[miningmx.com] – Barely a week after buying Anglo American Platinum’s Rustenburg division for R4.5 billion Sibanye Gold has now moved into coal through an agreement that will ultimately give it control of ASX-listed Waterberg Coal Company (WCC).
According to Sibanye CEO,Neal Froneman ,the move is justified by Sibanye’s requirement for a “long-term stable energy supply in response to the inconsistent and increasingly expensive power supplied by Eskom’ but the deal will come as a huge relief for investors in WCC and associate Firestone Energy.
WCC has been battling for more than a year to find the funds required to develop its proposed new coal mine near Lephalale in the Waterberg because investment appetite for coal juniors in South Africa has dried up through a combination of depressed conditions in the coal markets and anti-SA investor sentiment.
Trading in Waterberg shares has been under voluntary suspension since mid-March while the company; “finalises negotiations with certain banks and funding agencies to effect the funding required to retire its existing facility with the Standard Bank of South Africa as well as all other indebtedness of the company and its controlled entities.’
According to a Sibanye statement the company will take over a “secured convertible note’ amounting to A$22.5m (about R225m) from a consortium of lenders to WCC comprising Standard Bank and the Abu Dhabi investment Council.
The term of the convertible note are to be revised to provide conversion rights for Sibanye into WCC equity.
Sibanye will inject another A$8.5m into WCC to fund further development of the Waterberg coal project and will have the right to subscribe for sufficient new shares in WCC to take its stake to 51% within 18 months of conclusion of the deal.
Sibanye will also sign a coal off-take agreement with WCC to secure coal supplies for its proposed independent power producer (IPP) project. The deal is subject to a number of conditions precedent including completion of a detailed due diligence study.
Froneman commented, “we have been investigating various energy alternatives for some time now and the WCP (Waterberg coal project) has been identified as a viable platform to facilitate the company’s electricity supply objectives.
“The WCP as a multi-product coal project has the potential to provide Sibanye with a sizeable coal resource base which could underpin the development of a viable IPP platform.
“This will facilitate Sibanye securing a reliable energy supply while simultaneously having a greater control over energy costs. Ultimately, the security of supply and enhanced cost control will continue to support our bottom-line and hence our ability to pay industry-leading dividends.’
WCC’s original ambitious plans were to develop a multi-product mine that would supply Eskom and the export market but, so far, the company has not been able to conclude a coal supply agreement with Eskom.
In November last year WCC CEO Stephen Miller announced a revised approach in which the company would first develop an export coal mine with construction due to start in the second quarter of 2015 and first coal to be produced in the first quarter of 2016.
