Black economic empowerment (BEE) group Sekoko Resources announced this week that it has signed a Memorandum of Understanding for a Coal Supply Agreement with Eskom in a move that signifies the rise of what promises to be a new giant in South Africa’s mining and energy sectors.
After mopping up lucrative mining prospective rights, covering coal, iron ore and PGM’s, around the Limpopo province and under the leadership of Tim Tebeila, Sekoko Resources entered national radar screens following a link up with Australian mining exploration firm Firestone Energy. This cooperation is focused on the Waterberg Coal Project which was injected into the Australian and JSE listed Firestone to a form a JV. The JV saw Firestone acquiring the right to 60% participation interests in the Waterberg Coal Project with Tebeila assuming chairpersonship of Firestone.
In an announcement issued this week, Firestone which is listed in Australia and on the JSE said Sekoko Coal has signed a MoU with Eskom to supply thermal coal from its Limpopo based Waterberg Coal Project. The group was earmarked to supply to Eskom power stations in Mpumalanga Province.
The announcement said the parties have agreed that, upon compliance of the terms and conditions the parties will enter into a Coal Supply Agreement containing enabling provisions for the Firestone / Sekoko Joint Venture to supply a minimum of 10Mt of thermal coal on a Free on Rail (FOR) basis annually to Eskom`s two designated power stations in the Mpumalanga area for a minimum period of 30 years. “The production of coal will commence in 2014 and will ramp up over a period of 5 years to 10mt/pa.
The announcement also mentioned that “On the 7 March 2012, the Company received an offer from the Tata Power Company Limited to invest in the Firestone and Sekoko joint venture. The offer valued 100% of the JV`s Waterberg Coal Project at about A$130 million. “Following consideration of the offer, the Board of Firestone decided to reject the offer on the basis that it materially undervalues the inherent value that has been built up in the project to date”.
The group also announced that it has secured a AUD$2.2M short term finance facility to provide working capital to the Company for general corporate purposes.”In addition, the Company is considering further funding initiatives to finance its share of the Joint-Venture expenses in relation to completing a Definitive Feasibility Study as required in the terms and conditions of the Eskom MoU.