A resource development company targeting the coal and renewable- energy sectors has been established to raise funds from both listed companies and individual investors.

And the investors will get a tax break, in line with changes to the Income Tax Act announced in this year’s Budget.

James Allen, CEO of the new company, called Olivewood, says that there are requirements that investors need to adhere to in order to qualify for the tax break.

The first requirement is that investors looking to go into the mining industry need to invest a minimum of R150-million over the first 36 months of the agreed period, and at least 80% of the capital earmarked for investment must be invested in a junior mining company that has a value of no more than R100-million at the time of the investment.

The qualifying investment for companies outside the mining sector is R30-million. Investors must ensure that at least 80% of the capital earmarked for investment must be invested in a nonmining company that has a value of no more then R10-million at the time of the investment.

Allan reports that Olivewood has earmarked the coal and renewable-energy sector as target areas for the company as it will provide investors with the quickest return on investment.

“Oivewood has received a letter from Eskom CEO Jacob Maroga expressing the company’s interest in Olivewood’s development and eventual establishment as a possible new supplier of coal to add to its coal-supply mix,” says Allan.

To further support the company’s investment in the coal industry, Allan highlights the fact that 77% of South Africa’s primary energy needs are provided by coal and about 25% of South Africa’s coal is exported. In order to build a sustainable energy industry, South Africa needs at least 40 new coal mines at a estimated start-up cost of up to R40-billion.

Other commodities that the company is looking into include platinum, gold tailings, chrome and manganese.

Allan reports that this will be good for the industry as companies that are initially scared of taking the plunge into the mining industry now have a means to get an initial return on investment. This will also raise the profile of junior miners who stand to be the major beneficiaries of investments directed through Olivewood.

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