An agreement has been reached for the establishment of a 50:50 joint venture partnership between Shumba and South African black-owned Lurco Group South Africa at the Sechaba thermal coal project.
Lurco has been trading for eight years and is an emerging South African resource business with the vision to be the leader in the international mining sector with a focus on exploration, beneficiation and trading.
Lurco is a supplier to Eskom in South Africa and currently exports thermal coal to a number of international clients out of various ports in Southern Africa.
The deal will allow the partnership to supply coal into the region and for export.
Through the deal, Sechaba and Lurco will hold an equal stake of 50% each in the company’s Sechaba coal mining project situated in the Morupule coalfield, in Botswana.
Under the commercial terms of the Partnership, Shumba shall transfer Sechaba and related authorisations to a special purpose vehicle (SPV).
Lurco shall immediately commence work to conclude any feasibility work and begin work on the opencast construction spending a minimum of US$10 million.
Further, an amount of US$10 million shall be paid to Shumba in phases prior to Lurco earning its 50%.
Lastly, development capital expended by both Shumba and Lurco prior to commercial production shall be recouped from the SPV in the form of shareholder loans.
In addition to the above, the parties have agreed that coal produced at Sechaba from the open pit shall be toll processed through a wash plant owned by Shumba.
“As a Botswana-based and owned company, we are pleased to have concluded a partnership with such a progressive black South African company as Lurco,” says MD of Shumba, Mashale Phumaphi.
“The transaction will grant us access to markets that we haven’t had access to before. Together with Lurco, we will work towards regional inclusivity and the partnership is a clear example of fulfilling SADC’s objectives of integration between Southern African countries in the energy industry.
The partnership is in line with Shumba Energy’s long-term strategy which is to address the chronic power shortage and satisfy the growing energy demand in the SADC region while monetising all of our existing assets.
“The terms we have received will ensure that we continue to accelerate the development of Sechaba while allowing us to fast track our other projects,” concludes Phumaphi.