07 · Risks & terms
Key risks and mitigants
Each risk is matched to a structural control. The figures recalculate with the scenario so the committee can see each mitigant hold.
Exhibit 7.1 · Risk register
Each risk, its structural control and the live test
Transnet rail performance
At 60% of planned railings, Lancaster's IRR rises to 24.7% (lower drawn, fee intact) and Arnot still nets R136m. Allocation is confirmed before first drawdown.
24.7% IRR at 60% railings
Coal price and FX
Breakeven $98/t or R13.44/$. Cargo cover stays at 2.2x even with a 30% price fall. A forward FX cover option is offered on each LC.
2.2x cover after −30% price
Buyer payment delay
Payment only by irrevocable LC at sight, confirmed by an SA bank. A draw-stop applies while a prior tranche is unpaid.
Peak capped at R44.3m
Quality and spec rejection
An independent inspector (SGS or Bureau Veritas) samples at the siding and at loading; the CoQ is an LC document.
Two-point inspection
Title and security
Pledge over coal in transit, cession of offtake and LC proceeds, and a Lancaster-controlled collection account.
R100.3m cargo per cycle
Bottom line
A price fall erodes Arnot's profit before it reaches Lancaster's security. Each tranche is covered by cargo and repaid from the LC.
- Cargo cover
- 3.1x
- Headroom
- R5.7m
Exhibit 7.2 · Indicative terms
Facility terms summary
- Borrower
- Arnot OpCo
- Lender
- Lancaster Group
- Facility
- R50m revolving trade finance
- Tenor
- 12 months
- Purpose
- Pre-finance of road and rail logistics invoices for RB2 exports, Arnot → Sunberry → Durban (FOB)
- Advance rate
- 80% of road and rail invoices
- Pricing
- Prime (10.75%) + 4.00% = 14.75%
- Raising fee
- 2.0% of limit, upfront (R1.00m)
- Repayment
- Each tranche from irrevocable LC proceeds at sight into the collection account
- Security
- Pledge over coal in transit; cession of offtake and LC proceeds; Lancaster-controlled collection account
- Covenant
- Draw-stop: no new cycle may start while a prior tranche is unpaid if it would take exposure over the limit
- Asset
- 51.3 Mt ROM reserves; mining right valid to 2039; ungeared balance sheet; existing Eskom CSA
Note · Terms reflect the proposal and update with the current scenario. Final terms are subject to the facility agreement.
Exhibit 7.3 · Committee review
Conditions and review checklist
Tick items as they are confirmed. Progress is saved in this browser only.