South African coal miner LontohCoal has delayed its $1 billion Hong Kong initial public offering due to difficult market conditions, extending the time frame for the listing to the end of February next year, its chief executive said.
Tshepo Kgadima said the listing, originally planned for the first half of 2012, would help speed up its projects in South Africa and Zimbabwe. These include a planned $5.5 billion, 50,000 barrels-per-day coal-to-liquids plant the company hopes to construct by 2017 to supply diesel and other fuel products to the Zimbabwean and regional markets.
“I’m confident that in the current financial year which ends in February we should be able to conclude this IPO. We are ready to launch once equity capital markets improve,” he told Reuters.
A gloomy outlook for the world economy has made equity markets volatile and investors wary of putting money into new listings. Last month, London jeweller Graff Diamonds pulled its planned $1 billion IPO in Hong Kong.
LontohCoal has also decided to double the target for its IPO from an original $500 million after completing more detailed studies on some of its projects,.
In the interim, the group has launched an over-the-counter trading platform to broaden its shareholder base and provide liquidity and an exit for its initial investors.
The company decided to have its primary listing in Hong Kong rather than Johannesburg because of its large exposure to Asia.
The planned CTL plant will get its coal from the Lubimbi project in Zimbabwe, in which LontohCoal has a 51 percent stake.
Kgadima said Lubimbi would eventually produce around 46 million tonnes of coal per year, with trial mining likely to start within three years, rising to its full capacity by 2017.
“We plan to export 20 million tonnes of that coal, with the rest going into the CTL plant as well as to supply the domestic market,” he said.
The company plans to move the export coal via a 1,300 km (810 miles) slurry pipeline to a port in neighbouring Mozambique. Kgadima said the port of Inhambane was seen as the ideal solution, but would need to be dredged to accommodate larger vessels.
He said the cost of the slurry pipeline was estimated at up to $1.7 billion, while that of the port was not known. Both projects would be funded by the private sector, he added.
“We’ve been in discussions with Mozambique and its ports and railways company CFM about the slurry pipeline and the development of the port and they have been very receptive to the project,” he said.
Kgadima said LontohCoal had signed coal offtake deals with two state-owned utilities in China and a coal trading company in India, with their total worth up to $320 million a year.
Initial tonnages, which LontohCoal will buy from small mines in South Africa, will be shipped in July.
“These long-term agreements give us certainty of revenues at this very early stage,” he said.
LontohCoal is in talks with another Chinese state-owned firm for a long-term supply deal of 3.6 million tonnes of thermal coal per year.
“We expect to conclude negotiations in July 2012 and start supplies from February 2013,” he said, adding that the company was in the process of buying two thermal coal properties in South Africa’s Mpumalanga province to have the coal to do this.