Mvela and its private equity partners are increasing its stake in Coal of Africa (ASX, AIM, JSE: CZA) from 9.1% to 26.4% as it has faith in the coal developer's strategy to become one of the substantial coal players in South Africa in the short term.
CEO of Mvela Mark Willcox said today Mvela took a strategic stake in the company through its joint private equity initiative's first fund, African Global Capital (AGC), as it specifically believed in the quality of Coal of Africa's assets and management, and its strategy to acquire coal assets and consolidate in the industry.
Willcox said the private equity investment initiative was not interested in coal only, but was attracted to this particular company involved in both metallurgical and steam coal.
The recently formed private equity initiative includes Mvelaphanda Holdings (Mvela), Oz Management, an operating entity of Och-Ziff Capita Management Group, and Palladino Holdings.
Willcox said he believed Coal of Africa could realise its strategy of becoming a substantial coal player in the short term and the AGC fund would assist the company's management to attain this goal. The AGC, Coal Investments Limited (CIL) and its affiliates is taking a 26% stake in Coal of Africa that gives the latter full compliance with South African legislative requirements for black economic empowerment.
CIL is owned by affiliated investment funds of Och-Ziff.
Coal of Africa managing director Simon Farrell said the company was currently very focused on bringing three medium-sized coal mines in South Africa into production, but the partnership meant that it could look further afield at different commodities further down the track.
He said the company now had the benefit of having one of the strongest BEE partners in the country on board.
In terms of growth and consolidation, Farrell said Coal was fairly aggressive as it has grown from a market capitalisation of $7m in December 2005 to a market cap of $1.5bn, indicating the company was moving fairly quickly.
Although Coal had its hands full it would continue to grow the company as scale was an important factor in the mining business.
Farrell said there were a number of groups in South Africa which had managed to obtain coal resources with the intention of passing them on at a profit as opposed to developing the resources. This meant there were assets available for acquisition, though the company was not particularly interested in the Waterberg area.