Absa Capital scores coal mine mandate
South African mining firm Continental Coal has negotiated a US$65mn pre-export finance debt facility from Barclays’ African subsidiary Absa Capital.
The mining company will use the money to develop its Penumbra coal mine in South Africa to increase its annual coal production to 750,000 tonnes by the third quarter of 2012.
Around half a million tonnes of the mined coal will be exported.
The multi-tranche facility is split into a secured seven-year US$35mn loan that will be used exclusively to develop the Penumbra mine.
The first tranche will be repaid quarterly after a year’s grace with a margin of 4.61% over Libor before completion, dropping to 4.1% over Libor post-completion.
A second secured tranche of US$15mn will be used to refinance debt.
The second tranche has the same conditions as the first tranche, with a margin set at 4.61% and 4.11% over Libor for pre and post-completion of the project, respectively.
Finally, a R100mn (US$15mn) revolving working capital facility will be distributed to fund general corporate requirements.
This is set at a higher rate to the first two tranches and Continental Coal can expect to pay 9% on Absa’s prime overdraft lending rate.
Furthermore, Absa Capital has agreed to provide risk management facilities and hedging facilities against coal prices and interest rate fluctuations.
Absa Capital beat off a competitor and has completed its due diligence.
The loan drawdown schedule has been set; however, the loan is still subject to final completion of legal documentation.
“The fact that we received two very attractive financing offers for this mine is a testament to the feasibility studies we conducted and the subsequent mine development plan chosen,” says Don Turvey, Continental Coal chief executive officer.
“This finance package has optimised our ongoing funding arrangements, and proven that as an emerging coal producer we are able to raise debt at attractive levels for our aggressive growth plans.”