www.snrplc.co.uk
SNR intends to develop, own and manage natural resource extraction enterprises in southern Africa. SNR will concentrate, initially, on managing the development of and the investment in the Elitheni Mine, in the Gubahoek/Macubeni area of the Eastern Cape. Further opportunities both in South Africa itself and elsewhere in the southern part of the continent will be followed up as they arise. The company's main country of operation is the Republic of South Africa.
Strategic Natural Resources to raise £2.9m in placing to develop South African coal assets
Strategic Natural Resources (AIM: SNRP) (SNR) said it is raising £2.9m through a placing of 19.1m new shares at 15p, and plans to use net proceeds to fund the development and commercialisation its mining assets in the Eastern Cape of the Republic of South Africa, and to enable it to repay a short term debt facility.
The company’s principal asset is its 74% controlling-stake in Elitheni Coal Pty, which mine and distribute anthracite coal in the Eastern Cape.
The proposed placing is being conducted by SP Angel, an authorised representative of Helvetia Asset Management. The conditional placing is subject to shareholder approval, and SNR noted that it currently has irrevocable undertakings to take up the placing shares from certain SNR shareholders representing 48.2% of the company’s issued share capital, in aggregate.
SNR noted that Coal of Africa (AIM: CZA) a major shareholder who currently owns 15% of the company, has subscribed for approximately 6.6m shares in the placing and on closing it will subsequently own 17.9m shares representing 19% of SNR’s issued share capital. "I am delighted with the support that we have received in this placing from existing as well as new shareholders”, SNR chief executive David Nel said. “The board believes we now have sufficient funding to pursue our strategy in the short term".
Upon completion, SNR intends to use the proceeds to develop mining activities at the Elitheni property to enable increased supply of coal to the local steam market in 2010. The company will also invest in engineering to underpin the roll out of burner technology to local industrial customers and update the ‘Competent Persons Report’ on the western half of the Phase 1&2 reserve.
The funding will also support assessments of the feasibility of exporting coal through the Port of East London and/or the deep water Port of Coega, in the Eastern Cape. Additionally it will fund exploratory geological work, in the form of modelling and desktop mapping, for the new phase 5 exploration area where SNR intends to conduct a drilling programme.
In June 2009, Elitheni entered into a loan agreement with South African based Ulitorque Limited, which advanced the company ZAR4.5m (approximately £402,300). Under the terms of the loan, Ulitorque had the right to convert the principal and accrued interest into a shareholding of 10% in Elitheni which could subsequently be converted into new shares in SNR, subject to certain conditions.
SNR believes it was in the company’s best interests to repay the loan before 17 March 2010, thus avoiding the requirement to issue new shares in Elitheni or SNR. Consequently, SNR entered into a short term loan agreement with SP Angel for £300,000, which along with existing cash resources, covered the principal and accrued interest of the Ulitorque loan, totalling approximately ZAR4.9m. The company said it repaid the Ulitorque loan on 16 March 2010.
The short term loan from SP Angel will be repaid from the proceeds of the placing. The admission of the new shares is expected to become effective on 12 April 2010.
Today's announcement also included an operational update, which noted that during the previous financial year, ended 28 February 2010, Elitheni began coal extraction to supply a small number of brickyards. Elitheni commercially supplied 4,000 tonnes of coal during the year, with the primary purpose of funding the initial mine development needed to begin preparations for underground mining.
SNR said it remains committed to supplying IPSA Group (AIM: IPSA) with coal for Independent Power Producer (IPP) projects in the Eastern Cape. The company said it continues to believe in the viability of this strategy, especially as the South African government recently announced that it will conclude IPP contracts in 2010.
While IPSA continues to progress the development of the power generation plant, SNR said it will focus, in the short and medium term, on both the local steam market and the development of an export strategy.
