Continental Coal beats its own export record, ships 30% more thermal coal in December quarter

Continental Coal (ASX: CCC) subsidiary Mashala Resources has exceeded previous record exports of high quality export thermal coal through the Richards Bay Coal Terminal by more than 30% for the December 2011 quarter.

The company previously announced export sales from the Ferreira Coal Mine during the December quarter were forecast to exceed the previous quarter’s export sales of 130,995 tonnes and previous record export sales of 136,400 tonnes achieved in the June 2011 quarter.

Preliminary results for the December quarter also show unaudited revenue and earnings before interest, taxes, depreciation and amortisation have exceeded the September quarter unaudited results by over 35% and 70% respectively.


New Broad Based BEE Partner

Continental and the Sishen Iron Ore Company Community Development Trust (SIOC-cdt) are finalising the few remaining conditions precedent for Subscription and Shareholder Agreements under which SIOC-cdt has become the company’s new partner in South Africa.

SIOC-cdt is a Broad Based Black Economic Empowerment Company that holds a 3% interest in Sishen Iron Ore Company, the operator of the Sishen, Sishen South and Thabazimbi iron ore mines, Africa’s largest iron ore mining operations.

Importantly, the deal attracts an initial A$16.8 million (ZAR140 million) investment which will be used to further fund the growth and development of Continental’s thermal coal mining business in South Africa.

SIOC-cdt, which has become a 26% partner in the company's South African subsidiary, will invest a further $A9.1 million (ZAR75 million), which will satisfy the A$26.2 million (ZAR215 million) loan advances made by Continental Coal on behalf of its previous partner.

Following completion of the conditions precedent, which is expected to occur within the next two weeks, settlement will take place and the funding will be advanced to Continental.


ABSA Capital Debt Funding

Meanwhile, Continental has received committed finance from ABSA Capital for aggregate debt facilities of around US$65 million.

ABSA Capital is a division of Absa Bank, one of South Africa’s largest financial service providers and a subsidiary of Barclays Bank.

The facilities, which comprise US$35 million to fund the development costs of the Penumbra Coal Mine, have received all necessary credit approvals and all associated due diligence has been completed.

Drawdown of the funding will begin upon Continental funding up-front the balance of the project’s development costs not met from the US$35 million tranche from its existing cashflow and once it has satisfied the few remaining conditions precedent. First drawdown is scheduled for later in the current March quarter.


Laying the Foundations for Strong Growth

Continental has laid the foundations and has funding in place for substantial growth and a forecast increase in earnings.

The company has a current run of mine production of 2 million tonnes per annum of thermal coal with sales to the international export and domestic markets.

Continental also has a third coal mine currently under development that is forecast to double export thermal coal sales and group earnings in 2012.

A fourth mine Bankable Feasibility Study has been completed confirming a technically and economically viable operation that is forecast again to again double export thermal coal sales and group earnings in 2013.

This alone has earned Continental a target price of $0.56 per share, well over double the company’s current trading price of $0.18, from a broker.

The investment dealer maintained its ‘buy’ rating on Continental and increased its price target from $0.52 after the company released the preliminary draft Bankable Feasibility Study for its De Wittekrans Coal Project.

When in operation the project is expected to produce over 0.8 million tonnes of export sales, over 1.7 million tonnes of domestic sales, and annual earnings before interest, taxes, depreciation and amortisation in excess of US$50 million.

Continental’s goal is to achieve 7 million tonnes per annum of run of mine coal production in 2013.

Originally published at: http://www.proactiveinvestors.com.au/companies/news/24577/continental-coal-beats-its-own-export-record-ships-30-more-thermal-coal-in-december-quarter-24577.html