ASIC has restricted Continental Coal Limited (Continental Coal) from issuing a reduced content prospectus until 26 February 2017.

The decision means Continental Coal will not be able to rely on reduced disclosure rules and must issue a full prospectus in order to raise funds from retail investors.

ASIC's decision was based on Continental Coal's failure to inform the market about:

• the completion of the sale by Business Rescue Practitioners in South Africa of Continental Coal's interests in its mining projects known as Vlakvarkfontein and Penumbra;
• the effect of that sale on the sale which Continental Coal had announced on 9 January 2015 of its 74% interest in Continental Coal Limited (South Africa) (CCLSA) to Ivory Mint Holdings Corp; and
• Continental Coal not receiving payment of $2,000,000 in application monies from Ivory Mintprior to issuing 400,000,000 shares to Ivory Mint (and other investors introduced by Ivory Mint) on 23 February 2015 under Continental Coal's supplementary prospectus dated 26 November 2014.

Continental Coal has also failed to hold its Annual General Meeting, and to lodge its financial, directors' and auditor's report, for the 2014/2015 financial year. 

ASIC Commissioner John Price said, ‘A company’s ability to use reduced disclosure rules is predicated upon them meeting their ongoing disclosure and financial reporting obligations.

‘If this doesn’t happen, ASIC will intervene so that companies seeking to raise funds from retail investors are required to issue a full prospectus. This ensures that current and potential future shareholders are in a better position to assess a company’s prospects and financial position', Mr Price said.

Continental Coal has the right to appeal to the Administrative Appeals Tribunal for review of ASIC's decision.

Background

Under the law, a listed company can offer securities using a prospectus containing information relating only to the particular offer itself.

ASIC has the power to prevent a company from relying on these rules if they breach their continuous disclosure obligations or their financial reporting obligations.

On 29 August 2014, Continental Coal released a Prospectus for a fully-underwritten non-renounceable Rights Issue of 9 shares for every 1 share held to raise up to $35,176,172 (Rights Issue). 

According to Continental Coal's Preliminary Final Report for the end of the 2014/2015 financial year, Business Rescue Practitioners were appointed in South Africa over CCLSA and some of its subsidiaries on 20 November 2014.

On 27 November 2014, the Company released a supplementary prospectus for the Rights Issue which stated that it had agreed to sell its 74% shareholding in CCLSA to a consortium headed by LSP Energy (Pty) Ltd. 

On 9 January 2015, the Company announced that it had agreed to revised terms for the sale of CCLSA with a new purchaser consortium headed by Ivory Mint Holdings Corp and that Ivory Mint Holdings Corp and investors introduced by them had subscribed for 400 million shares as part of the transaction.

On 25 February 2015, Continental Coal announced that it was proceeding with Ivory Mint in respect of the sale process and that it looked forward to concluding the transaction over the coming weeks.

A Western Australia-based director of Continental Coal Limited, Mr Peter Neil Landau, has consented to interim asset preservation orders over his personal assets, and the assets of Okap Ventures Pty Ltd and Doull Holdings Pty Ltd (of which companies Mr Landau is sole director), following an application by ASIC to the Federal Court in Perth (refer: 15-410MR). Mr Landau consented to the orders on the basis that the Defendants' rights are reserved and that they do not accept the orders should have been made.

ASIC is continuing its investigation into Continental Coal, including the use of investors' subscription monies at a time when they were required by law to be held on trust.