Wescoal advises that it, through its wholly-owned subsidiary, Leeuw Braakfontein Colliery, has entered a sale of assets agreement with Sitatunga Resources, in terms of which LBC will dispose of its assets located in KwaZulu-Natal.
Leeuw Braakfontein Colliery (LBC) is an advanced-stage exploration property situated on the Klip River Coalfield, which is located approximately 10 km from Newcastle, KwaZulu-Natal.
Wescoal has declared no coal reserves for LBC, with shallow coal on the flanks of the resource area having potential to be extracted using opencast methods and the balance of the coal being mined using underground mining methods.
Rationale for the disposal
LBC is a non-core asset of Wescoal and the disposal is in line with its strategy of realising value for shareholders and building a scalable, sustainable business.
Consideration for the disposal
The total consideration for the disposal is R103 million (excluding VAT).
The consideration will be paid in cash from funds within the Sitatunga group. Payment of the consideration will be split into:
- R20 million payable within five days of signature of the agreement, being 7 August 2018; and
- R83 million and the VAT on the consideration payable on fulfilment of the conditions precedent set out in paragraph 4 below.
Application of sale proceeds
The consideration will be utilised to reduce short term borrowings of the Wescoal Group and to fund strategic growth options.
The disposal is subject to the fulfilment or waiver of regulatory consents from the Department of Mineral Resources and Competition Commission as well as procedural matters standard for this type of transaction.
Fulfilment of the conditions precedent will have to take place within 365 days from the signature date unless the parties agree to extend the period.
Value of the net assets and profits attributable to the net assets of the disposal
The value of the net assets that are the subject of the disposal is R92 million and being non- operational there are no profits attributable to the net assets that are the subject of the disposal for the year ended 31 March 2018, as extracted from Wescoal’s audited results
for the year ended 31 March 2018 which have been prepared in terms of International Financial Reporting Standards.
Arne Hansen, the MD of Sitatunga, said he and his team were excited about the prospects of converting the potential at Braakfontein into an owned and managed mining operation.
“As a start, it’s a good investment for us. We are therefore looking forward to start operations as soon as everything has been cleared by regulators. We believe our investment will create much-needed jobs and bring about development in the area.”
Sitatunga Resources’ largest shareholder, Menar Holding, wishes to build on its existing businesses including Canyon Coal and Zululand Anthracite Colliery, through this growth vehicle called Sitatunga Resources.
“We will benefit from the experience in responsible investing, where the focus is simultaneously on growth, job creation and environmental care. We have a positive outlook of mining in South Africa.”