The Industrial Development Corporation of South Africa has approved a term loan facility to fund the construction of Phase 1 of the Makhado hard coking coal project.
David Brown, CEO of MC Mining, confirmed the reports and said that the loan reaffirms the economics of the Makhado project and follows the conclusion of off-take agreements for the coal to be produced by Phase 1.
“The loan reflects the IDC’s support for the development of the Makhado Project and replaces the 2017 financing that was utilized to fund pre-project activities, including securing the numerous regulatory licences and approvals,” said CEO Brown.
Makhado hard coking coal project
The loan is expected to fund the development of the west pit and modify the existing Vele Colliery processing plant, with construction expected to take nine months followed by first coal production in month ten.
The total funding requirement for both Phase 1 and the settlement of the existing 2017 loan facility is US $50m. The loan will satisfy US $17.5m of this, leaving a residual equity requirement of US $32.5m. MC Mining anticipates that an equity raise to secure the residual equity requirement will be completed in due course enabling construction activities to commence later in Q3 CY2019.
The Makhado project is 69% owned by MC Mining’s subsidiary Baobab Mining & Exploration with the Industrial Development Corporation of South Africa having a 5% interest and, in compliance with South African black economic empowerment requirements, seven local communities own 20% and 6% is held by a black industrialist.
The construction of Phase 2 which is anticipated to commence from 2022 will yield approximately 0.8 Mtpa of hard coking coal and between 0.9 Mtpa and 1.0 Mtpa of export quality thermal coal.