Minergy weighs secondary listing destination
The JSE would be the cheapest option, but Minergy’s board is concerned about the uncertain regulatory environment in SA
Botswana-listed coal developer Minergy, which is headed by former Wescoal CEO Andre Boje, is taking steps to secure a secondary listing on the JSE, London’s AIM or the Australian Stock Exchange in the next few months, Boje said on Tuesday.
Although the JSE would be the cheapest option and Boje has experience in heading a JSE-listed company, he said Minergy’s board was concerned about the uncertain regulatory environment in SA and had asked management to look at alternatives. Minergy’s biggest investors are Botswana pension funds, with 28% to 30% of the shares.
Minergy listed in Botswana in April after raising 70-million pula (R89.3m) in a private placement of shares to develop its Masama coal project in the southwestern corner of Botswana’s Mmamabula coalfields. But the shares, currently at 1.05 pula — slightly higher than the placement price of one pula — are little traded.
Thirty-three companies are listed on the Botswana Stock Exchange, including some that are also listed in SA, such as Anglo American and Investec.
In the past few months, Minergy has been drilling its coal deposit to better understand it, discussing potential off-take agreements and preparing to file a mining licence application before the end of this month. It expects to secure the licence by the second quarter of 2018.
Minergy’s original target markets were regional merchants, power utilities or exports to Europe, Asia or India. Boje said Minergy would no longer target regional power utilities since it appeared unlikely that SA would need to import power.
Eskom has a surplus of power and has signed new off-take deals with Botswana and other countries in the Southern African Development Conference region.
Export markets could more than compensate if Minergy can move its coal from landlocked Botswana to South African ports. Minergy is fielding a number of inquiries for export coal, Boje said.
Global coal prices have benefited over the past year from China’s hydropower shortage and rising industrial demand. The RBCT coal index is $88.80 a tonne, a substantial improvement over its December 2015 low of just under $50 a tonne.
Although Botswana’s Mmamabula coalfield is massive, the quality of the coal was always understood to be too poor to make it economically viable to transport long distances to ports such as Richards Bay Coal Terminal or Durban.
Boje said this had been a misconception. Initial estimates of the Masama resource were 2.8-billion tonnes of coal and it was true that most of the product was of poor quality.
However, the resource had been refined to one that was substantially smaller but higher value, at 347-million tonnes of API4 grade, which was the top grade of coal exported from Richards Bay Coal Terminal.
The plan is to produce about 1.2-million tonnes a year from Masama, which would initially be sold to industrial customers only 250km away in SA. In the second phase of development, production could be doubled or trebled for export through Richards Bay, Boje said.
Transnet Freight Rail (TFR) had capacity of 84-million tonnes a year on the dedicated coal line to Richards Bay which it was unable to fill because local coal miners were not producing enough. TFR was also investing in expanding capacity on the rail link from the Waterberg.
Minergy has had engagements with TFR and Botswana Rail about using this line and Boje said the level of co-operation had been "amazing". With other firms developing export mines in Botswana, it would be possible to achieve the 12-million tonnes of coal exports that would make it viable for TFR or Botswana Rail to invest in the line from Botswana to SA.
In Transnet’s latest annual report, CEO Siyabonga Gama says Africa’s intercontinental trade has almost doubled since 1995. TFR plans to grow cross-border volumes and enable regional integration of rail, particularly in the Maputo Corridor, the East-West Corridor linking SA, Namibia, Botswana and Lesotho, and the North-South Corridor.