JOHANNESBURG (miningweekly.com) – The current crisis in the South African mining sector is opening up significant opportunities for emerging black junior miners in the coal space, Wescoal nonexecutive chairperson Robinson Ramaite said on Wednesday.
“From a junior miner's perspective, what this crisis comes with is a lot of opportunity, because certain assets that would otherwise not have been available, are now available, mainly from foreign-held companies and mainly arising from the listing boom in Australia, Canada and the London Aim," Ramaite said.
It is understood that some black juniors together with Eskom are also in potentially transformative talks with majors on taking over certain long-term coal contracts to supply the State power utility.
“This is the chance for us juniors, who did not have opportunities when the first generation of black economic empowerment unfolded,” Ramaite said.
Speaking to Mining Weekly Online in the attached video interview, he added that many companies that listed and acquired South African assets during the good times were now keen to sell.
“We are seeing a lot of opportunities in the mergers and acquisitions space,” he said.
The reason why many of the South African assets were taken to foreign stock exchanges in the first place was that ASX, TSX and London Aim investors understand exploration investment better than South Africans, who tend to be exploration-averse.
However, many of the foreign companies are now coming under pressure to dispose of their South African assets in particular.
“Similarly, we’re also seeing South African majors wanting to de-risk. We’re very excited by that prospect because suddenly we are seeing a lot of deal flow,” the chairperson of the JSE-listed coal company added.
State power utility Eskom has for long been entering into long-term cost-plus contracts with major coal producers.
“Interest is now being shown by some of those majors to offload some of those assets, which, of course, would have to happen in cooperation with Eskom.
“Some of the discussions around this have already started and those transactions, for the likes of us, will be very transformative,” Ramaite told Mining Weekly Online.
Eskom currently buys 130-million tons of the 250-million tons of coal produced a year in South Africa for use in its 13 power stations.
Coal production is currently concentrated in large mines, with eight mines currently supplying 61% of the output.
Capital for deal doing is being sought from institutions including local development funding bodies.
Exploration-stage support is now forthcoming as Eskom is looking to procure “no less than a billion tons-plus” of coal from emerging black coal miners in the next 40 years.
Eskom is also assisting with project funding and even equity funding and, once the coal is tested, offtake contracts are entered into, even before mine development commences.
“If you can’t raise funding with an offtake agreement then you shouldn’t be in the business,” Ramaite commented to Mining Weekly Online.
Coal trading will be used as a tool to develop black-owned companies in coal beneficiation and processing and Eskom also intends to use its purchasing power to empower black-owned suppliers and increase equity stakes to 50% plus one share.
Steps will also be taken to consolidate smaller black-owned mining resources into larger entities.
South African coal junior Keaton Energy this week made a play for ASX-listed Xceed Resources, advancing its strategy of growing into a five-million-ton-a-year producer.
Xceed holds an interest in three coal projects in South Africa, including the Moabsvelden, Roodepoort and Bankfontein projects, which have a combined total resource of 114.4-million tonnes.