Coal of Africa in $14.7m placement

Perth-based emerging mid-tier coal producer Coal of Africa Ltd has welcomed global steel company ArcelorMittal as a significant shareholder via a £66.7 million ($142.7 million) placement.

Incorporated in Western Australia and listed in 1980, CoAL is primarily focused on the acquisition, exploration and development of thermal and metallurgical coal projects.

Since 2005, the company has also listed on both the AIM and JSE markets.

The company's key projects, along with its leading metals processing company NiMag Group (Pty) Ltd are in South Africa.

The announcement is pasted below:

Perth-based Coal of Africa Ltd has reached agreement with ArcelorMittal whereby:

1. ArcelorMittal will subscribe for up to 60 million new ordinary shares @ £1.11 per share raising £66.7 million and representing approximately 16 per cent of CoAL's issued capital as enlarged by the issue of such shares;

2. ArcelorMittal will enter into an off-take agreement with CoAL, l to secure a minimum 2.5 million tonnes per annum of coking coal from Coal's 100 per cent owned Baobab and 74 per cent owned Thuli Coal Projects in the Limpopo Province of South Africa.

ArcelorMittal also has an option to increase its coal off-take to 5 million tonnes per annum; and

3. ArcelorMittal will have the right to nominate one person to be appointed as a director of the company following completion of the first tranche of the Placement as described below.

The placement shares are to be placed pursuant to the authority to issue shares recently granted by shareholders at a general meeting held on 8 April 2008 and will be issued in two tranches.

The first tranche will comprise such number of shares that, when aggregated with ArcelorMittal's existing shareholding in CoAL,, will result in a holding of 14.9% of the issued capital of the company (first tranche).

The balance (second tranche), or such lower number that ensures ArcelorMittal's holding in CoAL, does not exceed 20% of the enlarged issued capital, will be issued upon the Australian Foreign Investment Review Board's approval being obtained.

Further announcements of the completion of the first tranche and the second tranche will be made in due course.

Terms and conditions of the off-take agreement are subject to final negotiations and formal documentation, however in principle it has been agreed that the coal will be delivered to the town of Musina in the Limpopo province, at a Free-on-Rail price linked to the Free-on-Board price of Kestrel hard coking coal sold by Rio Tinto and reported by Wood Mackenzie, assuming similar quality and specification parameters.

ArcelorMittal employs over 310,000 personnel in more than 60 countries and in 2007 announced revenues of USD 105.2 billion, with a crude steel production of 116 million tonnes, representing around 10 per cent of world steel output.