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Issuing 100 Million Shares at an issue price of $A0.08 to raise $A8M to be used for debt reduction, working capital requirements and overall strengthening of the Company’s balance sheet. Plan to offer to acquire shares from small shareholders at minimum price of $A0.0521. http://www.asx.com.au/asxpdf/20130318/pdf/42dqtgwbrjm7ks.pdf
It could be De Witts. I ruled that out for now because they said they are seeking shareholder pre approval for the share investment ‘to allow the Company to proceed with certainty in its final negotiations'. So that would put the final negotiations after the General Meeting it looks like to me. I'm thinking Mashala or non-core sales.
Yeh, that vagueness has certainly added a speculative spark to proceedings ! Others are buying while I remain fearful :)
In fairness to grimsdale, the last announcememt on Mashala said it was ‘scheduled to be completed over the coming days’, not that it was concluded. I don't know what’s about to be announced but Mashala is clearly due and it is definitely a strategic corporate transaction. What news are you hoping for ?
I was trying to establish a ball park value of the non core assets for sale, Vaalbank, Project X, Wesselton II, Leiden and Mooifontein and this is as far as I got. There is no stated resource for Vaalbank or Project X, I believe they have yet to be appraised, which I guess contributed to the decision to write down the combined value by $30M, but to what I can't see. In the 2011 Annual Report it is stated that : Wesselton II has an Inferred Resource of 11mt, an Indicated Resource of 5mt and a Measured Resource of 4mt (coal product type Low Volatile) Leiden has an Inferred Resource of 12mt, an Indicated Resource of 2mt and a Measured Resource of 4mt (coal product type Export/Domestic) I think it’s a useful guide to value the two in relation to the amount paid by COOL for Wolvenfontein because in the last Annual Report it is stated that Wolvenfontein has an Inferred Resource of 36.7mt, broadly similar to the above. On the 21 November 2011 COOL announced they had bought Wolvenfontein for approx A$1.3M http://www.conticoal.com/_content/documents/364.pdf . Don Turvey stated this was an opportunistic purchase so maybe they got a bargain, but I believe that coal market prices have deteriorated since then so it may still be a relevant guide to approximate market value. I can’t see anything at all on Mooifontein. Sorry I can’t find anything more specific and I have run out of time for the rest of today but the figures look to back up my hunch that their sale will be unlikely to be market changing. Again, I’d be very interested if anyone can come up with more specific information that might help us all to establish a better estimate of what Continental Coal may gain from the various negotiations taking place.
I'm here to discuss a stock I'm interested in, nothing more and nothing less. This board was set up to discuss this stock so it seems sensible that this is where I should post my thoughts about it.
IHNC has me on his filter list but his post touches on a couple of interesting points I’d like to comment on. COOL didn’t hint at several times sp, they put it plainly in writing on 10 September 2012 : ‘The Company advises that indicative non-binding bids several times the Company's current market capitalisation have been received for an outright acquisition of the Company's South African thermal coal mining business.’ Last week they said ‘the Company looks forward towards further finalising its advanced negotiations with parties regarding the acquisition of an interest in its South African coal mining business and/or for the acquisition and/or joint venture of specific operating and development projects.’ I think that is a significant change in rhetoric. Regarding the Directors free shares, the deemed issue price seems irrelevant to me. The market price doesn’t need to reach 10c before they take the shares nor are they ‘increasing their shareholding at double the current SP’. The shares are free. They might as well have said $100 a share for all the difference it makes to shareholders unless I am missing something. There may even be tax advantages for them later if they sell at a price below 10c. I really wish I could go to the General Meeting, I’d love to hear what’s said.
