14 March 2011

Debt funding for Morupule Colliery expansion concluded



Standard Bank Group acted as lead arranger for BWP1.2-billion long-term bank loan facility concluded recently for Morupule Colliery Limited in Botswana. The funds are to be used towards the colliery's BWP1.7-billion expansion project

The funding for the bank loan was provided by Stanbic Bank in Botswana (a member of Standard Bank Group), First National Bank of Botswana and Barclays Bank of Botswana. BWP600-million is at a fixed interest rate for five years.

The combined size, tenor and fixed rate portion are unprecedented in the Botswana domestic loan markets, and speak to the growing depth and sophistication of the banking markets in the country.

LeinaGabaraane, Managing Director of Stanbic Bank in Botswana, says: "Standard Bank Group's role as lead arranger further entrenches the group's involvement in the development of the Morupule power precinct. So far, Standard Bank has arranged loans and bridging finance for almost USD1.2-billion between the mine and Botswana Power Corporation's Morupule B power station."

The loans (another BWP506-million was raised through a shareholder loan) will allow Morupule Colliery to take production capacity from 1-million to 3.2-milliontonnes a year.

Morupule is located near Palapye, 260km north-east of the capital, Gaborone. It is currently Botswana's only operating colliery, and its principal customer is the state owned utility Botswana Power Corporation (BPC). BPC is constructing the 600 megawatt Morupule B power station, which is scheduled to commence commissioning in the third quarter of 2011 and commercial operations in 2012.

By being denominated entirely in the Botswana pula, they make it possible for Morupule Colliery to sell coal to state-owned utility Botswana Power Corporation in pula, without either party taking on foreign currency risk.

This facility will secure the bulk of Botswana's power supply for the foreseeable future, replacing imports from Eskom in South Africa and other utilities in the region. Morupule's expansion will enable it to supply BPC with all of its increased coal requirements for Morupule Bunder a long-term coal sales agreement, as well as continuing to serve its other existing customers in Botswana and neighbouring countries.

Commenting on the transaction, Mr Albert Milton, General Manager of Morupule, said: "We are delighted to have concluded this milestone financing, which will enhance the energy security of Botswana, assist in the growth and diversification of the minerals sector in the country, as well as deepening our already well regarded financial markets. We would like to thank our banks, shareholders and advisors for their support and commitment".

The safe construction of the expansion project is well advanced with more than threequarters of a million man hours completed without a lost time incident, and the project remains on schedule. Delivery of major items of the mining fleet isunderway, and delivery of commissioning coal for the Morupule B power station will commence on 1 June 2011

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