facility in cash or shares.

The parties have entered into a derivative agreement whereby they agree to pay each other on one or more settlement dates an amount equal to any movements in the CoAL share price between the date of issue of the relevant shares under the subscription agreement and the relevant settlement date.

CoAL furthermore said it was in talks with three international investment banks regarding funding for the Makhado project.

Source: Miningmx. For more information, click here.