It’s my turn to thank you, TA is not my forte so it’s useful to see how you view that in relation to COOL. I think I should just make clear again that I am not posting here to talk the share price down and am certainly not making predictions on future price movements. I‘ve no ill will towards current shareholders and hope it all works out well for them. I made a loss on COOL before and because I try to learn from my mistakes I‘ve kept watching the stock since. It’s perfectly possible that they will announce market pleasing conclusions to the negotiations it’s just that I personally don’t have confidence in that outcome at the moment. But definitely not to say that won’t happen, I was wrong before and probably am now. Regarding an announcement ahead of the GM, it looks unlikely as they have said they are seeking shareholder pre approval for the share investment ‘to allow the Company to proceed with certainty in its final negotiations’. But that is in relation to ‘an acquisition of an interest in its South African coal mining business’ so there is still scope for news on non core sales and Botswana before then. CZA is one I keep meaning to look at but they appear on the risers and fallers list a bit too much for my liking and seem a bit accident prone. But I realise that kind of volatility is very appealing to more frequent traders than I am. Hopefully all will become clear about COOL soon. Regards
Nat, things being fluid in business is one thing, the question I have here is managements credibility when their delivery against guidance is so often missed by a country mile and especially when they state they are raising funds for a specific purpose but then quietly do something different. On the investment side, it is shareholders funds they have invested heavily and it looks to me that it has self evidently not been to good effect when I look at the decreasing market cap and the size of the liabilities the company is now saddled with. For example the accounts tell us they wrote down $30M in the value of acquired assets (During the 2011 financial year the updated JORC compliant Coal Resource statement and assessment, review and audit of the Company’s South African thermal coal projects resulted in a reduction in total resources and measured resources for both the Vaalbank and Project X Coal Projects. As a result, the Company adopted a prudent approach to the valuation of its Coal Projects resulting in an impairment charge of $11,855,895 (Project X $10,955,583, Vaalbank $771,275 and Lemoenfontein $129,037 ). Following on from this, an additional impairment charge of $19,775,325 was recorded at 30 June 2012 as a result of an internal review and change in the Group’s strategy regarding these assets’ http://www.conticoal.com/_content/documents/623.pdf . A couple of these are assets up for sale. I think that they have bitten off more than they could chew in an over ambitious attempt to become a mid tier producer and it has been at a high cost to shareholders. My reply to Grenade below includes some of my thoughts on the various asset negotiations but it’s been good for me to read your take on things as well. Cheers.
cont/ But maybe I’m being too pessimistic ? I’m very interested to hear your thoughts.
On the 3 month share performance, I guess that anyone buying in the 4’s and 5’s will be hoping it improves further. I think there was a sharp spike up on hyped expectations of bids coming in. But it’s certainly better than it was for a while before that. On where this goes next, gee I wish I knew ! The way the announcements are worded and knowing how previous expectations have not been delivered on makes the whole thing just too opaque for me at the moment, not helped by the difficulty in knowing what value Continental is carrying the various assets at in its books. The settlement of Vanmag was a big tick but spoilt by the late change in wording which suggested they needed to find cash from elsewhere to fully settle the Mashala debt. But a big tick nevertheless. I think we can take it that whoever they are negotiating with (a) know the financial position that COOL are in and (b) are not the kind to be pushovers. Equally I wonder, did COOL set up the stand by equity facility and potential cornerstone investor (it was funny seeing that same expression used in the Socius announcement back in 2011 !) to be able to say ‘look you are not the only option we have’ so as to drive a better bargain ? Trouble is that these options look very dilutive to me and they have already begun drawing down on the equity facility. I think that the non core assets they want to sell are Vaalbank, Project X, Wesselton II, Leiden and Mooifontein and I doubt the outcome will be seen as material. They have written the value of assets down a lot in the accounts and say they intend to use the proceeds to pay down debt and use as working capital so to me they are simply swapping low value assets for liabilities at best and at worst may lead to further accounting write downs on low bids accepted or no bids received at all. I think that in Penumbra and De Witts they have really valuable assets but I cannot ignore the debts associated with setting up Penumbra and the estimated $160M costs in getting De Witts