Canaf announces acquisition of new processing facility for its South African subsidiary
Canaf Group Inc., the Canada-registered mining group, is pleased to announce agreed terms for the acquisition of a new processing plant worth R20 million (South African Rand) for its South African owned coal beneficiating operation, Quantum Screening and Crushing (Pty) Ltd., (“Quantum”).
The new anthracite beneficiating facility, (“Calciner 3”) will be installed and commissioned at its operation near Newcastle, KwaZulu Natal, South Africa.
Calciner 3 is being purchased from a South African company specialising in furnace technologies. In May 2014 Quantum ran a successful trial of material through Calciner 3, and as a result Quantum signed a deal earlier this month to acquire the asset, subject to financing.
Payment terms for the Acquisition and Loan Facility
The value of the acquisition is R20 million (approximately US$1.8million). During November 2014, the Company paid a deposit of R6 million (approximately US$0.54million) from cash and working capital. The balance of the acquisition will be paid by a loan facility of R14million (approximately US$1.25million), which will be provided in payments as and when Quantum requires it, and borrowed over a period of 48 months, however it is the intention of the Company to pay down the loan within 24 months. The loan facility will be provided by Quantum’s existing bank, ABSA Business Bank, South Africa.
In addition to the payments for the acquisition, the Company expects to invest approximately R2 million (US$0.18million) in civil and electrical infrastructure for the new facility; this investment will come from working capital.
Motivation for New Calciner 3
The purchase of Calciner 3 is not only due to an expected increase in demand for Quantum’s product looking forward to 2015, but the new plant will also be environmentally compliant and significantly more efficient. Increased demand is expected to come from the newly refurbished ArcelorMittal Newcastle steel facility as well as an expected new contract during the course of 2015.
Calciner 3 will produce the same product as Quantum’s existing two plants, however, the design is far more environmentally beneficial and does not use electricity as its source of heat. This new, autogenous (self-sustaining) calciner will offer the following benefits to the Company, which include:
The Company plans to commission the new facility, Calciner 3, in May 2015. Subsequent to this, the Company plans to then convert Quantum’s existing two calciners to a similar design as Calciner 3; this will be scheduled in a way that will safeguard sales to existing customers and is expected to commence during the fiscal year 2015-2016.
Extension of Lease
In conjunction with this purchase commitment, the Company has also signed a 5-year extension of its existing lease for the premises, valid until 30 December 2020, which was signed by both parties on 12 November 2014.
The Company has also instructed Environmental Consultants, GCS Water and Environmental Consultants, to complete all applications and permissions to the relevant authorities. The total cost of environmental reports and applications for the new facility is approximately R 0.3milllion (US$0.03million).
Christopher Way, CEO, says: “Quantum’s exciting expansion program has been in the pipeline for the past twelve months. Not only will we be installing an environmentally compliant calcining plant, but we will significantly increase our bottom line by slashing the electricity consumption for every tonne of product produced to less than 5% of the electricity cost per tonne for the existing plants, which also means that the new plant will not be reliant on ESKOM [the South African Electricity provider]. The installation of the new plant can be justified by our existing contracts alone, and will also give Quantum the extra capacity to increase sales into new contracts. By the end of 2015, I hope that Quantum will be generating sales far in excess of US$1.5million each and every month.”
The new anthracite beneficiating facility, (“Calciner 3”) will be installed and commissioned at its operation near Newcastle, KwaZulu Natal, South Africa.
Calciner 3 is being purchased from a South African company specialising in furnace technologies. In May 2014 Quantum ran a successful trial of material through Calciner 3, and as a result Quantum signed a deal earlier this month to acquire the asset, subject to financing.
Payment terms for the Acquisition and Loan Facility
The value of the acquisition is R20 million (approximately US$1.8million). During November 2014, the Company paid a deposit of R6 million (approximately US$0.54million) from cash and working capital. The balance of the acquisition will be paid by a loan facility of R14million (approximately US$1.25million), which will be provided in payments as and when Quantum requires it, and borrowed over a period of 48 months, however it is the intention of the Company to pay down the loan within 24 months. The loan facility will be provided by Quantum’s existing bank, ABSA Business Bank, South Africa.
In addition to the payments for the acquisition, the Company expects to invest approximately R2 million (US$0.18million) in civil and electrical infrastructure for the new facility; this investment will come from working capital.
Motivation for New Calciner 3
The purchase of Calciner 3 is not only due to an expected increase in demand for Quantum’s product looking forward to 2015, but the new plant will also be environmentally compliant and significantly more efficient. Increased demand is expected to come from the newly refurbished ArcelorMittal Newcastle steel facility as well as an expected new contract during the course of 2015.
Calciner 3 will produce the same product as Quantum’s existing two plants, however, the design is far more environmentally beneficial and does not use electricity as its source of heat. This new, autogenous (self-sustaining) calciner will offer the following benefits to the Company, which include:
- Reduction of electricity consumption by 95% for each tonne of calcine product produced.
- Increase of current capacity of Quantum by up to 60%.
- Significant environmental improvements compared to Quantum’s existing calciners.
The Company plans to commission the new facility, Calciner 3, in May 2015. Subsequent to this, the Company plans to then convert Quantum’s existing two calciners to a similar design as Calciner 3; this will be scheduled in a way that will safeguard sales to existing customers and is expected to commence during the fiscal year 2015-2016.
Extension of Lease
In conjunction with this purchase commitment, the Company has also signed a 5-year extension of its existing lease for the premises, valid until 30 December 2020, which was signed by both parties on 12 November 2014.
The Company has also instructed Environmental Consultants, GCS Water and Environmental Consultants, to complete all applications and permissions to the relevant authorities. The total cost of environmental reports and applications for the new facility is approximately R 0.3milllion (US$0.03million).
Christopher Way, CEO, says: “Quantum’s exciting expansion program has been in the pipeline for the past twelve months. Not only will we be installing an environmentally compliant calcining plant, but we will significantly increase our bottom line by slashing the electricity consumption for every tonne of product produced to less than 5% of the electricity cost per tonne for the existing plants, which also means that the new plant will not be reliant on ESKOM [the South African Electricity provider]. The installation of the new plant can be justified by our existing contracts alone, and will also give Quantum the extra capacity to increase sales into new contracts. By the end of 2015, I hope that Quantum will be generating sales far in excess of US$1.5million each and every month.”