JOHANNESBURG (miningweekly.com) – Local coal producer IchorCoal has inked a deal to acquire stricken Continental Coal’s key 1.2-million-ton-a-year Vlakvarkfontein and stalled Penumbra mines, both in Mpumalanga, for R128-million.
Citing the driver of the purchase agreement as IchorCoal’s strategy to participate “meaningfully” in the South African coal sector, CEO Nonkululeko Nyembezi-Heita described the acquisitions as another step toward the group’s transition to a leading local midtier thermal coal producer.
Particularly noteworthy was the proximity of Penumbra to IchorCoal’s existing Vunene operation and the subsequent potential to extract material synergies, which would lower the group’s overall operating cost.
“Further, our existing, indirect, shareholding in Vlakvarkfontein makes us the logical acquirer of this asset and clearly demonstrates IchorCoal’s strategy to actively participate in the consolidation of the South African junior coal sector,” she commented.
Under the terms of the deal, IchorCoal would pay R55-million for Continental Coal South Africa’s 100% interest in Penumbra, which had a resource of 14-million tons in situ and had produced 500 000 t/y of coal since 2012.
The Penumbra acquisition also included a rail siding and a yearly export allocation of 18 000 t at the Richards Bay Coal Terminal, in KwaZulu-Natal.
In addition, IchorCoal would pay R73-million for Continental Coal South Africa’s 50% shareholding – and 60% economic interest – in Ntshovelo Mining Resources, which owned the opencast Vlakvarkfontein mine.
IchorCoal intended to fund the acquisitions through a combination of internal funds and third-party funding.
Continental Coal South Africa and its wholly-owned subsidiary companies Mashala Resources and Penumbra Coal Mining entered into business rescue proceedings in November 2014, after which court-appointed business rescue practitioners initiated a sales process on the Penumbra asset in February.
IchorCoal was, thereafter, selected as preferred bidder for Penumbra following approval of the business rescue plan at a meeting of creditors in April.
“IchorCoal was also selected as preferred bidder for Continental Coal’s interest in Vlakvarkfontein as part of this process. Ntshovelo was not placed under business rescue and continues to operate profitably,” the coal miner said in a statement.
The transaction would increase IchorCoal’s current attributable mineable resource base of 449-million tons to 460-million tons and would likely
secure the group “immediate” access to an additional 1.2-million tons a year of attributable run-of-mine production – an increase in excess of 50% on 2014’s production of 2.1-million tons.
“This is a significant opportunity for IchorCoal to increase its footprint in the domestic and export coal markets. We remain focused on our plan to increase attributable coal production, which we expect will coincide with an anticipated increase in the price of and demand for coal,” added Nyembezi-Heita.