off the ground. How much will an investor want in return for putting that amount of costs up and what effect will that have on existing shareholders ? I also struggle to know what Botswana is worth as the resource is only inferred and needs cash just to get a more adequate resource assessment done. The change in the wording of announcements from September 2012 to March 2013 says to me that the outright bids originally mentioned are no longer on the table and it’s very unclear what is actually being bid for. The process has been going on for eight months with nothing concrete announced on any aspect. All in all, I think they will survive but one way or another it will mean more dilution for shareholders either by way of new shares issued or shared asset ownership with JV partners or very probably both, with returns to shareholders not being apparent until De Witts is up and running in ??? But maybe I’m being to
Thanks for sticking up for free speech here grimsdale. I wasn’t trying to cause trouble, I was just giving some examples to Grenade of why there is so much animosity on Hotcopper and highlight how the glossy picture presented to potential investors often doesn’t match their subsequent experience as shareholders. trrime, so you think I’m a multi ID shorting deramping Aussie or whatever ? Here’s a tip for you, click my user ID and you’ll see I joined LSE on the 8th May 2009, over two years before Continental Coal listed on AIM. So, if I am a multi ID shorting deramping Aussie whatever then at least give me some credit for foresight ! The reality of course is that of the two of us you are the only one that posts on Hotcopper, trouble is your posts are often removed by the moderators before I get to see them, reason stated : unsubstantiated claim. Over and over again until you were warned that if you kept doing it you would be banned. If LSE was actively moderated even half as well as Hotcopper in removing unsubstantiated claims and flaming/baiting/off topic posts it would be a 100% better forum. You got one thing right, I don’t currently hold stock here, I did once and took a loss. But I’m not a disgruntled ex holder, I’m intrigued about what I missed when researching that led to me getting this one wrong. And here’s an example of that. Look at these posts I made on the 15th August 2012 http://www.lse.co.uk/member-info.asp?page=6&nick=Hitman (I don’t remember you posting back then, were you a holder ? ). They came after the price fell after last year’s announcement ( http://www.investegate.co.uk/continental-coal-ltd-%28cool%29/prn/lodgement-of-open-briefing/20120810070000P067D/ ) that they were short the money needed to settle the Mashala debt on time. How did I not see that coming ? Because previously I had read this http://www.conticoal.com/_content/documents/402.pdf that clearly states ‘To complete the acquisition of the minority interests in Mashala, Continental has entered into an agreement with Socius CG II, an established and highly successful United States based investment group and a wholly - owned subsidiary of Socius Capital Group (“Socius”) for up to a US$20 million equity investment in the Company.’ Another example of how the company often fails to meet the expectations it builds. At the meeting on the day of the October announcement more truths came out under questioning from shareholders and the Aussie’s sold off heavily on the Monday before our market opened. I’m not saying to anyone here not to buy or that things won’t work out the way you hope, but I am saying have a very good look before leaping.
If you want a feel for why there is negativity on the Hotcopper board, this Company Profile provides an interesting read http://www.conticoal.com/_content/documents/540.pdf When you keep in mind that it is dated August 2011 there are things that jump out, for example : The Penumbra underground coal mine is expected to be developed and producing first coal in early 2012. and : De Wittekrans…forecast to be brought into production over the next 18 months. But the starkest thing is the 1 for 10 share consolidation that occurred just before the company was listed on AIM. You’ll notice from the chart that less than two years later the share price is virtually back where it started but holders now have 90% less shares each. After consolidation the company had 430,742,398 shares in issue. As at the end of 2012 it stood at 511,119,601. If the resolutions at the upcoming General Meeting are passed, they will issue a further 70,680,011 shares, taking the total up by 35% more in under two years. They have also set up a $15M stand by equity arrangement and there is a proposal to issue a further 19.9% shares to a prospective investor. Jason Brewers’s comments in that Profile about ‘penny stock’ price levels are as relevant today as back then and yet they continue to pump out more and more shares. These are just some of the things that give me concern and that irk some of our Aussie cousins. But beware discussing any of this here or you’re seen to have ‘an agenda’. When I read the company financial reports I reckon that prospective buyers/investors of COOL assets have them over a barrel and shareholders are having their interest in those assets regularly diluted.
