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Coal exploration, development and mining company MC Mining has been granted two key properties, the Lukin and Salaita properties, required for its Makhado hard coking and thermal coal project in South Africa.

The purchase agreement by MC Mining subsidiary, Baobab Mining and Exploration will result in Baobab owning the Lukin and Salaita properties and is subject to a suspensive condition, which the parties have every expectation will be met in early January 2019.

As previously stated, the company has been pursuing various avenues, including legal and negotiation on commercial terms with the owner, a privately-owned company, who utilizes the properties for commercial hunting purposes.

The properties will be acquired for R70 million to be settled in two equal tranches of R35 million with the properties pledged as security until the purchase price is settled. The initial trance is payable on transfer of the properties while Baobab will have access to the properties upon payment of this amount to the conveyancing attorneys.

The second tranche will accrue interest at the South African prime interest rate (currently 10%) less 3% (from date of transfer) and is payable on the earlier of:

  • The third anniversary of the production of coal underlying the properties;
  • The first anniversary of production of coal underlaying the properties; or
  • Completion of a potential land claims and expropriation process that would, in all likelihood result in Baobab receiving market related compensation under present legislation. Should the properties be expropriated in favour of the land claimants, MC Mining will negotiate access terms with the Minister of Land Affairs and the successful claimants who are expected to be communities who have a shareholding in Baobab.

“The agreement to acquire Lukin and Salaita is a significant step for MC Mining and completes the suit of surface rights required for our permitted flagship Makhado project,” says MC Mining chief executive David Brown.

“With the acquisition of the properties, the company can proceed with the geotechnical and related studies for the mine’s infrastructure,” Brown adds.

MC Mining has made substantial progress on the Makhado project milestones, including an off-take agreement for approximately half of the hard coking coal to be produced at the mine. Negotiations for the sale of the remaining hard coking coal as well as the thermal coal are at an advanced stage while funding initiatives are also progressing. The company will keep shareholders appraised on these processes as well as the results of the geotechnical studies, with further updates expected in the March quarter of the 2019 financial year.

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