TIDMMCM
RNS Number : 6731R
MC Mining Limited
31 October 2019
ANNOUNCEMENT 31 October 2019
REPORT FOR THE QUARTERED 30 SEPTEMBER 2019
MAKHADO PHASE 1 FUNDING PROCESS COMMENCES
MC Mining Limited ("MC Mining" or the "Company") which operates
in South Africa, together with its subsidiaries, hereby provides
its update for the three months ended 30 September 2019, the first
quarter (the "Quarter") of the Company's 2020 financial year. All
figures are denominated in United States dollars unless otherwise
stated. Safety metrics are compared to the preceding quarter while
financial and operational metrics are measured against the
comparable period in the previous financial year. A copy of this
report is available on the Company's website,
www.mcmining.co.za.
Salient operational features
-- Safety training and awareness initiatives as well as changes
in supervisory personnel continued at the high-grade Uitkomst
metallurgical and thermal coal mine ("Uitkomst Colliery" or
"Uitkomst") but unfortunately five lost-time injuries ("LTIs") were
recorded during the Quarter (FY2019 Q4: nil LTIs);
-- Revised mining cycles implemented earlier in CY2019 as well
as changes in mine management resulted in Uitkomst's run-of-mine
("ROM") coal production increasing 8% compared to the September
2018 period (135,675 tonnes ("t") vs. 125,153t);
-- Sales of high-grade metallurgical and thermal coal derived
from Uitkomst ROM coal were 71,473t (FY2019 Q1: 80,573t) and the
colliery had inventory of 6,815t of export quality product at the
end of the Quarter;
-- 5,770t of high-ash middlings coal sold during the Quarter (FY2019 Q1: 0t);
-- As expected, no coal was purchased from third parties due to
supply contracts expiring in the previous financial year (FY2019
Q1: 12,466t) and no slurry sales (FY2019 Q1: 9,273t);
-- Commencement of composite debt/equity funding initiatives for
the Makhado hard coking coal project ("Makhado Project" or
"Makhado");
-- Approval by the Industrial Development Corporation of South
Africa Limited ("IDC") Credit Committee of a term loan facility of
R245 million ($17.0 million), the initial step in the composite
debt and equity funding package for the construction of Phase 1 of
Makhado; and
-- Vele semi-soft coking and thermal coal colliery ("Vele
Colliery") remained on care and maintenance during the Quarter, but
the Vele processing plant is expected to be refurbished and
recommissioned as part of Phase 1 of the Makhado Project.
Coal market and financial features
-- Reduced demand led to continued pressure on API4 thermal coal
prices, declining from $63/t in June 2019 to $59/t in September
2019 with average prices for the Quarter of $61/t (FY2019 Q1:
102/t) while Uitkomst's higher quality sized coal continued to
demand a market premium;
-- The slowdown in the global economy led to demand weakness and
average premium hard coking coal ("HCC") prices decreased from
$189/t in the comparative period to $156/t in the Quarter; and
-- Available cash at Quarter-end of $5.3 million ($8.8 million
at the end of June 2019) with restricted cash of $0.03 million.
David Brown, CEO commented:
"The Company has had a very successful CY2019 thus far,
completing significant milestones required for the development of
our flagship, fully permitted Makhado Project. This included the
acquisition of the last two properties required for the Phase 2
mining area and obtaining off-take agreements for a significant
portion of the Makhado hard coking coal and all of the thermal coal
by-product.
These achievements facilitated the commencement of initiatives
to secure the funds for the development of Phase 1 of the Makhado
Project. This resulted in the IDC Credit Committee approving a
$17.0 million term loan, the initial step in securing the $52
million required for the project and includes settlement of the
existing IDC facility. Discussions with potential funders for the
balance of the Phase 1 funding are ongoing and we anticipate that
this process should be completed in Q4 CY2019, with construction
commencing in Q1 CY2020.
Hard coking coal is a key ingredient contributing to the
manufacture of steel and trades at a significant premium to thermal
coal. The global underinvestment in new coking coal projects
combined with supply contraction as reserves currently being mined
are exhausted, indicates favorable medium and long-term outlooks
for coking coal. This is particularly so for South Africa, a
country that produces limited quantities of high quality
metallurgical coal and the development of the Makhado Project will
make MC Mining the pre-eminent South African producer of hard
coking coal.
The optimisation initiatives implemented at the Uitkomst
Colliery earlier in CY2019 yielded positive results and ROM coal
production pleasingly improved 8% on the comparative three-months.
The initiatives have led to a more predictable production profile
and the colliery is assessing various potential marketing
opportunities to maximise returns from Uitkomst's metallurgical and
thermal coal. Uitkomst is also currently reviewing its cost base to
ensure this is aligned with the its production profile."
QUARTERLY COMMENTARY
Uitkomst Colliery - Utrecht Coalfields (70% owned)
Safety continued to be a key focus at Uitkomst and the colliery
recorded five LTIs in four separate incidents during the Quarter
(FY2019 Q4: nil LTIs). Uitkomst has appointed a new safety officer
and the role encompasses a review and ensuring all staff understand
the safety processes and policies while a safety re-training
programme has been initiated at the colliery and will be completed
during the December 2019 period.
