WCC planning $140m export coal mine

[miningmx.com] – WATERBERG Coal Company (WCC), the Sydney- and Johannesburg-listed coal development firm, said it would unveil details of a $140m coal export mine in the Limpopo province in December or January.

“The start-up of the project will be in the second quarter of 2015,’ said Stephen Miller, CEO of WCC in an interview. “It will be a modular plant concept with first coal produced in the first quarter of 2016 at an annualised rate of 1.1 million tonnes/year (mtpa) of saleable coal,’ he said.

The Waterberg coalfields are expected to produce more than half of South Africa’s future coal in the coming years but development has been limited, partly owing to infrastructural restrictions. Financing has also been difficult owing to the depressed state of the export markets and regulatory uncertainty in South Africa.

The export mine replaces an earlier scoped project by WCC that would have sold Eskom and export quality coal simultaneously.
However, this integrated project has been shelved because a coal sales agreement (CSA) with Eskom could not be concluded, a development that also led to a rollover in A$35m of loans held by WCC with a syndicate of banks.

WCC is therefore hoping the export mine will generate short-term cash flow whilst the details around the Eskom dedicated mine, which is to supply the power utility’s Majuba power station, are concluded.

A group of three banks were running the rule over the export coal plans whilst talks regarding the provision of rail capacity out of the Waterberg between WCC and Transnet Freight Rail were also underway.

The banks with which WCC was in discussion were not the same ones that provided the A$35m loan, part of which has been repaid but which totals just short of A$40m now including interest.

Roughly $100m of the export project would be funded with debt with the balance most likely to be in the form of an offtake agreement with an end-user. “We’re not keen to use equity at this stage,’ said Miller.

“We’ve been knocked over by the rush of traders trying to get hold of coal from the export project,’ said Miller. “I’m not talking about small traders, I’m talking about the big, global players,’ he said.

WCC is hoping it can agree a CSA with Eskom during the first quarter of 2015 in order to finalise the development of the domestic portion of the WCC project. It’s thought one of the issues in finalising an agreement with Eskom is that the power utility has its own challenges financing its capital project shortfall.

The company is also adjusting to a newly appointed CEO whilst even the minister in Public Enterprises, to which it reports, is a new appointment.

WCC said in a statement earlier this month that outstanding issues regarding the CSA include coal specification finalisation, final pricing, delivery dates and the provision to Eskom of a satisfactory due diligence report on a previously concluded definitive feasibility study. “The discussions with Eskom are regular and ongoing,’ it said.