Lontoh Coal, which aims to be the first African firm to list in Hong Kong by raising up to US$500 million by the end of the year, plans to spend up to US$775 million to expand output capacity, build port and rail facilities and a coal-to-liquid fuel plant.
South Africa-based Lontoh wants potential investors to put US$30 million in before the Hong Kong listing, which will be followed by a listing in Johannesburg. Samsung Securities is the adviser.
Most of Lontoh's resources are in Zimbabwe, where investment and trade with firms linked to the nation's controversial president Robert Mugabe and his government are the subject of sanctions by the United States and the European Union. This came after a controversial compulsory land redistribution.
Although Lontoh is not on the list of sanction targets, chief executive Tshepo Kgadima said in October last year it could be difficult to explain to Western investors, and that selling shares in Hong Kong could be easier than in New York or London.
To allay concerns about Zimbabwe's political risks, he said yesterday: 'We have a good understanding of Zimbabwe, we keep close contact with legislators there frequently.'
After an economic slump and hyperinflation in much of the past decade, Zimbabwe's economy grew over 5 per cent in each of the past two years, after Mugabe's power-sharing deal with the opposition party.
Lontoh controls 7.5 billion tonnes of inferred coal resources, of which 6.25 billion tonnes are in Zimbabwe and the rest in nearby South Africa. About 60 per cent of the resources are power-station coal and the rest steel-smelting-used coking coal.
Drilling has proved that 400 million tonnes of its resources in Zimbabwe and 35 million tonnes in South Africa are economically recoverable.
Lontoh plans to sell 80 per cent of its coking coal output to China.
Its Lubimbi mine in Zimbabwe is about 1,400 kilometres west of Maputo on the east coast of Mozambique, where it proposed to invest in a coal export terminal.
A study said up to US$200 million would be needed to build rail tracks and rolling stock, and Lontoh had budgeted US$55 million to expand coal output capacity, Kgadima said.
Lontoh aims to raise saleable coking coal output to three million tonnes in 2016 from 600,000 tonnes this year. It plans to spend US$450 million to US$520 million on a coal-to-liquid fuel plant in Zimbabwe.
'From the experience of Australia-listed miners with assets in Zimbabwe, I'm not aware of a lot of concerns on human rights issues deterring institutional investors. More investors are gaining comfort with the high political risk profile there,' said CLSA head of resources research Andrew Driscoll.
'Mozambique is one of the next frontiers for coking coal investment. Zimbabwe's competitiveness will depend on the infrastructure and logistics costs of delivering coal to the seaborne market.'
The amount that Lontoh Coal aims to raise from investors before its planned listing in Hong Kong, in US dollars: $30m