The underground mining re-organisation initiatives implemented
earlier in CY2019 yielded improved results and ROM coal production
was 8% higher than the comparable period (135,675t vs 125,1531t).
The expiry of a coal supply agreement in FY2019 resulted in no ROM
coal purchased from third parties during the Quarter (FY2019 Q1:
12,466t). The ROM coal generated high-grade metallurgical and
thermal coal sales of 71,473t compared to 80,573t in Q1 FY2019 with
carry-over high quality inventory at the end of the Quarter of
6,815t (FY2019 Q1: 4,414t). There were no sales of slurry during
the Quarter (FY2019 Q1: 9,273t) or of saleable coal derived from
purchased ROM coal (FY2019 Q1: 5,282t) and the Company is not
expecting any new third party coal purchases in the near future.
Uitkomst sold 5,770t (FY2019 Q1: 0t) of high-ash middlings coal
during the Quarter and had over 2,000t of this product on-hand at
the end of September 2019 (FY2019 Q1: 0t).
Uitkomst's revenue was adversely affected by continued pressure
on international thermal coal prices during the Quarter and the
average API4 coal price was 40% lower than the same period in the
prior year ($61/t vs $102/t). The 40% decline in coal prices was
somewhat offset by the premium above the API4 price that Uitkomst
received for its sized coal product during the Quarter. The change
in sales mix also resulted in a higher proportion of this premium
product being sold compared to Q1 FY2019, which included sales of
slurry and purchased ROM coal for blending. Production costs per
ROM tonne declined from $46.12/t to $38.18/t, benefitting from the
8% increase in ROM coal production, a 4% weakening of the ZAR:US$
exchange rate as well as a reduction in mining costs post the
insourcing of underground mining operations in August 2018.
Quarter to Quarter to
end-Sept 2019 end-Sept 2018 %
Production tonnages
Uitkomst ROM (t) 135 675 125 153 8%
Purchased ROM to blend
(t) - 12 466 (100%)
135 675 137 619 (1%)
Sales tonnages
Own ROM (t) 71 473 80 573 (11%)
Slurry directly sold - 9 273 (100%)
Middlings sales 5 770 - 100%
Purchased ROM to blend
(t) - 5 282 (100%)
77 243 95 128 (19%)
Quarter financial metrics
Revenue/t ($) 65.58 87.39 (25%)
Revenue/t (ZAR) 964 1 230 (22%)
Production cost/ROM tonnes
($)^ 38.18 46.12 (17%)
---------------------------- --------------- --------------- -------
^ costs are all South African Rand based
The Uitkomst Colliery has an estimated 15-years life-of-mine
("LOM") which includes the development of a north adit (horizontal
shaft). The colliery is reassessing options regarding the design of
the planned north adit.
Makhado Hard Coking Coal Project - Soutpansberg Coalfield (69%
owned)
The fully permitted Makhado Project recorded no LTIs (FY2019 Q4:
nil) during the Quarter.
The Makhado Project has a LOM in excess of 46 years comprising a
nine-year Phase 1 LOM and Phase 2 which will be mined for more than
37 years. Phase 1 entails construction of the west pit and trucking
of scalped and screened ROM coal to the existing, but to be
modified Vele Colliery for final processing.
Phase 1 will generate an estimated 3.0 million tonnes per annum
("Mtpa") of ROM coal producing approximately 0.54Mtpa of HCC and
0.57Mtpa of a thermal coal by-product and the saleable coal will be
sold utilising previously tested road and rail infrastructure. MC
Mining has secured a HCC off-take agreement with ArcelorMittal
South Africa Limited for the purchase of between 350,000t and
450,000t of Phase 1 HCC annually while all of the Phase 1 thermal
coal by-product will be sold to one of the world's largest
producers and marketers of bulk commodities.
The conclusion of these off-take agreements in the June 2019
quarter allowed the Company to progress the composite debt/equity
funding initiatives for Phase 1. This resulted in the IDC Credit
Committee approval during the Quarter of a R245 million ($17.0
million) term loan facility to fund the construction of the
project. Various funding mechanisms for the balance of the $52.0
million required are underway and MC Mining anticipates completing
the funding package in H2 CY2019 with construction commencing in Q1
CY2020.
The development of Phase 1 will take nine months with first coal
sales in month ten and the project provides a quick payback of
funds facilitating the development of Phase 2. The second phase
comprises the construction of the east and central pits and the
Makhado processing plant and related infrastructure. This phase
will produce approximately 4.0Mtpa of ROM coal, yielding an
estimated 1.7Mtpa of saleable HCC and thermal coal.
Vele Semi-Soft Coking and Thermal Coal Colliery - Limpopo (Tuli)
Coalfield (100% owned)
The Vele Colliery remained on care and maintenance during the
Quarter and no LTIs were recorded during the period (FY2019 Q4:
nil).
There were no further developments to report during the Quarter
and the Vele processing plant is expected to be refurbished and
recommissioned as part of Phase 1 of the Makhado Project
Greater Soutpansberg Project - Soutpansberg Coalfield (74%
owned)
The Greater Soutpansberg Project ("GSP") recorded no LTIs
(FY2019 Q4: nil) during the Quarter.
