Xceed Resources (ASX: XCD) has achieved a major milestone for the Moabsvelden thermal coal project in South Africa by securing development finance from the county's largest financial institution - the Standard Bank of South Africa.
The Moabsvelden thermal coal project is situated in the Witbank coal field.
The financing offer has been approved by the credit committee of Standard Bank and is subject only to standard conditions precedent such as permitting and off-take commitments, with the facility to provide for 67% of the expected project development cost.
The total financing amount from Standard Bank is R179 million, and based on the current exchange rate of R9.2 to $1, this equates to A$19.5 million. The estimated project development cost for the Moabsvelden project is R268 million or A$29.1 million
Xceed has already secured an investment by Thebe Mining Resources, and along with the Standard Bank funds - provide for R244 million (91%) of the estimated Moabsvelden development costs leaving the balance of R24 million or A$2.6 million plus working capital to be secured from other sources.
Ian Culbert, managing director of Xceed, commented: "It is gratifying that two highly regarded institutions like Standard Bank and Thebe, following their own exhaustive due diligence processes, have decided to fund the development of Moabsvelden.
"It is a testament to the quality and simplicity of the project and affirms the Directors view that Moabsvelden is an excellent platform from which to grow the company."
What is important to note with today's financing, is that receipt of this credit committee approved offer of project development finance satisfies one of three conditions precedent covering the investment into the Moabsvelden project company of R65 million or A$7 million by Thebe Mining Resources.
Moabsvelden is expected to have a mine life in excess of 14 years with the potential to produce export quality as well as domestic quality thermal coal from an open-cast, low strip mine, and is located in the Witbank coal field.
Thebe Mining Resources remaining two conditions
The remaining two conditions precedent are the granting of a mining right by the Minister of Mines and the approval of the Thebe investment by the Minister in terms of Section 11 of the Mineral and Petroleum Resources Development Act (2002).
The company has been advised that its application for a mining right has progressed from the regional office to the national office of the Department of Mineral Resources in Pretoria, where it is now awaiting the consent of the Minister.
The significance of today's news is that the funding for the Moabsvelden coal project provide a form of due diligence for investors given that Standard Bank is the largest financial institution in South Africa.
Moabsvelden appears an attractive proposition with a mine life in excess of 14 years with the potential to produce export quality as well as domestic quality thermal coal from an open-cast, low strip mine.
With this funding support we would expect to see investors return to Xceed given the re-tracement in market cap.
The company had over $4.4 million in cash at the end of 2012.
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