[miningmx.com] – THE South African unit of Macquarie Capital has joined forces with the privately-owned Belelani Investment Managers to establish a coal fund aimed at helping to bridge the two billion tonne (bt) supply shortfall from 2018.
The Australian bank will part finance the fund which is aimed at assisting establishing coal producers source black economic empowerment partners in order to comply with Department of Trade & Industry regulations (DTI).
According to the regulations, new sources of coal production to Eskom have to be 50% plus one share empowered. A separate BEE code developed by the Department of Mineral Resources puts BEE threshold at 26%.
Malose Kekana, the principal of Belelani Investment Managers, said it intended to pair black-controlled coal development companies with coal producers seeking expansions.
“The asset allocation will be with the existing producer that wants to expand but needs to have BEE compliance,’ said Kekana.
Kekana is currently a 10% investor in Alpha Coal and has a 51% stake in Altius Trading through the Baswa Investment Holding & Kekana Investment Trust.
“My inspiration to start a coal private equity fund originates from the practical experiences in the industry,’ he said. “[Coal] prices are low so it’s a biased market for private equity. I think it’s a good time to come in,’ said Kekana.
Earlier this year, Eskom said it had progressed plans to launch its Mine Development Fund which will be predominantly a public sector product. Eskom’s head of business development, Kannan Lakmeeharah, said at the IHS McCloskey Coal Conference in January that the utility was hoping for private sector involvement.
However, a highly placed source at one of South Africa’s largest commercial banks said private equity involvement with Eskom was difficult to support.
“If Eskom is hoping to do a million deals with small-sized economic partners in the coal space it will be extremely difficult to manage, and the scope for losing track of the money is high,’ he said.
The third fund is one planned by Thebe Investment Corporation, South Africa’s oldest empowerment organisation. It is setting about a junior mining incubator and coal fund with investment firepower that could eventually run into the billions of rands.
Said Kekana: “From 2018, a lot of Eskom’s contracts will have expired and I don’t think we are thinking enough now about new projects’.
Kekana added that he had “a geographical bias’ towards coal in South Africa’s Waterberg coalfields (in the Limpopo province) where he was born.
“The starting point is coal, but the long-term intention is to develop a diversified portfolio of mining investments. We hope to do a couple of deals and hope to build critical mass,’ he said.
