Chinese industrial conglomerate, Qingdao Hengshun Zhongsheng Group (Hengshun), could acquire a 34% stake in Baobab Mining & Exploration, the owner of the Makhado hard coking coal project in South Africa, for US$113.95 million, following the signing of a non-binding memorandum of understanding (MoU) with Baobab’s parent company, Coal of Africa (CoAL).
The deal remain subject to CoAL shareholder and regulatory approval but is expected to be completed in 1H16. The deal is also subject to Hengshun being awarded the engineering, procurement and construction (EPC) contract for the project.
“The MoU and the proposed investment by Hengshun is another step towards bringing the Makhado project into production,” said David Brown, CEO of CoAL. “Together with the imminent receipt of the Water Use License, 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 2H16.”
The investment will entitle Hengshun to nominate a number of directors to the board of Baobab – although the exact number is yet to be agreed. CoAL will however will remain responsible for managing and operating the Makhado project.
Henshun’s investment comes after Yishun Brightrise Investment decided not to acquire an interest in the Makhado project or the EPC contract, despite previously showing interest.
CoAL is a coal exploration, development and mining company operating in South Africa. The Makhado project forms part of the Greater Soutpansberg Project in the Soutpansberg Coalfield in Limpopo Province. The Makhado project contains 344.8 million t of mineable tonnes in situ and is close to the railroad to the Richards Bay Coal Terminal.
The Makhado project is expected to produce 12.6 million tpy of ROM coal, yielding 2.3 million tpy of hard coking coal and 3.2 million tpy of thermal coal over a 16 year life.
Edited by Jonathan Rowland.
Read the article online at: https://www.worldcoal.com/exploration-and-development/02122015/hengshun-could-acquire-interest-in-makhado-project-3227/