Waterberg Coal gets Eskom extension

ESKOM had increased the term of its offtake agreement with Waterberg Coal to 40 years from 30 years, the AltX-listed coal exploration firm said on Friday.

Australia-based Waterberg Coal will operate the Waterberg Coal Project (WCP) in Limpopo, which has 3.88 billion tons in identified coal resources. This is expected to make it the second-biggest coal mine in South Africa.

“Eskom has relaxed the very strict cut-off for coal specifications which will increase the yield and reduce the operating costs,” the firm said.

Its team had readjusted the economic model for the project.

“As a result of this, Eskom and WCP are now able to advance discussions to reach agreement on price for delivery of the specified coal product requested by Eskom.”

In 2012, the WCP joint venture agreed to supply Eskom with 10 million tons of coal a year. “WCP have notified Eskom that a construction build commencing next January would see first coal product in the fourth quarter of next year,” the statement added.

WCP’s technical team was in talks with Exxaro Resources about sharing logistics infrastructure as part of its “value engineering” programme to focus on cutting costs.

JSE-listed Exxaro operates the Grootegeluk Mine next to the WCP. Grootegeluk produces about 18 million tons of coal a year and is also looking at expanding its operations through developing the Thabametsi coal project, which shares a boundary with the WCP.

Grootegeluk has been producing coal for over 25 years.

Standard Bank had been tasked with arranging project finance for the construction and development of the WCP, Waterberg Coal said.

The bank had appointed Hatch Goba as the independent technical consultant to review all technical matters for the WCP as part of its due diligence for the credit process.

The company said it had short-listed mining contractors during the second quarter with a view to finalisation of the process to appoint a preferred mining contractor. It would announce the preferred mining contractor this quarter.

The stock was flat at 80c on Friday. Waterberg Coal bought 480 million Firestone Energy shares in April last year.