JOHANNESBURG - MC Mining Limited said on Monday the state-owned Industrial Development Corporation had approved a loan facility to fund the construction of the first phase of its Makhado hard coking coal project in Limpopo province.
"The term loan reaffirms the economics of the Makhado project and follows the conclusion of off-take agreements for the coal to be produced by Phase 1," MC Mining said in a statement.
"Proceeds of the loan will be utilised to develop the west pit and modify the existing Vele Colliery processing plant, with construction expected to take nine months followed by first coal production in month ten."
The Makhado project is 69 percent owned by MC Miningn subsidiary Baobab Mining & Exploration, while the IDC has a five percent stake, seven local communities own 20 percent and six percent is held by a black industrialist, in compliance with South Africa's black economic empowerment requirements.
Under the loan agreement, the IDC will advance R245 million to MC Mining, with draw-down taking place any time before June 30, 2021. The loan will endure for seven years following draw-down.
The loan carries a coupon of the prime interest rate, currently at 10.25 percent, plus a margin "that reflects the significant progress made on Makhado as well as the increased confidence that the IDC has in the execution of the project", MC Mining said.
Capital repayments will only commence 24 months after the first draw-down and will be repaid in 20 equal quarterly instalments.