Continental up on offtake, funding deals

Shares in West Perth-based Continental Coal were higher after it entered another offtake deal and secured $US47 million ($A51 million) for the Vlakplaats coal project in South Africa.

The company today said it had entered into its second offtake deal with energy trader, EDF Trading, which came with an option to provide Continental Coal a loan of $US20 million.

It follows a similar offtake agreement struck between the two parties three weeks ago, focusing on the Vaalbank, Project X and Vlakvarkfontein coal mines.

Under the proposed terms of the latest arrangement, EDF has agreed to purchase a thermal coal from Vlakplaats for an initial 20-year period.

Vlakplaats is expected to start production in the second half of 2011 and will have a 2.4 million tonne annual production rate.

The offtake agreement will be based on South Africa's benchmark price for coal out of the Richards Bay terminal. The current price values Continental's offtake deal at $US155 million a year, and more than $US3 billion over the 20-year period.

Meantime, Continental has entered into an additional funding arrangement with a South African resources focused investment consortium for $US27 million.

The five-year debt facility will be used to complete the acquisition of the Vlakplaats coal project and provide further development funding.

Shares in Continental were up 1.3 cents, or 27 per cent to 6.1c at 11:54 AEST.