CoAL draws flak, not funding

Troubled Coal of Africa (CoAL) failed this week to raise much-needed capital and is also facing further scrutiny over its community and environmental conduct.

CoAL's ability to keep afloat depended in part on raising $12-million (R142-million) last month, the company said in its December interim results statement. But this week it played down its funding problem.

"Stage three of the capital raising was slightly delayed but it has had no impact on the company," CoAL spokeswoman Charmane Russell said on Friday. Last week, CoAL said it had $13.5-million in available cash on hand.

The company, which is listed on the JSE, the Australian Stock Exchange and London's AIM, now hopes to raise the funds at the end of this month.

The company's investors include Investec Asset Management and, most recently, TMM.

TMM said the only reason the company invested in CoAL was to diversify its business interests, which include operations in the electronics and security industries. But TMM did not respond to questions about why it could or would not raise the money CoAL needed. Investec also did not respond to a request for comment on CoAL's fundraising efforts.

CoAL first announced its plans to raise $65-million (R578-million) in August, but it had to restructure its plans when its first fund-raising exercise failed to raise enough money.

The company desperately needs the money to get its redesigned Vele colliery back into production and to raise the additional funds needed to develop its flagship Makhado project.

CoAL also still owes $22.5-million for land it bought from Rio Tinto for another potential coal mine project it plans to develop. This had to be paid in September last year.

The company is negotiating with Rio Tinto to defer the payment.

Besides its financial troubles, CoAL has attracted the attention of an NGO in Switzerland for the way it is dealing with local communities and environmental concerns.

Its dealings within South Africa have been highly contentious, according to certain lobby groups. Its intention to mine a heritage site in Limpopo saw several lobby groups try to block its plans.

At present, there is an appeal against the company's amended Environmental Authorisation for its Vele project, which it aims to make about three times bigger, and an interim court interdict has been issued against its Makhado project to halt any construction at the site.

In March, CoAL announced that it had concluded a BEE deal selling a 20% stake to seven communities, but the deal is now being disputed by a section of the Mudimeli community, who live a few hundred metres from where the massive open-pit Makhado coal mine will be built.

The group have for years been asking CoAL for recognition as an interested party in the project , but the company has been ignoring their plea.

The latest letter seen by Business Times from this section of the Mudimeli community was sent to the company on April 14, but the community says CoAL has not yet acknowledged the letter.

CoAL's disregard of community interests prompted Swiss NGO Bread for All to ask a local NGO, the Bench Marks Foundation, to investigate the company's conduct.

CoAL has signed an agreement for coal production with the Swiss-based, Dutch-owned commodity trading company Vitol.

Bench Marks's David van Wyk said: "The conflict that this company has attracted from the communities sparked the interest in CoAL's conduct from the NGO in Switzerland. They believe that CoAL is not operating according to international best practice and is contravening all sorts of legislation.

"They have asked us to compile a report about CoAL's dealings with communities and the controversies around its environmental issues. From there, I believe that they will try and influence the agreement that CoAL has with Vitol."

Russell said CoAL had engaged with the Bench Marks Foundation and Bread for All. "It is our understanding that Bench Marks is undertaking a review of coal juniors following its review of larger companies last year. The research is being funded by Bread for All."

CoAL's false starts over the years have punished its share price. It slid 4% after news that the third stage of the capital raising was not completed, to 48c, but it is still above the low of 24c it hit on April 7. In 2008, CoAL traded at R35 a share.

READ THE FULL RESPONSE FROM COAL HERE (PDF)