The Industrial Development Corporation (IDC) of South Africa has extended the date by which coal miner MC Mining is to repay two loan facility drawdowns of R160-million to July 31.
MC Mining initially used R120-million of a R240-million IDC facility to progress the Makhado project to fully permitted status and to complete the acquisition of the surface rights required for the mining area.
The first and second drawdowns of R160-million, plus accrued interest, were originally due for repayment by November 30, 2020.
MC Mining previously secured a conditional R245-million term loan facility from the IDC, the initial step in the composite Phase 1 debt/equity funding process, the drawdown of which is subject to the IDC reaffirming MC Mining’s financial due diligence.
The IDC has provided longstanding support for the development of MC Mining’s flagship, fully-permitted Makhado project.
MC Mining has also secured in-principle agreements with various other parties for a further R200-million for Phase 1 that are subject to the agreement of final documentation. It is also in advanced discussions with potential equity funders for the remaining R130-million and anticipates that these will be finalised during the first quarter of this year.
The company also reports that the IDC has agreed to extend the terminal drawdown date in respect of the conditional R245-million term loan facility agreed to partially finance the development of Phase 1 of the Makhado hard coking coal project to July 31.
During August 2020, the company and the IDC restructured the IDC facility and MC Mining drew down an additional R40-million, while the remaining R80-million undrawn balance was cancelled.
The first and second drawdowns resulted in the IDC becoming a 6.7% shareholder in MC Mining subsidiary Baobab Mining & Exploration, which owns the Makhado project.
Going forward, MC Mining and the IDC will continue discussions with the objective of scheduling the repayment of the first drawdown to align with the positive cash flows generated by the project, while repaying the second drawdown from the proceeds raised to build Phase 1.
In the unlikely event that the parties cannot reach agreement on further deferment terms or MC Mining not repaying the loan by the repayment date, the financing documentation enables for the debt to be converted into equity.
MC Mining acting CEO Brenda Berlin says the IDC’s extension of its initial facility, as well as the terminal drawdown date for the term loan, reiterates their support for the development of the Makhado project.
“The company continues to make progress on the initiatives to secure the remaining funding for Phase 1 and anticipates that these will be completed during the first quarter of [the year], followed by a nine-month construction period and first coal sales in the first half of 2022.”
He adds that Phase 1 has an internal rate of return in excess of 40% and a payback of less than 2.5 years, supported by favourable long-term hard coking coal markets and driven by forecast growth in worldwide steel demand.