Waterberg news
WCC in funding squeeze as project faces delay
David McKay | Tue, 16 Sep 2014 15:16
[
miningmx.com] – WATERBERG Coal Company (WCC) is considering building a smaller export-focused coal mine after acknowledging it may take a year to finance a larger mine that would supply coal to Eskom.
WCC had been planning a 10 million tonnes/year Eskom quality coal mine at its Waterberg Coal Project in South Africa's Limpopo province in terms of a memorandum of understanding (MoU) signed with Eskom in 2012.
The MOU was to be followed by a coal supply agreement (CSA) with the power utility which would, in turn, help establish the economic feasibility of the mine on which project finance could be raised. The critical development is that there appear to be delays in finalising the CSA.
Citing Stephen Miller, CEO of WCC, Miningmx said in mid-July year that a coal specification agreement with Eskom would be finalised in "four to six weeks", adding that there was "urgency on both sides".
In an announcement to the JSE today, however, Miller said the CSA had not yet been finalised as there were outstanding requirements including agreements on coal specification, final pricing, delivery dates and the provision to Eskom of a satisfactory due diligence report on the economics of the Waterberg Coal Project.
Miller said that while a CSA with Eskom was due end-October "... it could take up to a period of six to 12 months after receipt of the review report for the debt funders to provide the project funding". This is effectively saying the Waterberg Coal Project as first envisaged will be delayed by up to a year.
As a result, the company was looking into the potential for a stand-alone export project in order to generate shorter-term cash flow, repay debt and stay liquid.
This project will be subject to a stand-alone definitive feasibility study requiring separate funding.
The project partners, which also includes Firestone Energy in which WCC has a 42% stake, “... are presently considering separate funding options for the export project”.
In the meantime, WCC is in discussions to extend the maturity date beyond October 9 of A$35m (R346m) loan provided by Standard Bank to WCC which it used to buy control of the Waterberg Coal Project in 2013.
It was anticipated that the loan could be converted into equity in the project - an option that is not possible whilst WCC is still to conclude a sales agreement with Eskom and whilst it considers developing a smaller project instead.
"At the current date such discussions are ongoing and no arrangements have yet been concluded for the restructure, extension or conversion of the facility,” the company said in its statement to the JSE.
WCC has just over $1m (R11m) in the bank, but said it could raise additional working capital once it had restructured its bank debt.
