Coal and Energy mining outfit Minergy is set to list on the Botswana Stock Exchange (BSE) this coming Thursday. The company has planned another listing on the Johannesburg Stock Exchange (JSE), anticipated to happen in the second half of this year. This comes after the Australian company raised P70 million through private placements with selected investors and a further P50 million is expected to be raised through this listing. According to the company’s listing prospectus, Minergy will list a total 424 166 667 securities on the BSE main board. Minergy’s sole project in Botswana is Masama Coal Mine, which is situated on the Southern edge of Mmamabula coal fields. The company believes Masama Coal Resource is a unique coal asset that represents a low-cost mine development opportunity, with the development representing the first step in the company’s strategy of becoming a mid-tier Southern African coal mining and energy company. The company says assessment carried out so far indicate that it will be capable of generating commercially attractive returns which would enable it to pay attractive dividends. “Management has significant mine development and operational experience and a wide range of expertise underpinned by strategic and practical knowledge of coal and energy markets in the region and internationally,” the company says in its listing prospectus.
The Masama Coal Mine is said to have a relatively quick ramp up and payback period and is expected to produce approximately 2.4Mtpa to 3.45Mtpa during steady state, with an initial mine life of approximately 20 years. Minergy says it is well positioned to take advantage of both the regional and international market trends by focusing on the 18 to 20 million tonnes per annum regional coal market with future expansion to supply the international coal markets. The company believes the Masama Coal Mine has significant advantages, including being closer to the railway line rail and road logistical infrastructure which gives it competitive edge over access to markets. It boasts of thick high-quality seams. The high-quality coal of the Masama Project, much of which is open-castable, and its proximity to key customers in certain markets is believed to be one the key competitive advantages. “The Masama Coal Mine is expected to generate significant free cash flow. This should present an opportunity to pay attractive dividends and also enable the Company to consider various opportunities for growth in the future,” the company says.
Despite recent fears that coal use might be on terminal decline owing to key consumers such as China and India moving away from coal generated energy, the company believes it can extract value from the mineral. The company says international scene, the coal industry seaborne thermal coal market has rebounded significantly from the lows of 2014/15 with international prices rising 70% during 2016 alone. Regionally the company says the market has seen a significant reduction of coal availability with prices rising between 15% and 20% during 2016. Minergy, through Masama project, intends to supply power utilities such as South Africa’s Eskom, Botswana Power Corporation (BPC) and some Independent Power Producers (IPPs). South Africa alone is said to have an estimated demand of 120 to 130 million tonnes per annum. The company estimates its regional target market to be between 18 and 20 million tonnes per annum.