S Africa's Continental secures option to acquire 50% of...

S Africa's Continental secures option to acquire 50% of Colombian hard coking coal project



London (Platts)--17May2012/944 am EDT/1344 GMT




Continental Coal has secured an exclusive option to potentially acquire a 50% joint venture interest in an operating Colombian hard coking coal mine for $15 million, the South African thermal coal production, development and exploration company said in a statement Thursday.

The producer has also entered into a new limited recourse debt and commodity linked facility to fund the acquisition.

It said in a statement that the acquisition if the high quality hard coking coal mine will complement its existing South African thermal coal assets and diversify its production base geographically and from a product perspective into the coking coal market.

Continental said that, subject to completing satisfactory due diligence, it will acquire half of an existing 24-year-old underground operation and five mining concessions or contracts covering over 1,500 hectares on the mine's adjacent exploration ground.

The producer said that it will also assist the JV in funding and developing the existing operation located in the east of Colombia.

Continental said it believes that 500,000 mt/year can be achieved at the mine in the medium-term, with production increased from current levels through the introduction of mechanization, improvements to mine infrastructure, a modified mine layout and an additional production shift.

The producer said that the mine has committed to a staged production expansion using minimal capital expenditure and predominantly involving mechanization of the existing operations.

Continental noted that sales from the mines are made at the mine gate with margins around 75% and direct export sales are planned for 2013.

Meanwhile, Continental also announced that it has finalized an A$5 million ($5 million) convertible note facility with investment fund Bergen Global Opportunity Fund to be made available to the producer in three tranches.

It said the facility will be used for general working purposes, as working capital and to assist in the evaluation of advanced and producing opportunities in and outside of South Africa.