us$65m in funding secured with absa capital...

US$65M in funding secured with ABSA Capital for Penumbra mine development

Key points:
?h Committed financing offer received from ABSA Capital for development of Penumbra Coal Mine in South Africa,
?h Final credit approval received and due diligence completed, with legal documentation nearing completion,
?h Loan draw down schedule has been agreed between parties,
?h Principal earthworks contractor has mobilised to site and commenced civil and construction earthworks, including initial ground breaking taking place in the proposed box-cut area, and
?h Run-of-mine production from the Penumbra Coal Project is forecast to increase to the targeted annual rate of 750,000t in Q3 2012.

South African focused coal mining company Continental Coal Limited (ASX: CCC) (??Continental?? or ??the Company??) is pleased to advise it has finalised its debt funding and related coal, foreign exchange and interest risk management facilities (the ??Facility??) to be used for the development of the Company??s Penumbra Coal Project, its third coal mine, in South Africa.
This committed US$65M financing offer has been received from ABSA Capital, a division of ABSA Bank Limited, one of South Africa??s largest financial service providers and a subsidiary of Barclays Bank PLC.
The offer of finance comprises:
1. A secured 7 year term loan facility of US$35 million to be made available to fund the development of the Penumbra Mine
2. A secured 3 year term loan facility of US$15 million to be made available to refinance existing secured indebtedness under the EDF Trading Coal Prepayment
3. A secured annually renewable working capital facility of ZAR100 million (approx. US$15 million) to fund general corporate working capital requirements
In addition ABSA Capital will provide risk management facilities to allow the Company and its subsidiaries to hedge a portion of its exposure to thermal coal prices and interest rate fluctuations. The facilities have received credit approval and ABSA Capital has completed all necessary due diligence. Final documentation is nearing completion, with the parties having already the loan drawdown schedule.
ABSA Capital is a division of ABSA Bank Limited and is mandated within the Barclays Group to lead corporate and investment banking activity in Sub-Saharan Africa. ABSA Capital has a fully local, fully global investment banking model. ABSA Capital??s domestic expertise and network taps into Barclays Capital??s global capabilities and product knowledge providing its clients with tailored financing and risk management solutions across Africa.
As announced on 12 September, the management of the Company??s experienced Owners Team and TWP Projects, as the appointed EPCM contractor for the Penumbra Coal Project, the principal earth works contractor, Leomat (Pty) Limited (??Leomat??) mobilised to site over the weekend of the 3-4 September 2011. Leomat commenced civil and construction works on site on 7 September with the initial ground breaking taking place in the proposed box-cut area.
On 5 September, following site health and safety inductions that were completed with all staff and contractors, Leomat was able to commence the off-loading of all major earthmoving and support equipment in the contractors lay down area on 6 September.
Run-of-mine production from the Penumbra Coal Project is forecast to increase to the targeted annual rate of 750,000t in Q3 2012.
The run-of-mine coal produced at Penumbra will be beneficiated through the existing Delta Processing Operations which comprises a 300tph coal processing plant and the 1.2Mtpa Anthra Rail Siding. Production of 500,000tpa of a primary export thermal coal product is forecasted. The export thermal coal product will be transported through to RBCT under existing rail contracts and sold to EDF Trading and other export off-take agreements.
Commenting on the finalisation of the funding package for the Penumbra Mine development, Continental Coal Limited CEO, Mr Don Turvey said, ??the development of the Penumbra Mine, our third coal mine in South Africa, is of strategic importance for our overall growth plans and therefore to have secured funding for this project is very important to the Company and its shareholders.??
??The fact that we received two very attractive financing offers for this mine is testament to the feasibility studies we conducted and the subsequent mine development plan chosen.??
??This finance package has optimised our ongoing funding arrangements, and proven that as an emerging coal producer we are able to raise debt at attractive levels for our aggressive growth plans.??
Key financing terms of the facilities are summarised below. The facilities have been structured to reduce dilution to existing shareholders and importantly there no share or option equity participation rights under the facility terms
1. US$35 million Secured Term Loan Facility

Borrower: Penumbra Coal Mining Pty Limited
Guarantor: Continental Coal Limited (Australia)
Purpose: To fund construction of the Penumbra Coal Mine
Term: 7 years
Repayments: Quarterly repayments commencing after 12 months
Interest Rate: LIBOR + 4.61% p.a (pre-completion) LIBOR + 4.11% p.a (post-completion)
Hedging: Approx. 30% of export thermal coal production over the facility term Approx. 50% of the interest rate exposure
2. US$15 million Secured Term Loan Facility
Borrower: Continental Coal Limited (South Africa)
Guarantor: Continental Coal Limited (Australia)
Purpose: To refinance existing secured indebtedness
Term: 3 years
Repayments: Quarterly repayments commencing after 12 months
Interest Rate: LIBOR + 4.61% p.a (pre-completion) LIBOR + 4.11% p.a (pre-completion)
3. ZAR 100 million Secured Working Capital Facility
Borrower: Continental Coal Limited (South Africa)
Guarantor: Continental Coal Limited (Australia)
Purpose: To fund general corporate working capital requirements
Term: Annually renewable
Repayments: Revolving credit facility settled on maturity date or renewed annually
Interest Rate: Absa??s Prime Overdraft Lending rate p.a. (currently 9.00% p.a.)