MC Mining’s subsidiary, Baobab Mining & Exploration, has reached agreement on the terms and conditions under which it will acquire the two key properties required for its Makhado hard coking and thermal coal project, in Limpopo.

Baobab will buy the Lukin and Salaita properties for R70-million.

The company has been pursuing various options, including going the legal route or negotiations on commercial terms with the owner of the properties, a private company that uses the properties for commercial hunting.

The purchase price will be settled in two tranches of R35-million, with the properties pledged as security until the purchase price is settled.

The initial tranche is payable on transfer of the properties, while Baobab will have access to the properties on payment of this amount to the conveyancing attorneys. The purchase will be funded from internal cash flows.

The second tranche will accrue interest from the date of transfer at the South African prime interest rate (currently 10%) minus 3%.

It is payable on the earlier of the third anniversary of the transfer of the properties or the first anniversary of production of coal underlying the properties, or on completion of a potential land claims and expropriation process that will, in all likelihood, result in Baobab receiving market-related compensation under current legislation.

Should the properties be expropriated in favour of land claimants, MC Mining will negotiate access terms with the relevant authorities and the successful claimants, expected to be communities that have a shareholding in Baobab.

“The agreement to acquire Lukin and Salaita is a significant step for MC Mining and completes the suite of surface rights required for our permitted flagship Makhado project,” MC Mining CEO David Brown commented in a statement published last week.

The acquisition paves the way for the company to proceed with geotechnical and related studies for the mine’s infrastructure.

MC Mining has made considerable progress in terms of achieving important milestones at Makhado, including inking an offtake agreement for about half of the hard coking coal to be produced at the mine.

Negotiations for the sale of the remaining hard coking coal, as well as the thermal coal, are at an advanced stage, while funding initiatives are also progressing.