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CoAL’s CEO unveils strategy to become leading coal producer

COAL of Africa’s (CoAL’s) new strategy was outlined by chairman and interim CEO David Brown in its annual report released on Friday.

As a combined mine operator, developer and explorer, its financial and human resources were stretched, he said. It would instead focus on developing Vele and a second mine, Makhado. The company planned to cut overheads by at least $3m in this financial year.

"We now have a strategy for a sustainable future in which Coal of Africa will be a viable coal producer generating value for all its stakeholders," he said.

"Our future lies largely in developing and working the considerable resources we have on the Soutpansberg coalfield that will deliver metallurgical and thermal coal to international and domestic customers.

"As these developments get under way, we shall ensure that they are funded using appropriate blends of debt and equity finance from new and existing partners."

The next step in developing Makhado would be to raise funding, including introducing black empowerment partners and communities. The mining right depends on finalising a black empowerment deal.

The company intends to retain majority ownership in the project while new partners contribute the full equity requirement. Mr Brown said the target was to complete all funding and regulatory approvals by end-September next year.

Makhado, with a capital cost of $406m, is the flagship project. Once funding is in place, construction is expected to start in the second half of next year and first coal would be produced 26 months later.

At the end of June, CoAL had $29.9m in cash in the bank and said it had subsequently received an approved term sheet for a R200m bridging facility.

The company’s after-tax loss for the year rose to $148m from $139m last year and the share price declined from A$0.58 ($0.56) at the beginning of last year to A$0.19 at the end of the year.

Auditors Deloitte noted an "emphasis of matter" on the statements, pointing to the loss incurred and net cash outflows, which raised material uncertainty about the going concern status of the company.

Former CEO John Wallington, who left in May when his three-year contract ended, received no annual bonus. In the 2012 financial year his bonus accounted for about a third of his total remuneration. No other of the firm’s executive directors received bonuses, which depended on the achievement of key performance indicators.

CoAL’s shares jumped 11.5% in Australia to A$0.15 and as much as 8.66% to an intraday high of R1.38 in Johannesburg on Friday.

CoAL’s average monthly volume is around 16-million shares, compared with 1-billion shares in issue. The price is still a long way below the January peak of R3.53.

Macquarie Coal Newsletter reported coal prices firmed in active trade last week, but coal price trends are less relevant to CoAL since it announced on October 15 that it was suspending production at its Vele colliery until 2015, as it is being expanded at a cost of R220m.

Its Woestalleen and Mooiplaats mines are being sold.

Source: bdlive