Makhado Drill Rig

Coal of Africa (CoAL) is looking for potential investors to fund its new R3.96bn ($406.3m ) Makhado coal project near Musina in Limpopo, South Africa.

The opencast Makhado project, set to be the largest coking coal facility in South Africa, will commence production by th end of 2016 and produce 2.3 million tonnes of coking coal and 3.2 million tonnes of thermal coal per annum.

According to CoAL, the project will reduce the import of raw materials needed every year to meet the requirements of the country’s steel industry.

CoAL chairman David Brown said; "We have now embarked on the financing stage of the Makhado Project and have already commenced discussions with both potential Black Economic Empowerment (BEE) groups, including our communities and strategic partners.

"We are working towards a funding structure which will include debt funding, whereby CoAL retains majority ownership with the incoming partner’s contribution meeting CoAL’s full equity requirement for the project," added Brown.

The company expects to secure funds and mining permits in the next six to nine months.

China-based Haohua Energy, which owns 23.6% equity in CoAL, invested $100m in the company in October 2012 to acquire a 30% stake in the Makhado project.

ArcelorMittal could be a potential buyer of the coking coal produced by Makhado project and may seek a preferential price as it owns a 12% stake in CoAL, reported BD Live.

ArcelorMittal, the largest steel maker in South Africa, currently imports around 1.8 million tonnes of coking coal every year from Australia.

On 19 June, CoAL completed a definitive feasibility study, which showed that the project could deliver ‘robust’ economic returns and provide a platform to turn CoAL into a leading global hard coking coal and thermal coal producer.

Image: The opencast Makhado project is expected to commence coal production by end of 2016. Photo: Coal of Africa Limited.

Energy Technology forum on LinkedIn