Cement group PPC has signed a memorandum of agreement (MoA) with cement equipment and engineering company Sinoma Overseas Development Company for the construction of a new R3-billion low-carbon plant in the Western Cape.

The parties inked a strategic cooperation agreement in July last year to collaborate on identifying new projects and opportunities to improve efficiencies at PPC’s operations.

The new plant will have the capacity to produce 1.5-million tons of cement a year.

It will replace and increase PPC’s existing capacity and is set to be constructed at one of the company’s existing sites – Riebeeck West.

PPC’s existing two plants in the Western Cape will be mothballed once the new plant enters production.

The new operation will be equipped with a dedicated solar generation system, as well as other technology, which PPC believes will help enable it to supply the lowest-carbon cement in the country.

“South Africa’s changing cement market dynamic urgently requires modern and cost-efficient assets and environmentally conscious producers,” says PPC CEO Matias Cardarelli.

“With this new and most advanced energy and environmentally efficient plant in the country, we will be able to supply our customers with lower-carbon cement at a more competitive cost.

“It represents a major step in the sustainability of our business moving forward, and will play a key role in achieving PPC’s commitment to reduce its carbon emissions and to deliver value to shareholders.

“By substituting existing capacity with a more efficient, environmentally friendly and larger plant, we are securing PPC’s competitiveness in a key market, by delivering to our customers the best value proposition in the region,” adds Cardarelli.

“At the heart of our ‘Awaken the Giant’ turnaround strategy is the active pursuit of strategic opportunities and projects to ensure that we are successful in a more competitive future market context.”

PPC says the feasibility studies for the plant have already reached an advanced stage, and the parties will spend the next three months finalising the scope and final assessment of the new operation, as well as the associated turn-key engineering, procurement and construction agreements.

As the company will utilise an existing site, all mining rights and environmental approvals remain in place.

Subject to the PPC board’s approval, it is anticipated that construction will start in the second quarter of this year, and that the plant will be commissioned by the end of next year.

PPC’s existing plants in the Western Cape will continue to operate during the construction and commissioning process.

PPC says the project’s funding structure is still being finalised, but believes that the project can be funded from debt facilities, assisted by the cash generated from existing operations during construction.

Also of assistance will be a milestone payment structure as agreed with Sinoma.