Business case for Lancaster Group
R50m Trade Finance Facility for the Arnot RB2 Export Corridor
Self-liquidating logistics pre-finance: Arnot Coal Mine → Sunberry Siding → Durban Port (FOB)
Prepared on behalf of Arnot OpCo | October 2026 | Confidential
For decision
The request to the credit committee
Resolution sought
Approve a R50m revolving trade finance facility to Arnot OpCo for 12 months, priced at Prime + 4% (14.75%) with a 2% raising fee, funding 80% of road and rail invoices on RB2 exports through Durban, repaid from irrevocable LCs confirmed by an SA bank.
Executive summary
A short-dated, cargo-backed credit
01
The opportunity
Arnot sells RB2 at $121 FOB Durban (R2,006/t at R16.58/$) against a landed FOB cost of R1,610/t, a R386/t margin after royalty. The constraint is working capital: R810/t of road and rail must be paid before the vessel loads.
02
The facility
R50m revolving, 12 months, financing 80% of logistics invoices. Each tranche self-liquidates from irrevocable LC proceeds ~40 days after first drawdown, turning the limit over 7.8x a year (R389m financed).
03
The cushion
Arnot stays profitable down to $98/t or R13.44/$: about 19% below today's price and 19% below today's exchange rate.
Credit view
Why this is a strong credit
Self-liquidating
Each tranche is repaid from LC proceeds within ~40 days. No refinancing risk, no term exposure.
Asset-backed
Coal in transit is worth 3.1x the funds advanced, with proceeds ceded to a Lancaster-controlled collection account.
Margin absorbs shocks
A R386/t margin covers finance costs 45x. Arnot's breakeven is $98/t, against $121 today.
Producing asset
51.3 Mt ROM reserves, a mining right valid to 2039, an ungeared balance sheet and an existing Eskom CSA.
Contents
Work through the case
Open Scenario in the header to test your own assumptions. Every page recalculates live.
- 02
Export corridor & cash cycle
Follow a 50kt cycle from mine to LC proceeds, day by day.
- 03
Unit economics
Revenue, cost and margin per ton of RB2 at any price and exchange rate.
- 04
Drawdown profile
Weekly drawn balance against the R50m limit, with draw-stop logic.
- 05
Returns to Lancaster
Interest, fee, yield and all-in IRR from daily cash flows.
- 06
Sensitivity & stress
Price × FX grid, payment lag, rail shortfall and price-fall cover.
- 07
Risks, security & terms
Mitigants, the security package and a committee review checklist.