PERTH (miningweekly.com) – South Africa-focused Coal of Africa Limited (CoAL) has signed a nonbinding memorandum of understanding (MoU) with China’s Qingdao Hengshun Zongsheng Group for a possible equity investment into Baobab Mining & Exploration, which holds the Makhado project, in Limpopo.
Under the terms of the MoU, Hengshun could invest $113.94-million to acquire a 34% stake in Baobab, with the transaction valuing the Makhado project at $335-million.
The 34% equity investment would allow Hengshun to nominate its own members to the Baobab board, and would allow the Chinese firm to match any alternative proposals for the provision of a mining contract at the Makhado operation.
The final transaction valuation would be subject to negotiations, and the proposed equity investment would also be subject to an engineering, procurement and construction contract being awarded to Hengshun, the value of which was expected to be about $400-million.
“The MoU and the proposed investment by Hengshun is another step towards bringing the Makhado project into production,” said CoAL CEO David Brown.
“Together with the imminent receipt of the water use licence, the formalisation of the MoU into a subscription and sale agreement will greatly assist the company in completing the outstanding requirements for the Makhado project and commencing the planned construction by the second half of 2016.”
The transaction was expected to be completed by the first half of 2016.
The Makhado project had a resource of some 344.8-milion tonnes, and could produce 12.6-million tonnes a year over a mine life of 16 years.
Edited by: Creamer Media Reporter
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