Coal miner MC Mining has submitted a formal application to the Industrial Development Corporation of South Africa (IDC) to extend the repayment period for its loan facilities with the institution.
The IDC has since acknowledged the application, but no agreement has been reached yet between the parties.
The initial drawdown and the second drawdown plus accrued interest were due for repayment by November 30.
Negotiations between the parties are ongoing to align the repayment of the first drawdown with the positive cash flows generated by the project, while repaying the second drawdown from the proceeds raised to construct Phase 1 of the Makhado project.
In March 2017, MC Mining secured a R240-million loan from the IDC, of which the company used R120-million to develop Makhado, including progressing the project to fully permitted status, and completing the acquisition of the surface rights required for the mining area.
During August, the company and the IDC agreed to restructure the balance of the initial IDC facility and MC Mining drew down R40-million and agreed to cancel the balance of the initial IDC facility.
The first and second drawdowns resulted in the IDC becoming a 6.7% shareholder in the Makhado project.
MC Mining has made significant progress securing the funds required to build Phase 1, which will create more than 650 direct and permanent job opportunities and reduce the volumes of hard coking coal currently imported into South Africa.
Phase 1 comprises the construction of the Makhado west pit and modifications to the existing Vele Colliery processing plant to process the screened and scalped Makhado run-of-mine coal.
The total funding required is about R575-million, including the repayment of the second drawdown.
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. MC Mining has also secured in-principle agreements with various other parties for a further R200-million for Phase 1 that are subject to agreement of final documentation.
It is also in significantly advanced discussions with potential equity funders for the remaining R130-million and anticipates that these will be finalised during the first quarter of 2021.
MC Mining acting CEO Brenda Berlin says a nine-month construction period will follow, with first coal sales expected in the first half of 2022.
“The development of the Makhado project is supported by favourable long-term hard coking coal markets and forecast growth in worldwide steel demand, driven by global economic development and urbanisation. Phase 1 has an internal rate of return in excess of 40% and a payback of less than 2.5 years.”