AFR�s capital raising plan flounders
Brian Benza | Wednesday June 4, 2014 16:46
Announcing the results of the rights offer in a statement to the Botswana Stock Exchange (BSE), African Energy yesterday said that only $300,000 was raised as 3.5 million shares were bought by existing shareholders from about 34.7 million shares on offer.
Through the rights issue, which closed on May 29, 2014, African Energy, was offering existing shareholders a chance to buy one new share at $0.085 for every 13 shares currently held.
According to the company, from the 31 million untaken shares, Sentient Executive, will now buy 17.1 million the underwriters of the issue, leaving a shortfall of 14.1 million.
Apart from the rights issue, Sentient Executive has also participated in a $1.5 private million private placement, which will shore up its shareholding in AFR to 19.9 percent.
“The company reserves the right to place the remaining shortfall of 14.1 million shares at 8.5 cents per share within three months of the closing date of the Rights Issue,” African Energy said. The rights issue offer price of 8.5 cents was at a discount to the counter’s prevailing trading price of 10 cents on the Australian Stock Exchange and 58 thebe on BSE.
The funds raised by the placement and rights issue were meant to allow the company to advance its portfolio of coal band power projects in Botswana. African Energy owns three large coal projects in Botswana, the Mmamabula West Project, Sese Power and mine project and the Mmamantswe, which collectively contains over 8.7 billion tonnes of thermal coal.
Of the three deposits, Sese is the closest development with two million tonnes per annum mine expected to be commissioned next year followed by construction of a 300 MW power station.
African Energy acquired the Mmamabula West project last December owing to its relatively high coal quality and perceived potential as a source of export coal.
About two months ago, African Energy stated that two principal markets in South Africa and Asia have been identified for Mmamabula West Coal. But with the current coal prices, the current rail tariffs are marginally too high for profitable export operations thus making the power generation a sound business solution.
African Energy is now focusing on the power generation than exporting coal due to depressed coal prices coupled with high freight costs.
In a statement to the Botswana Stock Exchange (BSE) recently, African Energy managing director Frazer Tabeart said that the company will for the next six to 12 months exploit power development opportunities in southern Africa as electricity generation projects are devoiced from the current coal price.
Coal prices are down 14 percent this year as oversupply pulled down international to their lowest level in nearly seven years, with further pressure from China’s attempts to reduce air pollution.