UK-based London Mining has announced that it has signed an agreement with Johannesburg-based diversified exploration and mining company Delta Mining Consolidated (DMC) for the acquisition of 50.5 percent of its South Africa-based subsidiary DMC Energy for about $120 million.
London Mining's first coal acquisition in South Africa is in line with the company's plan to continue to build up its production and resource base in order to become a significant supplier to the steel and energy markets.
Following completion of an internal reorganization by DMC, DMC Energy will own 70 percent of Ashante Mineral Resource, as well as 30.35 percent of DMC Coal Mining, to increase to 69.65 percent upon completion of London Mining's investment and the reorganization of DMC Energy.
Ashante Mineral Resource holds the Rietkuil coal project, with an inferred resource of up to 288 million mt. Meanwhile, DMC Coal Mining holds the Limpopo coal project, with a potential resource of 426 million mt of metallurgical and thermal coal, and also the Pixley Ka Seme (PKS) coal and torbanite project which includes a coal deposit of more than 234 million mt, as well as 73 million mt of torbanite.
DMC has also secured an irrevocable 40 million mt per year port allocation through the future Porto du Bella Vista port in Mozambique and is in the process of acquiring additional coal exploration assets in Botswana, Zimbabwe and Swaziland. These assets will be transferred to DMC Energy after registration is complete and all coal projects developed by DMC shall be developed through DMC Energy.
In addition, London Mining's investment is to be used by DMC Energy to complete a bankable feasibility study on the Rietkuil project, expected to be completed by the middle of next year, and to carry out preparatory stages for the commencement of mining at Rietkuil, which has been expected to start at the end of 2009.
As part of the subscription agreement, London Mining is to make a secured loan of $18.5 million to DMC Energy, with $4.5 million to be paid immediately upon receipt of South African regulatory approval, $5 million to be paid on August 31, and $9 million to be paid on September 30.