Australia's Gleneagle Gold Ltd plans to become a major player in South African coal after acquiring interests in the Waterberg coal field that contains about 50 percent of the country's known reserves.
Gleneagle said on Wednesday it had received shareholder approval for the acquisition of an initial 35 percent stake in subsidiaries of black empowerment company Namane Resources that hold the sole prospecting rights in the Waterberg field.
Black empowerment companies were formed after the end of apartheid in 1994 when the South African government launched a program to redress inequalities by giving disadvantaged black Africans economic opportunities not previously available to them.
Glenagle director Lee Boyd said the transaction laid the foundations for his company to become a major producer of thermal coal needed by South Africa's electricity generators, and export quality coking coal, used in steel-making.
South Africa's state-owned electricity utility, Eskom, has estimated that between 90 billion rand ($9.2 billion) and 110 billion rand will need to be invested in coal mines by 2020 to meet domestic power demand growth, equivalent to 40 new mines being opened.
Gleneagle will pay Namane 15 million rand ($1.5 million) and issue it with shares and options for an initial 35 percent stake in the prospect licence holders.
It will have the right to increase that to 70 percent by spending up to 100 million rand within two years to advance the project to a feasibility study stage.
Namane is wholly-owned by CIH, which was established in 1995 by South African business leaders Anna Mokgokong and Joe Madungandaba. Both have been invited to join the Gleneagle board.
The coal interests are located near the 19 million tonnes per year Grootgeluk operation, one of the world's largest coal projects, owned by Exxaro, South Africa's biggest coal supplier to Eskom.
Source: Reuters
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