This Is What Happened

IchorCoal to buy Continental interests
by Charlotte Mathews, 11 June 2015
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.
Ichor to acquire troubled Continental Coal’s mines for R128m

by Natalie Greve, 10th June 2015
JOHANNESBURG (miningweekly.com) – Local coal producer IchorCoal has inked a deal to acquire stricken Continental Coal’s key 1.2-million-ton-a-year Vlakvarkfontein and stalled Penumbra mines, both in Mpumalanga, for R128-million. Citing the driver of the purchase agreement as IchorCoal’s strategy to participate “meaningfully” in the South African coal sector, CEO Nonkululeko Nyembezi-Heita described the acquisitions as another step toward the group’s transition to a leading local mid-tier thermal coal producer.
Particularly noteworthy was the proximity of Penumbra to IchorCoal’s existing Vunene operation and the subsequent potential to extract material synergies, which would lower the group’s overall operating cost. “Further, our existing, indirect, shareholding in Vlakvarkfontein makes us the logical acquirer of this asset and clearly demonstrates IchorCoal’s strategy to actively participate in the consolidation of the South African junior coal sector,” she commented. Under the terms of the deal, IchorCoal would pay R55-million for Continental Coal South Africa’s 100% interest in Penumbra, which had a resource of 14-million tons in situ and had produced 500 000 t/y of coal since 2012. The Penumbra acquisition also included a rail siding and a yearly export allocation of 18 000 t at the Richards Bay Coal Terminal, in KwaZulu-Natal. In addition, IchorCoal would pay R73-million for Continental Coal South Africa’s 50% shareholding – and 60% economic interest – in Ntshovelo Mining Resources, which owned the opencast Vlakvarkfontein mine.
IchorCoal intended to fund the acquisitions through a combination of internal funds and third-party funding. Continental Coal South Africa and its wholly-owned subsidiary companies Mashala Resources and Penumbra Coal Mining entered into business rescue proceedings in November 2014, after which court-appointed business rescue practitioners initiated a sales process on the Penumbra asset in February. IchorCoal was, thereafter, selected as preferred bidder for Penumbra following approval of the business rescue plan at a meeting of creditors in April. “IchorCoal was also selected as preferred bidder for Continental Coal’s interest in Vlakvarkfontein as part of this process. Ntshovelo was not placed under business rescue and continues to operate profitably,” the coal miner said in a statement.
The transaction would increase IchorCoal’s current attributable mineable resource base of 449-million tons to 460-million tons and would likely secure the group “immediate” access to an additional 1.2-million tons a year of attributable run-of-mine production – an increase in excess of 50% on 2014’s production of 2.1-million tons. “This is a significant opportunity for IchorCoal to increase its footprint in the domestic and export coal markets. We remain focused on our plan to increase attributable coal production, which we expect will coincide with an anticipated increase in the price of and demand for coal,” added Nyembezi-Heita.