MC Mining concludes purchase of key surface rights

Date: 18 January 2019 By: 

MC Mining, formerly known as Coal of Africa Limited, announced that its subsidiary, Baobab Mining & Exploration (Baobab), has completed the previously announced transaction to acquire the farms Lukin and Salaita, key surface rights required for its Makhado hard coking and thermal coal project.

The mine’s Makhado Project is situated just north of the Soutpansberg. The purchase, first announced on 15 November 2018, was conditional upon the seller, Akkerland Boerdery, notifying and addressing any concerns regarding the transaction raised by the Limpopo Province regional land claims commissioner. “The commissioner did not object to the transaction during the legislated 30-day notification period and the Deeds Office has subsequently processed the change of ownership, legally transferring the properties to Baobab,” stated MC Mining in a press release issued on Monday.

The payment of the initial R30 million tranche has now been made to Akkerland Boerdery. “The balance of the purchase price, being a further tranche of R35 million, will accrue interest at the South African prime interest rate (currently 10,25%) less 3% and is payable within three years.

“The acquisition of Lukin and Salaita completes the suite of surface rights required for our flagship Makhado Project and the initial tranche of the purchase price was settled using internal cash flows. The transaction will facilitate the commencement of the final geotechnical drilling and related studies required for the siting of the mine’s infrastructure. In parallel, we continue to progress offtake negotiations for the balance of the Makhado coking and thermal coal as well as discussions with potential funders,” said MC Mining’s CEO, Mr David Brown, in the press release.

If the names Lukin and Salaita sound familiar, they should. The two farms made international news headlines last year as they were first on a list of properties to be expropriated without compensation by the South-African government. Civil rights organisation AfriForum waded in on the ensuing legal battle, arguing that the government’s attempt to expropriate the two farms at 10% of the market value sought to employ land reform as the pretext to hide the real motive behind the expropriation: That the government wanted to lay its hands on the rich coal reserves below the surface of these farms to facilitate expansion of the Chinese government’s economic interests in South Africa, namely the Musina-Makhado SEZ. In November last year, MC Mining announced that they had struck a deal with Akkerland Boerdery for the sale of the two farms for R70 million.

Shortly before announcing the purchase of the two farms, in October last year, MC Mining confirmed the conclusion of their first off-take agreement for hard coking coal at their Makhado Project.  The coal purchase agreement was reached between Baobab and Huadong Coal Trading Center Co (HDCTC), a Chinese state-owned enterprise and a subsidiary of the Chinese Forestry Group Corporation.

According to the three-year take-off agreement, the Makhado Project will have to supply a minimum of 400 000 tonnes of hard coking coal per annum to the HDCTC. That is more than half of the Makhado Project’s annual production of 800 000 tonnes of hard coking coal. Apart from the expected 800 000 tonnes of hard coking coal annually, the Makhado Project will also produce between 900 000 and 1 000 000 tonnes of export-quality thermal coal.

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