LONDON (Alliance News) - Coal of Africa Ltd Tuesday said it has reached an agreement with two companies regarding the deferred consideration owed by the company's subsidiary in connection with its acquisition of the Chapudi coal assets in 2010, which are part of the Greater Soutpansberg project in South Africa.
In 2010, Coal of Africa's wholly owned subsidiary MbeuYashu Proprietary Ltd acquired stakes in Chapudi Coal (Proprietary) Ltd and Kwezi Mining and Exploration (Proprietary) Ltd from Rio Tinto Minerals Development Ltd and Kwezi Mining Proprietary Ltd.
Rio Tinto Minerals is part of the larger FTSE 100-listed miner Rio Tinto PLC.
Chapudi Coal and Kwezi Mining and Exploration hold the prospecting rights for the Chapudi coal project and related exploration properties in South Africa's Soutpansberg coalfield in the Limpopo province.
The full acquisition cost to Coal of Africa's subsidiary was USD75.0 million, of which USD30.0 million was subject to a deferred consideration agreement. As of Tuesday, Coal of Africa had USD22.0 million left in deferred consideration to pay to Rio Tinto Minerals and Kwezi Mining.
On Tuesday, Coal of Africa said it had signed an amendment to the agreement with the two companies, which will lead to Coal of Africa paying a minimum of USD100,000 a month with the total outstanding USD22 million expected to be paid off in full by June 2017 at 4% interest per year.
Certain mandatory payments have also been stipulated in the agreement and these are linked to the completion of the third stage of the company's equity raise and/or the completion of the sale of Mooiplaats colliery and the disposal of other non-core assets, it said.
Coal of Africa said last Tuesday that the sale of its Mooiplaats Colliery in South Africa had been delayed in order to allow more time for the buyer to provide proof of funding. The sale and purchase agreement with Blackspear Capital on the ZAR250 million sale of the property has been extended to June 30.
In regards to the equity raising, Coal of Africa plans to launch the third stage before May 29 to raise a further GBP7.9 million, bringing the total proceeds from the three-stage capital raising to over USD38.2 million. The third stage equity raise will consist of 144 million shares being issued at the issue price of 0.055 pence per share, the same as the previous tow stages.
"This was the last of the historic liability issues and this agreement provides certainty of outcome as well as providing Coal of Africa with flexibility. I would like to thank all parties for their co-operation in realising a solution," said the company.
Coal of Africa shares were down 4.3% at 3.11 pence per share on Tuesday afternoon.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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