JOHANNESBURG (miningweekly.com) – South Africa-focused coal miner Continental Coal on Thursday announced that it had closed its A$5-million limited recourse bridge funding deal with UK-based Empire Equity, announced in January, while larger recapitalisation plans were also advanced.

In terms of the funding agreement, Empire had subscribed for 7.5-million unsecured convertible promissory notes with a face value of A$1, at a discounted issue price of A$0.6667 per note, and with a maturity date of four months post closing.

Empire would also assist Continental in undertaking a rights issue to raise up to A$28-million at an offering price of 1c a share, with the proceeds to be used to settle debts to various existing convertible note holders and other major creditors.

The promissory notes would only become redeemable on the successful completion of the rights offer, with Empire having the option of redeeming the notes by either conversion into shares or the payment of A$7.5-million face value in cash.

Further, Empire would receive a 6% fee on the investment amount and 70-million options, subject to shareholder approval. Each option would be exercisable at the rights' offering price, with three years to expire.

In the event that shareholder approval was not obtained for the options, A$500 000 in cash would become payable to Empire in lieu of the options, while 100-million shares would also be issued to a settlement agent and held in escrow as collateral.

Continental on Thursday said that the A$5-million had been received by its escrow agent and that all conditions of the agreement had been met, allowing for the funds to be released to meet key payments to current creditors and ensure a three-month standstill period to recapitalise the company and restructure its financial arrangements.

“Importantly, the company will focus on and ensure stability at an operational level [at] its current mining operations while saving significant costs at the corporate level.

“As part of the restructuring process, Continental will look to strengthen its black economic-empowerment credentials in South Africa and generate additional synergies with key strategic partners including Eskom, Transnet and Richards Bay Coal Terminal to ensure a significant growth profile [in future],” Continental said.

Further, the company announced that, following the closing of the transaction, its board now included former executive director Peter Landau as well as Empire venture partner Dr Paul D’Sylva, who was acting as interim chairperson, and coal marketing specialist Dr Lars Schernikau.

"While it has experienced some balance-sheet issues, the company is well positioned to supply the domestic/global coal markets from two operating mines. We have also received interest from a number of globally recognised energy investors/traders to participate in the company [in future], which we expect to finalise shortly,” D’Sylva said.

Meanwhile, Continental also confirmed that, as was previously announced to be a condition of the funding, the resignation or termination of the contracts of current CEO Don Turvey, CFO Lou van Vuuren and nonexecutive directors Mike Kilbride and Johan Bloemsma was effective, while nonexecutive directors Ron Chamberlain and Bernard Swanepoel had also tendered their resignations.

The company’s shares would remain suspended from trading on Aim and the ASX for the time being.