Media coverage

2 MAY 2014

Approvals of asset sales help CoAL’s cash-flow position

Author: Brendan Ryan

COAL of Africa Ltd (CoAL) raked in some much-needed cash during March thanks to obtaining the regulatory approvals required for completion of disposals of several noncore assets.

The company banked R80m from the sale of the Woestalleen colliery in Mpumalanga after receiving the section 11 approval required from the Department of Mineral Resources.

The department also approved the sale of the undeveloped Opgoedenhoop mining right, which resulted in CoAL receiving a deposit of R5m with the balance of R15.8m payable within 12 months.

CoAL has yet to find a buyer for the Mooiplaats thermal coal mine, which was placed on care and maintenance in September last year, though CEO David Brown said in Wednesday’s statement that "negotiations with prospective purchasers are at an advanced stage. The company expects to complete a transaction during the second half of calendar year 2014."

As a result of the cash inflows CoAL’s cash position improved to $8.88m at end-March from $4.16m at end-December, and Mr Brown said that estimated June quarter cash outflows would be about $2.6m.

But the company has a major looming liability to be met by the end of the year. That is the $30m payable to Rio Tinto, which is the balance of the purchase price for the Greater Soutpansberg assets, which CoAL bought from Rio in 2012 for $75m.

"The company is engaged in negotiations with Rio Tinto in order to reach an agreement on payment terms that is suitable for both parties," Mr Brown said.

CoAL also has to finalise a settlement of its "take or pay" liability to export coal through the Matola terminal at Maputo in Mozambique for the remaining term of the contract, which runs to end-December 2016.

That cost CoAL $1.55m in the six months to end-December and another $500,000 in the March quarter to make a total of just over $2m for the nine months to the end of March.

According to Investec Securities, "it is positive that Coal of Africa is starting to receive funds for the asset sales which it has negotiated. All in all, good progress has been made during the quarter."

Despite this, the share price remains depressed and at rock-bottom levels around 70c which is just above the all-time low of 64c that CoAL hit on the JSE earlier this year.

The 12-month high for the share is 198c. CoAL was trading as high as R13 back in 2010.

During the quarter, management signed a memorandum of agreement with seven communities near its Makhado project. Mr Brown said that this initiative will ensure that the project meets the black economic empowerment requirements for the granting of a new-order mining right.