Coal developer MC Mining (ASX:MCM; JSE:MCZ) has secured $9.94mn in promissory note funding from its two largest shareholders, providing additional financial support as the company advances its flagship Makhado steelmaking coal project in South Africa's Limpopo province.
MC Mining said it had entered into binding agreements with controlling shareholder Kinetic Development Group (KDG), a Hong Kong-based investment group, and minority shareholder Eagle Canyon International Group. Under the arrangement, KDG will provide $8.45mn while Eagle Canyon will contribute $1.49mn through unsecured promissory notes.
The funding will go towards strengthening MC Mining’s working capital position and supporting ongoing project development activities. The notes carry an interest rate of 12% per year and mature after 12 months, unless repaid earlier or converted under agreed terms.
The financing comes as MC Mining continues efforts to advance the Makhado project, which is expected to become one of South Africa's largest producers of hard coking coal used in steel production. The company has been seeking funding solutions to support development of the asset while progressing permitting, engineering and commercial arrangements.
MC Mining is focused on the development of steelmaking coal assets in South Africa, including the Makhado project and other interests in the Limpopo coalfield. The company says the project is well positioned to benefit from continued demand for metallurgical coal used in blast-furnace steel production despite the longer-term shift towards lower-carbon steelmaking technologies.
While South Africa is one of the world's leading coal exporters, domestic production of premium hard coking coal remains limited. Most of the country's coal output is thermal coal consumed by power utility Eskom or exported through Richards Bay Coal Terminal.
The country's steel sector, led by ArcelorMittal South Africa and several smaller producers, continues to rely heavily on imported metallurgical coal and coke for blast-furnace operations. The development of the Makhado project could therefore strengthen local and regional supplies of steelmaking coal at a time when governments and manufacturers are seeking greater security of critical industrial raw materials.
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