Coal of Africa (CoAL) has secured a $100 million injection from Beijing Haohua Energy Resources, in a move to fast-track CoAL projects and forge ties with the world’s largest coal market.
Haohua Energy International (HEI) – a unit of the Shanghai listed Beijing Haohua Energy Resources – made the equity offer to CoAL in the Chinese company’s first ever investment outside of China. The deal will see HEI take a 23.6 percent stake in the South African mining outfit.
The equity offer came as somewhat of a surprise, following a decision by South Africa’s diversified miner Exxaro that it would not be exercising its option to purchase a 30 per cent stake in Coal’s Makhado coal coking operation, located in Limpopo to the north of South Africa.
The $100 million capital injection is to take place in two stages, CoAL announced. In the first phase, HEI will make a $ 20 million payment to CoAL taking a 4.8- 5.2 percent shareholding by January, subject to regulatory approval by the Australian Foreign Investment Review Board (CoAL also being listed in Sydney).
The remaining $80 million in funds will see HEI purchase shares at 25 pence ($ 0.40) a piece, amounting to a maximum stake of 23.6 percent in CoAL – pending regulatory approval by the relevant bodies in the People’s Republic of China, but also subject to approval by CoAL shareholders.
This announcement comes just at the right time for mining operation, CoAL, which has seen difficulties over the past year. The company revealed operating pre-tax losses to year end June of $32.8 million, as compared to losses of $10.1 million at the same time last year. Revenue dropped to $243.8 million from $261.4 million over the 12 months leading to June, with the company pointing to diminished coal prices causing a decrease in sales revenue.
The company was also hit by a legal strike last week at its colliery located at Mooiplaats, with the labour force at the mine demanding wage increases in line with a trend sweeping the whole of the South African mining sector since the resolution of the violent strikes at the Lonmin mine at Marikana, on 19th September.
CoAL’s shares on the Johannesburg Stock Exchange (JSE) have seen a sad demise, plummeting 71 percent this year, free-falling 18 percent last week as news of the Mooiplaats strike was revealed.
However, following the announcement today of the HEI deal, CoAL shares have seen a spike across various markets. The Sydney Stock Exchange saw shares in the company surge 30 percent so far today, while in London shares were up 18 per cent. On the JSE, CoAL shares picked up, trading at 2.45 rand ($0.29) per share – a 16 percent rise.