The South Africa-focused producer announced a $US6 million loan facility from Resource Capital Fund as well as a $2 million private placement.
The junior, dual-listed in Johannesburg and Toronto, said it would use the funding for general working capital tied to its operations and exploration properties in Dundee, as well as to pursue the acquisition of additional South African coal assets.
"The new convertible loan facility provides Forbes Coal with the financial flexibility to enhance its current operations and pursue new ones at a very opportunistic time,” Forbes Coal president and chief executive officer Stephan Theron said in a statement.
“We are pleased to have RCF's continued support."
Subject to shareholder approval to be sought at a meeting on September 11, the loan facility is convertible into Forbes Coal common shares at a price of C36c per share.
The loan will bear interest at a rate of 10% a year, payable on each calendar quarter and will decrease to 8% once shareholder approval is received.
The deal needs approval by Forbes Coal's senior lender and regulatory bodies to close, expected by August 15.
RCF will also receive a 3% establishment fee and can receive this and interest payments in cash or shares.
RCF owns 19.97% of the issued and outstanding common shares of Forbes Coal.
Assuming an exchange rate of $C1 to $US1, if RCF converts the entire amount of the loan and chooses to receive the establishment fee in common shares, it will increase to 49% ownership.
If RCF chooses to receive all interest payments under the loan in common shares, assuming the current average conversion price of C32c, RCF will be issued around 4,340,766 common shares, which would result in it holding 52.8% of the issued and outstanding common shares in the company.
If RCF chooses to receive all interest payments under the loan facility in cash, a total of $1,389,045 in interest would be paid.
Forbes holds a majority interest in the Dundee properties, the Magdalena bituminous mine and the Aviemore anthracite mine in South Africa.
The company is in the process of increasing production at both mines using existing infrastructure and capacity.
