Coal news and updates

COAL of Africa’s (CoAL) share price fell 10.4% to 112c on thin volumes on the JSE this week, losing some of the ground it had recovered after touching an all-time low of 90c on December 18th.

 

CoAL chairman and interim CEO David Brown said on Tuesday there was no fundamental reason for the share price decline. It reflected macroeconomic factors and thin trading volumes. Commodities were subdued in general, and mining in South Africa was regarded as a tough environment.

 

The company was still “work in progress”,  he said. Its repositioning strategy was not yet complete and the small volume of shares traded (less than 2% since December 2) suggested some retail shareholders who bought in a different commodity price environment did not want to wait for the turnaround. CoAL’s major shareholders were supportive of the turnaround strategy.

 

The company, which is also listed in London and Australia, is moving ahead with the development of a coking coal project at Makhado in the Soutpansberg.

 

It aims to raise $406m in capital funding and introduce a broad-based black empowerment group to the project.

 

But over the short term, CoAL’s revenue from coal sales will fall as it is selling noncore assets and has suspended operations at its Vele coking and thermal coal mine in Limpopo while it modifies the processing plant over the next few months.

 

The company said it held $9.56m in cash at the end of September and management predicted it would spend about $7.625m in this quarter.

 

It said cash holdings would be increased by the sale of coal and noncore assets, and the company had also secured a $21.4m loan facility from Investec.

 

Coal prices have been weak over the past few months and the short-term outlook is negative. According to the latest London Commodity News report issued just before Christmas, first-quarter 2014 hard coking coal prices were settled at a record low of $143 a metric tonne.

 

A report from global investment house Macquarie suggested sustained price recovery would be delayed in 2014 by strong growth in supply, especially in Australian export coal.

 

CoAL chairman and interim CEO David Brown said in the group’s latest annual report that although coal markets had been "tough" since 2008, he believed demand would recover.

 

Demand from China and India for coal for power stations would increase and growth in the US, Chinese and European economies would result in higher demand for coking coal, which is used to make steel.

 

Mr Brown said CoAL’s partnerships with Chinese investor Beijing Haohua Energy Resource Company and international coal trader Vitol would help it to market its product internationally and it also said Eskom was a potential domestic buyer.

 

Source: http://www.bdlive.co.za/