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Cokal signs financing term for AUD 67 million Development of BBM Coking Coal Project

Coal News - Published on Tue, 15 May 2018

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Cokal Limited announced that it has signed a Term Sheet for a financing package of no less than AUD 67 million for the development of its BBM Coking Coal Project with Domain International Holdings Limited. Domain is a major Asian minerals development company. Domain has been in discussion with Cokal for the past 12 months and has conducted detailed Due Diligence on the BBM Coking Coal Project's feasibility documentation. In addition, Domain has sent its technical team to inspect Cokal's BBM Anak PCI coal mining operation. Domain is more than satisfied with its findings and is intent on its involvement in the BBM Coking Coal Project mining opportunity.

The Agreement is expected to provide an attractive and strategic funding solution for Cokal, transforming the Company to a major international coking coal producer.

Under the Agreement, Domain is to provide Cokal with a debt and equity financing package sufficient to fully fund development of the BBM Coking Coal Project to a capacity of 2 Mtpa production of coking coal. The Agreement is not binding unless an initial payment of AUD 1 million is received by 25 May 2018. Should this money not be received, the Agreement may not proceed and the Company will need to obtain other financing solutions. The Agreement comprises the following terms:

1. AUD 2 million subscription for Cokal shares in two Tranches, with AUD 1 million to be received by 25 May 2018 and AUD 1 million to be received by 15 June 2018:

a). The Cokal shares subscribed for by Domain will be priced at a 10% discount to the 5 day Volume Weighted Average Price for the 5 trading days after receipt of the funds by Cokal; and

b). The issuance of Cokal shares under the Agreement is contingent on shareholder approval. The Company will seek this approval as soon as possible;

2. Debt and Equity finance of no less than USD 50 million to fund the development of the BBM Coking Coal Project to a capacity of 2 Mtpa of coking coal production. In addition to cash funding, the financing package may include mining equipment and site infrastructure.

The USD 50 million funding will be injected into Cokal-BBM Pte Ltd, a wholly owned subsidiary of Cokal, which holds a 60% interest in BBM, and will comprise:

a). Equity component of USD 30 million for a 50% interest in Cokal-BBM Re Ltd; and
b). Residual debt component of no less than USS20 million, or such greater amount as required to reach a coking coal production capacity of 2 Mtpa. The debt component will be repaid from project cashflows with no recourse to Cokal;

3. The Agreement is binding on both Cokal and Domain, subject to the satisfaction of Conditions Precedent customary for a transaction of this nature and as detailed below:

a). Cokal to receive the first payment of AUD 1 million by 25 May 2018 (after which Domain will be granted a three-month exclusivity period for BBM Coking Coal Project development financing. During this time Cokal will not be restricted on corporate capital raisings);

b). Shareholder and regulatory approvals, where required; and

c). Formal documentation.

Exclusivity expires 25 August 2018. Domain has indicated its intention to complete the transaction prior to this date.

Mr Domenic Martino Cokal Chairman, said that "Cokal has developed a much sort after coking coal project in BBM to production-ready stage, and is highly motivated to commence production in order to realise the inherent strategic and financial value of the asset. Coal production from BBM will generate attractive profits for Cokal and returns for its shareholders."

Meanwhile, Cokal's most advanced project is Bumi Barito Mineral - a high quality metallurgical coal project. Cokal is focused on the near-term production of BBM and is currently raising capital for mine construction and to commence production.

BBM is located in the Central Province, Kalimantan, Indonesia and comprises approximately 1,500ha. The BBM Coking Coal Project is the largest of the three BBM projects, with forecast production capacity of 2 Mtpa of coking coal.

A Feasibility Study indicates a financially robust project, possessing strong technical merits, with all mining permits and approvals in-place. The development capital requirement for establishing a 2 Mtpa coal mine at BBM has been estimated at USD 68 million.

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Posted By : Nanda Koijam on Tue, 15 May 2018
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