ICHORCOAL TO BUY CONTINENTAL INTERESTS
ICHORCOAL, the German-listed coal company focused on SA and headed by former ArcelorMittal SA CEO Nonkululeko Nyembezi-Heita, has agreed to buy Continental Coal’s interests in the Penumbra and Vlakvarkfontein coal mines for a total of R128m.
Australian-listed Continental Coal put its South African operations into business rescue last November as coal prices fell and it was unable to raise the necessary funds to continue operating.
In 2013 Bernard Swanepoel’s Village Main Reef bought a 19.9% stake in the company, but as Continental Coal issued shares to raise funds, Village Main diluted its stake to 2% and wrote it down to zero last year.
In January, Continental Coal said it was planning to sell its 74% stake in its South African interests to a consortium called Ivory Mint for $75m (about R900m). It has not published any subsequent updates. IchorCoal said it was selected as preferred bidder for Penumbra and Vlakvarkfontein at a creditors’ meeting in April.
Continental Coal SA has 100% of Penumbra mine and a 60% economic interest in Vlakvarkfontein mine, as well as a project in development, De Wittekrans, and several exploration prospects.
Penumbra, which was in business rescue, was producing about 500,000 tonnes of coal a year for export and had an 18,000 tonnes a year export allocation through the Richards Bay Coal Terminal.
Vlakvarkfontein, which was not in business rescue, produced about 1.2-million tonnes of coal a year from an opencast operation.
Vlakvarkfontein had about a four-year life of mine to 2019 and was a good, low-cost mining operation, generating free cash, Ms Nyembezi-Heita said.
Penumbra, which was currently on care and maintenance, had a longer life, to about 2023, but it had been problematic for Continental Coal because the mining method was not appropriate to the geology of the coal seams.
The quality of Penumbra’s coal was good, and IchorCoal understood it well because its own Vunene mine was adjacent to it, Ms Nyembezi-Heita said. IchorCoal had a plan to address Penumbra’s problems by making several changes, including to the mine plan and the customer focus.
IchorCoal’s strategy is to build up the scale and diversity of its coal portfolio, Ms Nyembezi-Heita said. "It is common cause that there needs to be consolidation in the coal industry and we have been open about saying IchorCoal is a player in that space."
IchorCoal has about 2-million tonnes of attributable coal production a year and, according to its website, is targeting 15-million tonnes by 2017 through organic growth and acquisitions.
Ms Nyembezi-Heita said IchorCoal had no plans in the short term to seek a listing on the JSE