[miningmx.com] — THE Waterberg coal joint venture between Sekoko Resources and Firestone Energy is back on track with the introduction of a new shareholder, which has committed up to $400m for the development of the project.
The new party is a consortium of international institutional and private investors, which has created a special purpose vehicle named Ariona Company. According to joint Sekoko and Firestone chairman, Tim Tebeila, around half these investors are based in South Africa.
In the first of three separate but related deals, Ariona agreed to recapitalise Firestone with a A$30.7m convertible note facility which would redeem Firestone’s existing A$21.3m facility, with another A$6.6m going towards working capital.
In a second deal, Ariona would buy a 25.7% stake in Firestone from Sekoko for A$8m, leaving Sekoko with a 1.7% interest. Ariona would also acquire 10% of Sekoko’s direct interest in the Waterberg JV for A$13m.
Until now, Sekoko had an effective stake of just under 60% in the JV by way of a 40% direct stake and 27.4% interest in Firestone. The purchase price of A$13m for Sekoko’s 10% also implies that the project carries a R1bn value tag.
The third and most significant deal, however, is Ariona’s undertaking to procure project funding for the development of the project for up to $400m. This would include Sekoko’s funding obligations on a “deferred carry’ basis where Sekoko would only pay back its equity obligation once the project becomes operational.
As a result of these deals, FSE would continue to hold a 60% stake in the Waterberg JV, but now with Ariona as its largest shareholder. Sekoko’s interest in the JV is reduced to 30% with Ariona holding a direct 10% stake.
These deals are expected to be put to the vote to shareholders on June 18, and would pave the way for the estimated R5bn development of the project to start.
Tebeila told Miningmx that Ariona’s $400m contribution, approximately R3.2bn, would be sufficient to take the project to a point where it would start generating revenue, with the remaining R1.8bn capex to be derived from cash flows.
Sekoko had earlier clinched a R250m financing deal with the Industrial Development Corporation for its contribution to the development of the Waterberg project. While the financing is still in place, it doesn’t seem as if the facility will be necessary.
In March, Sekoko signed a memorandum of understanding (MoU) with Eskom on a 30-year supply agreement, in terms of which the Waterberg JV would commence delivering two million tonnes per year (mtpa) to the power utility in 2014, to be ramped up to 10 mtpa by 2019. The MoU replaced an earlier agreement whereby Firestone and Sekoko would’ve supplied Eskom with 525,000 tpa; called off after the project’s scale and mining plan proved to be insufficient for securing project finance.
Speaking from Sekoko’s point of view, Tebeila said the deal has put an end to the financing delays which have plagued the project.
“It is not about taking us out of the project,’ he said. “We still have a significant shareholding and has an arrangement to flip up our 30% to the listed level (Firestone) at a later stage, with no further dilution.’
Development is expected to start in April 2013. Until then, the venture has to complete its revised feasibility study and sort out regulatory issues. It also has to plan and build a 7km rail link to Transnet Freight Rail’s main line.
The Ariona deals remain subject to certain conditions.
