LONDON (Alliance News) - Strategic Natural Resources PLC Wednesday said its Elitheni Coal (Pty) Ltd subsidiary has managed to get short-term funding from an existing shareholder, and is also in talks with other investors about long-term funding in return for a stake.
Strategic Natural owns 74% of Elitheni, which had previously warned that cash was running out and it would have to consider its options if it didn't get funding. It has ceased mining until it gets long-term funding, and when it restarts, plans to use cheaper drilling and blasting techniques.
Elitheni has initially been granted a loan of about GBP915,000 by existing black economic empowerment partner and 20% shareholder Rapidtrade 644 (Pty) Ltd. The details of the loan are still to be finalised, but it will bear an interest rate of 1% a month and will be repayable by December 12. It may also be converted into a 10% stake in Elitheni, to be taken from Strategic Natural's stake.
Elitheni is also in talks with another black economic empowerment company about longer-term funding, Strategic Natural Resources said. That company is doing due dilligence with a view to potentially acquiring a stake. Talks are also continuing with other potential South African investors.
"The Board of Elitheni has informed SNR that it intends to use the period of the cessation of mining operations to source an experienced mining CEO and a new management team for Elitheni and pursue legal action against the washplant manufacturer and other associated parties with regard to their underperformance," Strategic Natural Resources said in a statement.
"When mining operations recommence, it will be with a new mining contractor and different associated mine site service providers and, as referred to above, the mining methodology will be changed to drill and blast," it added.
Elitheni only shipped its first coal in September, but has been struggling to secure long-term funding after the international coal price fell.
Strategic Natural Resources shares were down 20.4% at 5.7725 pence early Wednesday.
By Steve McGrath; stevemcgrath@alliancenews.com; @SteveMcGrath1
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