JOHANNESBURG (miningweekly.com) – Singaporean private investment firm Yishun Brightrise Investment has kicked off a due diligence investigation of Coal of Africa Limited’s (CoAL’s) Makhado coking coal project, in Limpopo, expressing its intent to acquire a stake in the potential 5.5-million-ton-a-year prospect.
Potential transactions under discussion between the parties included an equity investment in the Makhado project, the provision of a shareholder loan on commercial terms to provide the debt required to develop the colliery and the award of the Makhado project engineering, procurement and construction contract.
During the quarter ended September 30, the company also entered into a subscription agreement with Yishun, which held interests in coal and nickel projects in China and Indonesia, under which it received $14.7-million to finance preconstruction costs at Makhado and for general working capital.
An additional deal saw the Singapore-based firm lending CoAL $10-million, which bore no interest and was only repayable if an unrelated third party made an equity investment in the Makhado project prior to June 30, 2016, or if the company decided not to proceed with the sale of an equity interest in the project to Yishun.
“The transaction with Yishun is an important milestone in the identification of a strategic investor for the company’s flagship Makhado project.
“The investment . . . is a vote of confidence in the project and ensures CoAL is in a position to start preconstruction activities once the water-use licence has been granted. CoAL has engaged constructively with the Department of Water and Sanitation and expects to be granted a licence in due course,” CEO David Brown noted in a quarterly results statement on Friday.
Makhado’s 26-month construction phase was expected to begin in the second half of 2016, with a further four-month ramp-up phase.
During the quarter, consultations continued with possible project funders and potential customers to secure offtake agreements for Makhado’s hard coking and thermal coal products.
While an interim court interdict seeking to halt any mining or construction activity had been issued against the Makhado project during the quarter, CoAL said it, as one of the respondents, was preparing to have it set aside and the matter was due in court in November.
“CoAL does not anticipate that the process will affect Makhado’s construction timetable,” said Brown.
CoAL was, meanwhile, continuing to engage with potential buyers for its mothballed 74%-owned Mooiplaats colliery.
The company closed the period with available cash of $37.2-million and restricted cash of $1.3-million.