flavour of the month in london

December 14, 2010

Continental Coal Is Flavour Of The Month In London, As A UK Listing Looms

By Alastair Ford

"We will raise about US$30 million in London", says Continental Coal chief executive Don Turvey. "The idea would be to link it to some sort of acquisition. We'd hope to get it done in the first half of next year, and there are various parties who want to do the listing for us." You bet there are! The London office of Continental Coal has been inundated in recent weeks with friendly offers of lunch or drinks, or a catch up on old times, and London's not even where the real decisions are made. Continental also has offices in Perth, Australia, where veteran promoter and Continental executive director Pete Landau looks after the company's Australian listing, as well as running his umbrella organisation Okap Ventures. And it also has offices in Sandton, a plush suburb of Johannesburg, South Africa, from where Don Turvey's staff issue their operational directives as regards the running of the company's portfolio of Southern African coal mines.

Pete's an old hand at running the market side of a resources company - Okap also has a hand in Range Resources, an African-focussed oil company, and in Nkwe Platinum, a platinum developer that's been much in the news lately, following licence complications. But Don's not exactly new to the business either. He started in the coal business with BHP Billiton back in January 1984, and has stuck with it ever since. "It's been a very exciting journey", he says. "Coal has been very good to me. I've seen the ups and downs. I've seen US$19 per tonne. Today it's sitting at US$106 per tonne." BHP Billiton was good to him, but even so, when the opportunity at Continental Coal came knocking the decision wasn't difficult. "What really attracted me to Continental was that it offered an opportunity to apply learning and expertise to a junior company that could be a lot more nimble, that would work without bureaucracy."

Well, he's got that in spades. Continental has been moving pretty quickly of late, in its plans to ramp up production from the current two million tonnes per year to a far more ambitious seven million tonnes by 2012. Thereafter the plan is to go to 10 million tonnes by 2015, but one thing at a time. At the moment there are two mines in operation, Vlakvarkfontein and Ferreira, the first of which is currently ramping up to production at 100,000 tonnes per month, the second of which is producing, at a steady state, 55,000 tonnes per month of export-quality thermal coal. Two more mines, Penumbra and De Wittenkrans are due to come into production within the next two years. Penumbra, says Don, will be ready by the end of 2011, while De Wittenkrans should be up and running in 2012.

So Continental is already beginning to build up a nice production profile, and it won't be long before it all starts feeding through to the profit and loss account. Some forecasters reckon that profits for 2012 will come in at nearly A$85 million. Not a bad bit of business for a company that had no producing assets a year or so ago, and hardly surprising that the London brokers and service providers want a piece of the action when the company comes to tap the London market later next year.

Still, they'll have to strike a hard bargain, because it's not as if Continental will be hard pressed for the cash. For one thing, there's those looming profits. But for another, Continental has just lately shown itself to be pretty adept at making new friends. Enter the Korea Resources Corporation, or Kores, a government-owned organisation which has just put up a sizeable chunk of the funding to allow Continental to complete on the ZAR180 million acquisition of the billion-tonne Vlakplaats project, 80 kilometres east of Johannesburg. Kores has plenty of experience in investing in coal projects overseas, and has significant interests in Australia. This is its first move into South Africa, though, and the deal represents a serious endorsement both of the country and of Continental.

And Kores isn't the only friend with deep pockets that Continental has been able to call upon recently. EDF Trading has not long since signed a US$20 million deal to secure supply from three of Continental's projects. The first EDF delivery, says Don, was made in November. So this is a company in rapid growth mode, with plenty of options as far as money and funding are concerned. No wonder London is scrambling for a piece of the action.

http://www.minesite.com/nc/minews/singlenews/article/continental-coal-is-flavour-of-the-month-in-london-as-a-uk-listing-looms.html