JOHANNESBURG (miningweekly.com) – Midtier gold mining company Pan African Resources has sold its coal interests to Coal of Africa Limited (CoAL) for a combination of cash and shares.
Pan African will dispose of all its shares and loan accounts in its wholly-owned subsidiary, Pan African Resources Coal Holdings Proprietary, the holding company of the Uitkomst colliery, to CoAL for R275-million.
The transaction results in a profit of R157-million, inclusive of dividends received of R30-million, on the original investment of R148-million, which represents a total return of 106% over a 12-month period.
CEO Cobus Loots said the transaction reaffirmed Pan African’s focus on its gold mining business and again demonstrated the company’s ability to conclude value-accretive transactions to the benefit of shareholders.
Pan African has the capacity to produce more than 200 000 oz of gold a year and 12 000 oz of platinum-group metals a year.
Uitkomst, a high-grade thermal coal producer, is situated in the Utrecht coalfields of KwaZulu-Natal.
Pan African’s coal company holds 91% of the issued share capital of Uitkomst, with the balance of the shares held by broad-based trusts, including employees and communities, and a black-owned and controlled strategic entrepreneurs' trust.
For the six months ended December 31, Uitkomst processed 236 011 t of coal and sold 327 202 t, including bought-in coal. It employs 520 people, including contractors, has a net asset value of R209-million and its after-tax profits in the six months ended December 31 totalled R21.3-million.
CoAL – an emerging coal mining, development and exploration company operating in South Africa headed by CEO David Brown – is incorporated in Australia, with its shares traded on the Australian Securities Exchange, the Alternative Investment Market of the London Stock Exchange and the main board of the Johannesburg Stock Exchange.
CoAL’s recent focus has been to restructure its balance sheet, operations and project pipeline to be better positioned to provide a platform for growth in the junior coal sector.
ELIKHULU TAILINGS PROJECT
The transaction provides Pan African with an opportunity to crystallise the value created from its acquisition of Uitkomst, and enables the company’s management to focus on the development of the Elikhulu tailings retreatment project, the group’s existing gold operations and its strategic objective of geographically diversifying its operations.
CoAL will settle the R275-million purchase price with R125-million in cash from its available cash resources, payable on the effective date of the transaction.
A deferred R25-million may be paid by CoAL at any time prior to the second anniversary of the effective date and will bear interest at the South African prime overdraft rate from the effective date.
If the deferred amount is not paid by the second anniversary of the effective date, Pan African may elect to have the amount settled through the issue of new ordinary CoAL shares.
CoAL’s principal coking and thermal coal assets and projects include the Makhado hard coking and thermal coal project, which has been granted a new order mining right and has the potential to produce 5.5-million tonnes of saleable product.
Currently, the majority of hard coking coal used in South Africa is imported and the Makhado project will contribute to the import substitution of the majority of this coal.
CoAL also owns Vele Colliery, a semi-soft coking and thermal coal mine, currently under care and maintenance, with the potential to supply 1.2-million tonnes of saleable product a year; Mooiplaats Colliery, near Ermelo, currently on care and maintenance, and subject to a formal sale process; and a portfolio of exploration-stage coking and thermal coal projects in the Soutpansberg coalfield.
Pan African’s growth strategy is to identify and exploit mining opportunities at margins that create stakeholder value by driving growth in earnings, cash flows, minerals base and full precious metals value chain.