Wescoal is acquiring a 50% interest in Arnot coal mine and intends to restart coal production and supply to Eskom’s Arnot power station during FY2020.
Wescoal, Holdings (WSL) will acquire the assets, liabilities and employees of the Arnot coal mine in Mpumalanga from Exxaro Coal Mpumalanga (ECM) in partnership with Innovators Resources (IR).
The transaction was subject to several key conditions precedent including the consent by the Minister of Mineral Resources, in terms of section 11 of the Mineral and Petroleum Resources Development Act (MPRDA) to the cession of the mining right by ECM in favour of Arnot OpCo (Ministerial Consent).
The Ministerial Consent was received on 26 April 2019 and the only outstanding conditions precedent before Arnot is transferred to Arnot OpCo are the approval by the Competition authorities and the assignment of all the rights and obligations of ECM under the Coal Supply Agreement (CSA) with Eskom to Arnot OpCo.
The shareholders of IR are previous employees of ECM who were retrenched during the shut-down in December 2015.
Their initiative to restart the Arnot Mine and unlock its value created the opportunity for Wescoal to become a partner.
Wescoal’s 50% interest is subscribed for in Arnot HoldCo whose only asset is its shareholding in Arnot OpCo, which in turn holds one asset only, namely the Arnot Mine.
Importantly, this is a significant broad-based empowerment Transaction which will secure employment and provide employees and communities around the mine with equity participation as outlined in Mining Charter III and we are excited that Wescoal Mining is the enabling partner in the relationship with IR.
This transaction will enable development of coal reserves that would have been sterilized by the mine closure process.
Arnot Mine is adjacent to the Arnot Power Station and coal can be delivered to the power station through a conveyer belt, resulting in a cost competitive advantage with minimum carbon emissions environmental impact.
In this regard, Arnot OpCo has responded on 2 April 2019 to the Eskom Request for Proposal (RFP) to supply coal to the Arnot Power Station.
Wescoal’s strategy is focused on securing additional resources and strategic interests in coal and key logistics infrastructure and the DMR has actively sought out acquisitive value-enhancing opportunities, such as this extensive coal resource base.
It’s aligned with Wescoal’s strategy of generating value for Wescoal shareholders in a scalable, sustainable way.