THE Industrial Development Corporation (IDC), a South African financial development institution, has agreed to extend the deadline for repayment of R160m extended to MC Mining, the coal developer said today.
MC Mining stated in an update that it will have until July to repay the first installment on the outstanding loan, originally provided in order to finance the permitting and licensing of its two million ton a year thermal and metallurgical coal project, Makhado.
Thereafter, the loan will be extended in order that repayment is aligned with operating cash flow produced by Makhado. In the event that the parties fail to agree to an extension, the loan will be converted into equity.
The IDC already owns 6.7% in MC Mining.
In the meantime, MC Mining is waiting on the IDC to “reaffirm” its study into the financial viability of Makhado. This is in order to secure about half of the R575m required to finance the project (which includes the repayment of the initial IDC drawdown).
The IDC agreed to provide R245m in funding for the first phase of Makhado’s development with the terminal drawdown date for the loan extended to end-July.
The balance of the project has been partially secured. MC Mining previously said it had tied up R200m from other parties, whilst discussions to land the outstanding R120m were likely to bear fruit before the end of the first quarter.
“The company continues to make progress on the initiatives to secure the remaining funding for Phase 1 and anticipates that these will be completed during the first quarter, followed by a nine-month construction period and first coal sales in the first half of 2022,” said Brenda Berlin, acting CEO of MC Mining.
“Phase 1 has an internal rate of return in excess of 40% and a payback of less than 2.5 years, supported by favourable long-term hard coking coal markets and driven by forecast growth in worldwide steel demand,” Berlin said.