Coal miner MC Mining has concluded a conditional loan restructuring agreement with the Industrial Development Corporation (IDC) of South Africa, which increased the IDC’s project level interest in the Makhado coal project to 6.7%.
The company first secured a R240-million loan facility from the IDC in March 2017 for its subsidiary Baobab Mining and Exploration to develop the Makhado project, in Limpopo.
The loan facility resulted in IDC becoming a 5% shareholder in Baobab and also receiving warrants equating to 2.5% of MC Mining’s issued share capital.
MC Mining previously used R120-million of the initial loan facility to develop the project, including taking it to fully permitted status and acquiring surface rights for the Makhado mining area.
The remaining R120-million, or second tranche, of the loan remained undrawn.
Phase 1 of the Makhado project has a nine-year mine life and is forecast to produce 540 000 t/y of hard coking coal, as well as 570 000 t/y of export quality thermal coal by-product.
MC Mining is in discussions to secure R535-million, which is required to develop Phase 1.
To this end, MC Mining secured a further R245-million loan facility from the IDC – an initial step in the Phase 1 composite debt/equity funding package.
The IDC agreed to loan MC Mining more money on condition that it would agree to cancel the undrawn second tranche of the initial IDC loan facility. However, IDC has now agreed that the company may draw down R40-million of the second tranche and the Phase 1 loan facility can still form part of the composite Makhado Phase 1 funding packaged.
This is on condition that the R40-million is repaid before November 30 this year.
The new agreement between MC Mining and the IDC also allows for delayed repayment of the first tranche until November 30.
MC Mining explains that the drawdown of the R40-million will result in the IDC’s participation in the Makhado project increasing by a further 1.7% interest in Baobab, taking their total project level interest to 6.7%.
Additionally, the IDC will be granted warrants equating to 0.8% of MC Mining’s issued shares.
Another condition precedent to the loan restructuring agreement is that MC Mining must raise R15-million in the form of new equity, which the company is discussing with prospective new investors.
Once the funding is finalised, construction of the project should take nine months to complete.
MC Mining acting CEO Brenda Berlin says the company had made significant progress in securing the capital required for Phase 1 of the Makhado project prior to the Covid-19 lockdown.
She explains that the execution of the Phase 1 composite funding package was delayed owing to Covid-19 and that restructuring of the initial IDC facility pursuant to the agreement gives the company the time it needs to conclude the funding process.