Coal miner MC Mining has satisfied the conditions in a restructured loan agreement with the Industrial Development Corporation of South Africa (IDC), with this condition required for the company to secure commitments for the issue of new equity for a collective R15-million.
In terms of the agreement, the company will now draw down R40-million and these funds will be used to advance the Makhado hard coking coal project and for general working capital.
The new equity will be issued at an agreed price of 105.56c, a 9% discount to MC’s closing share price on July 17.
This will result in the issue of about 14.2-million new ordinary shares in the company.
The IDC will receive an estimated 1.1-million warrants, equating to 0.8% of MC’s issued shares, and its direct participation in the Makhado project will increase from 5% to 6.7%.
The new equity will be issued, pending approval by the South African Reserve Bank, which is necessary for certain tranches of the new MC shares being issued. Approval is expected in early August.
MC previously secured a R245-million loan facility from the IDC. This is the initial step in the R535-million composite debt/equity funding package to develop Phase 1 of Makhado.
MC is in advanced discussions for the balance of the funding required and construction is anticipated to start in the fourth quarter of this year or the first quarter of 2021.
Phase 1 has a nine-year life-of-mine and is forecast to produce 540 000 t/y of hard coking coal, as well as 570 000 t/y of an export quality thermal coal by-product.
“The issue of the new equity to existing and new shareholders underlines the robust fundamentals and compelling returns of the Makhado project.
"This is a further significant step for MC and we will now focus on securing the balance of the Phase 1 funding, delayed by the Covid-19 lockdown. The company will also continue negotiations to defer the November 2020 repayment of existing debt owing to the IDC until the Makhado project is generating positive cash flows,” says MC acting CEO Brenda Berlin.