[miningmx.com] — LONTOHCOAL, the first company headquartered in South Africa to attempt a listing on China’s Hong Kong Stock Exchange, is facing a challenge for control over its key Zimbabwe coal resources – a development it says won’t derail its $500m listing.
LontohCoal controls the 110Mt/year Lubimbi coal field in the Kariba basin near Hwange Colliery Company, Zimbabwe’s only substantial coal miner. Development of a mine and infrastructure on the property is estimated to total $4.2bn, said Tshepo Kgadima, CEO and president of LontohCoal.
The capital cost includes a coal-to-liquid (CTL) plant, and a conveyer system that will transport the coal in slurry form hundreds of kilometres, possibly to Mozambique’s Beira.
Ownership of Lubimbi is split between LontohCoal (51%) and three Zimbabwean investors who are shareholders in Zimbabwean company, Liberation Mining. According to an announcement, however, a stake in Liberation Mining was bought by Sable Mining, a pan-African exploration firm which is listed in London and which announced on June 6 it was developing Lumbibi for itself.
“We have the pre-emptive rights over Liberation Mining, and we think Sable Mining is going to have to tell its shareholders it has a problem,’ said Kgadima when asked if fears over the security of Lubimbi might unhinge the initial public listing in Hong Kong.
“It (Sable Mining) will not get the regulatory support for this transaction,’ he added.
Sable Mining, which also has iron ore properties in Liberia, said it transacted with Liberation Mining through subsidiary, Somedon Investments. Mining entrepreneur Andrew Groves, who heads Sable Mining, declined to comment. “He is on an international roadshow,’ a Sable spokesperson told Miningmx.
Nonetheless, Sable Mining issued the following statement about Lubimbi: “Results already suggest.that a high grade thermal coal and a soft or blend coking coal could be produced’. Drilling would begin immediately, it added.
“Our view is that Sable is being very premature,’ said Kgadima. “It might even be trying to put a spike in the spokes of our listing.’
Lontoh has declared total coal resources in excess of one billion tonnes in South Africa and Zimbabwe. But Lubimbi is the flagship asset containing 80Mt of coking and 27Mt of thermal saleable coals which will be extracted over the 30 year life of the prospect. Up to 80% of production will be exported to China, and there are plans to secure financing for the project through Chinese end-users.
“We hope to provide 4,000 to 5,000 direct jobs and over a 20-year period generate some $10bn in royalties and corporate taxes.’ A further $2bn would be saved in fuel imports if Lontoh develops a coal-to-liquids plant using 2Mt of thermal coal per year.
This kind of internal investment is likely to appeal more to the Zimbabwean government than a company “sinking a few drill holes and then on-selling the prospect to another company,’ said Kgadima on his view of Sable’s investment strategy.
Instead of waiting for Zimbabwe to rehabilitate its train links, LontohCoal would rather invest in a conveyer system that will transport coal in slurry form 1,500km to Beira. This would make Lubimbi comparable with Mongolia’s coal fields which hope to deliver product at a port east of Bejing in China, said Kgadima.
It was cheaper to operate the conveyor which will transport coal slurry at a cost of 12 to 15 US cents per kilometre, equal to a $30 to $40 per tonne saving, said Kgadima.
“We’ve appointed two banks which includes the Industrial and Commercial Bank of China (which owns 20% of South Africa’s Standard Bank) which will be global coordinator of the listing, and Samsung Securities Asia,’ said Kgadima. “In the next two to three weeks, we hope to be in position to file an application with the [Hong Kong] exchange,’ said Kgadima.
LontohCoal sized up a listing in Johannesburg last year before opting for Hong Kong.
LontohCoal is owned by Lontoh SA, a private equity firm that has provided permitting advice to Toronto-listed Homeland Energy as well as Wesizwe Platinum. Kgadima worked as a merchant banker for Nedcor Investments, the precursor for Nedbank Capital.