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Southern African coal producer Buffalo Coal Corporation may have to close its Magdalena coal mine should it be unable to restructure the operation and ensure the viability of the business going forward.

Buffalo Coal has been given notice that its underground mining contractor, STA Coal Mining Company, intends to not renew the contract mining services agreement at the coal producer’s Magdalena underground mine in South Africa.

The contract mining services agreement, dated 31 October 2015 entered into by STA, Buffalo Coal and certain subsidiaries of the company, will not be renewed following the expiry of the contract on 31 October 2018.

Under the terms of the contract mining services agreement, STA currently conducts all underground coal mining operations at the Magdalena mine under the supervision of Buffalo Coal.

Subsequent restructuring

In light of the non-renewal of the contract mining services agreement and Buffalo Coal’s current financial position, the coal producer is initiating a restructuring process at its Magdalena mine operations aimed at ensuring the viability of the business going forward.

If no feasible alternatives are found, such process may ultimately result in employee retrenchments and may involve the closure of the Magdalena mine operation.

A consultation process has commenced in South Africa with organised labour and relevant stakeholders, as required pursuant to section 189A of the South African Labour Relations Act. Further details on the outcome of this process will be announced at the appropriate time, the company said in an announcement.

Buffalo Coal holds a majority interest in two operating mines through its 100% interest in Buffalo Coal Dundee, a South African company which has a 70% interest in Zinoju. Zinoju in turn holds a 100% interest in the Magdalena bituminous mine and the Aviemore anthracite mine in South Africa.