<sigh> Shame, I'll miss our insightful chats.
There is other different wording that shareholders should be bothered about is re Vanmag/Mashala. This : The proceeds from the sale of the Company's shareholding in VanMag are to be used to fund all remaining amounts due for the outstanding minority interests in Mashala Resources not already held by the Company's principal subsidiary in South Africa. Changed to : Total sale proceeds of approx. US$10 million from the sale of its shareholding in VanMag are to now be used by the Company towards purchasing all the outstanding minority interests in Mashala Resources ("Mashala") not already held by the Company's principal and 74% owned subsidiary in South Africa (Continental Coal Limited ("CCL")). Looks like the Mashala late payment and interest charges were a lot more than anyone expected and bad news for a company so low on cash. I wonder if shareholders will ever find out how much they paid for Mashala in the end.
I think that’s what I find so fascinating about Continental Coal. Every presentation and broker note I read paints such an inviting proposition especially when I look at the share price. And then I read the annual report and the Interim Results and delve into the past a bit and the whole thing turns ugly, not least the share price performance ! Whatever happens, it’s got me glued but I fear there are more disappointments to come for some this month.
Shareholders were informed that Vanmag was on track to settle by end February and Mashala was due to be paid by 28 February. If these things have happened I wonder why nearly two weeks later they would they halt trading on ASX for two days before saying so. They didn’t halt trading to say that the $3M part payment was received in February. Given that the sale of Vanmag was first informed to shareholders in 2009, I suspect there is another twist in the tale about to be revealed.
'Breakaway Investment Group....received a commission on the preparation of this research note'
The 20% placing is to be 'at an issue price equal to or above the prevailing price of Shares at the date of issue.' Its always best to look beyond the headlines with Conti Coal, the Aussies know that. Looks like big dilution to plug the balance sheet deficit identified in the Interim Results. Note 1 in the financials was a sobering read to anyone thinking of investing in this.
JP Morgan Cazenove, in house broker for Bumi, moves to underweight with a 100p price target. "BUMI’s announcement that it is investigating financial irregularities at its subsidiary PT Bumi raises more questions around the financial outlook for the group, in our view. While we see it as a necessary move, we believe it does call into question the equity outlook over the next few months. Coupled with our revised coal price forecasts, which imply PT Bumi may not generate bottom line profits until 2015, we believe the risk of an equity issue is high. In that context, we downgrade our recommendation for shares of BUMI to UW, with a revised Dec-13 price target of 100p/sh. Investigation on potential financial irregularities. BUMI released a brief statement on Monday morning stating the company was investigating “potential financial and other irregularities” in the company’s subsidiary PT Bumi. While we have limited details at this point on what these financial irregularities might be, PT Bumi’s “development funds” were singled out as an area of particular focus for the investigation. Funding shortfall looming for PT Bumi. Based on current spot coal prices, we calculate PT Bumi would record negative FCF of -$315m in 2013E (-$197m on JPMCe) vs debt repayments of c.$635m the same year. As a result, even if coal prices recover to our forecast price of $103/t in 2013E, in the absence of non core assets sales balance sheet gearing looks set to increase substantially. In the context of net debt of $4.06bn as of June, (5.5x ND/EBITDA and 85% gearing), we believe there is a high risk that alternative funding sources, including a rights issue, may have to be considered. In turn, with BUMI’s balance sheet carrying only $70m of cash, participating in any equity issue at the subsidiary level would likely not be straightforward." http://ftalphaville.ft.com/blog/2012/09/26/1179201/markets-live/