[miningmx.com] — OPTIMUM Coal Holdings (Optimum) is carrying out a major refinancing exercise ahead of embarking on a number of brownfields and greenfields projects, including building a new mine on the Remhoogte prospecting rights.
The Remhoogte rights have been acquired from Billiton Energy Coal South Africa (Becsa) for R235m and contain an estimated coal resource of 306.5mt situated south and west of Davel near Ermelo.
The Remhoogte mine will replace export production in the “medium to long-term’ currently being sourced from the group’s Optimum mine. Remhoogte sits adjacent the Richards Bay coal mine and is closer to Richards Bay than Optimum’s current operations on the Witbank coal field.
Once built, the Remhoogte mine will be an underground operation with an initial life-of-mine of 16 years which could be extended. It will produce 4mt/year of run-of-mine product from which an estimated 2.5mt/yearof export coal and 400,000t/year of Eskom middlings coal will be sold.
Optimum CEO Mike Teke declined to be pinned down on a development time-line for Remhoogte and commented only that construction of the mine could begin from about 2016.
Projects to be tackled ahead of that include the development of the TNC prospecting rights, bought for R420m, which are needed to extend the life of the group’s Koornfontein mine.
Other projects being looked at are the greenfields Overvaal and Vlakfontein projects where a mining licence application has already been submitted for Vlakfontein and one will be submitted for Overvaal before the end of the year.
According to Teke, “the actual timing of these Greenfield developments will depend on their group ranking, availability of capital, access to export rail entitlement and/or Eskom off-take arrangements”.
Commenting on Optimum’s results for the year to end-June Teke said, “the group is currently re-financing its debt facilities and is in the process of evaluating debt proposals received from various lenders”.
Teke declined to specify to Miningmx precisely how much debt Optimum was looking at taking on to fund its various projects.
He said “we are working on the capital expenditure programme. Once we have the final capital number then we will know just how much we will be looking for. I would stress that we intend being responsible in our debt programme.”
As part of the group’s current debt package Optimum agreed to sell 1.02mt of export coal to Becsa during the 2011 calendar year at a fixed price of $87/t.
That was a requirement insisted on by the group’s bankers to re-finance Optimum’s debt in November 2009 but it has proved an expensive condition because of the way in which export coal prices have soared since then.
Coal export prices (freight-on-board) Richards Bay have been trading above $100/t since the beginning of the year and currently sit around $118/t, meaning Optimum will effectively have to account for a derivative loss of potential revenue from that million tonnes of coal.
Optimum reported an attributable profit of R460m for the year June – more than double the R216m for financial 2010 – earned on the back of a 57% rise in revenues to R5.3bn (R3.4bn).
A special dividend of 30c a share has been declared.
