MC Mining subsidiary agrees terms to buy two properties at Makhado

MC Mining announced on Thursday that its subsidiary, Baobab Mining & Exploration, has reached agreement on the terms and conditions under which it would acquire the two key properties required for its Makhado hard coking and thermal coal project.

The AIM-traded firm said the purchase agreement would result in Baobab owning the Lukin and Salaita properties, and was subject to a suspensive condition, which the parties had “every expectation” would be met in early January.

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

In terms of the agreement, the properties would be acquired for ZAR 70m ($4.8m), to be settled in two equal tranches of ZAR 35m, with the properties pledged as security until the purchase price, including any accrued interest, was settled.

The initial tranche was payable on transfer of the properties, while Baobab would have access to the properties upon payment of that amount to the conveyancing attorneys.

MC Mining said the second tranche would accrue interest at the South African prime interest rate, currently 10.0%, less 3.0% from date of transfer, and was payable on the earlier of the third anniversary of the transfer of the properties, the first anniversary of production of coal underlying the Properties, or completion of a potential land claims and expropriation process that would likely result in Baobab receiving market-related compensation under present legislation.

The board said that, should the properties be expropriated in favour of the land claimants, MC Mining would negotiate access terms with the Minister of Land Affairs and the successful claimants who were expected to be communities who had a shareholding in Baobab.

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

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

“The initial tranche of the purchase price will be funded from internal cash flows.”

Brown said MC Mining had 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 2019 quarter.”