Billionaire Patrice Motsepe’s African Rainbow Capital (ARC) Fund has extended a further R200m loan to emerging phosphate miner Kropz for the development of the Elandsfontein project, putting it in the home stretch with production set to begin in the first quarter of 2022 .
Kropz announced on Wednesday that it has entered into the new conditional convertible equity facility of up to R200m with ARC Fund to deliver Elandsfontein to first revenue. The loan facility, which is subject to shareholder approval, could boost the ARC Fund’s majority shareholding in Kropz International from 83.53% to 86.9%.
“The significance is that it is basically the final working capital we require to actually get the Elandsfontein mine operational and get first sales revenues in,” Kropz CEO Mark Summer told Business Day.
Kropz owns Elandsfontein, an advanced-stage phosphate mining project 95km northwest of Cape Town, and Hinda, a significant phosphate deposit in the Republic of the Congo.
The new facility comes just weeks after an appeal against the mine’s water-use licence, brought by the West Coast Environmental Protection Agency (WCEPA), was dismissed by the Water Tribunal earlier in September, though it imposed 79 conditions on the licence to ensure environmental compliance.
The loan facility is the third entered into between ARC and Kropz.
In June 2020, Kropz secured a convertible loan facility of up to $40m (though not exceeding R680m) from ARC for the development of Elandsfontein that has been completely drawn down. In February 2021, the two entered into a $5m (R75.5m) facility, of which $600,000 remains undrawn.
At any time during the term of the new R200m facility, repayment of the capital amount will, at the election of ARC, either be in cash or in the form of a conversion into ordinary shares, which would bring the ARC shareholding up to almost 87%. This, Summers said, assumed that the full loan amount is drawn down and converted to shares.
The facility is conditional on shareholder approval as it is above the authorised share allotment limits given at the most recent annual shareholder meeting, in June. Approval from the Kropz shareholders will be sought at a general meeting to be held in London on October 15. The ARC Fund intends to vote in favour of the instrument.
At full production, Elandsfontein is expected to produce 1-million tonnes of phosphate a year, making it SA’s largest source of phosphate rock after Foskor, which can produce 2.4-million tonnes a year.
Phosphate is a major component of commercial fertiliser and the development of Elandsfontein comes amid soaring phosphate prices that have prompted China, a major phosphate trader, to effectively ban phosphate exports until mid-2022 amid tight supply and high prices.
“Prices are pretty strong at the moment, on the back of the global resources boom,” said Summers. “There’s some new production coming on stream in 2025, so they could flatten out after that. But the forecast certainly for the next two, three years is looking pretty good.”
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