The Chapudi, Mopane and Generaal Projects comprise MC Mining's
longer-term coking and thermal GSP. The mining right applications
for the three GSP project areas were submitted to the Department of
Mineral Resources ("DMR") during 2013 with the Chapudi Project
mining right granted in December 2018. The Mopane and Generaal
Project mining right applications are at an advanced stage and MC
Mining has regular interactions with the DMR and is hopeful that
the granting thereof will occur in the near future.
Markets
The slowdown in the global economy adversely affected
metallurgical coal markets and average premium HCC prices during
the Quarter were $156/t (FY2019 Q1: $189/t). Post Quarter-end, HCC
prices appear to have been more stable. API4 thermal coal prices
remained under pressure due to subdued northern hemisphere demand
as well as competition from the increased supply of 'cheaper'
liquefied natural gas with average prices reducing to $61/t (FY2019
Q1: $102/t).
Authorised by
David Brown
Chief Executive Officer
This announcement is inside information for the purposes of
Article 7 of Regulation 596/2014.
For more information contact:
David Brown Chief Executive Officer MC Mining Limited +27 10 003 8000
Brenda Berlin Chief Financial Officer MC Mining Limited +27 10 003 8000
Tony Bevan Company Secretary Endeavour Corporate Services +61 08 9316 9100
Company advisors:
Financial PR
Jos Simson/ Gareth Tredway (United Kingdom) Tavistock +44 20 7920 3150
Ross Allister/David McKeown Nominated Adviser and Broker Peel Hunt LLP +44 20 7418 8900
Charmane Russell/Olwen Auret Financial PR (South Africa) R&A Strategic Communications +27 11 880 3924
Investec Bank Limited is the nominated JSE Sponsor
About MC Mining Limited:
MC Mining is an AIM/ASX/JSE listed coal exploration, development
and mining company operating in South Africa. MC Mining's key
projects include the Uitkomst Colliery (metallurgical coal),
Makhado Project (coking and thermal coal). Vele Colliery (coking
and thermal coal), and the Greater Soutpansberg Projects (coking
and thermal coal).
Forward-Looking Statements
This Announcement, including information included or
incorporated by reference in this Announcement, may contain
"forward-looking statements" concerning MC Mining that are subject
to risks and uncertainties. Generally, the words "will", "may",
"should", "continue", "believes", "expects", "intends",
"anticipates" or similar expressions identify forward-looking
statements. These forward-looking statements involve risks and
uncertainties that could cause actual results to differ materially
from those expressed in the forward-looking statements. Many of
these risks and uncertainties relate to factors that are beyond MC
Mining's ability to control or estimate precisely, such as future
market conditions, changes in regulatory environment and the
behaviour of other market participants. MC Mining cannot give any
assurance that such forward-looking statements will prove to have
been correct. The reader is cautioned not to place undue reliance
on these forward looking statements. MC Mining assumes no
obligation and do not undertake any obligation to update or revise
publicly any of the forward-looking statements set out herein,
whether as a result of new information, future events or otherwise,
except to the extent legally required.
Statements of intention
Statements of intention are statements of current intentions
only, which may change as new information becomes available or
circumstances change.
MC Mining has ensured that the mineral resources quoted are
subject to good governance arrangements and internal control. The
Company has engaged external independent consultants to update the
mineral resource in accordance with the JORC Code 2012 and SAMREC
2016. The units of measure in this report are metric, with Tonnes
(t) = 1,000kg. Technical information that requires subsequent
calculations to derive subtotals, totals and weighted averages may
involve a degree of rounding and consequently introduce an error.
Where such errors occur MC Mining does not consider them to be
material.
Tenements held by MC Mining and its Controlled Entities
Project Name Tenement Number Location Interest Change during Quarter
------------------------------ ------------------------------- ---------------- --------- ----------------------
Chapudi Project* Albert 686 MS Limpopo 74%
Bergwater 712 MS 74%
Remaining Extent and Portion 2
of Bergwater 697 MS 74%
Blackstone Edge 705 MS 74%
Remaining Extent & Portion 1
of Bluebell 480 MS 74%
Remaining Extent & Portion 1
of Bushy Rise 702 MS 74%
Castle Koppies 652 MS 74%
Chapudi 752 MS 74%
Remaining Extent, Portions 1,
3 & 4 of Coniston 699 MS 74%
Driehoek 631 MS 74%
Remaining Extent of
Dorps-rivier 696 MS 74%
Enfield 512 MS (consolidation
of Remaining Extent of
Enfield 474 MS, Brosdoorn 682
MS & Remaining
Extent of Grootvlei 684 MS) 74%
Remaining Extent and Portion 1
of 74%
Grootboomen 476 MS 74%
Grootvlei 684 MS 74%
Kalkbult 709 MS 74%
Remaining Extent, Remaining
Extent of Portion 2,
Remaining Extent of Portion
3, Portions 1,
4, 5, 6, 7 & 8 of Kliprivier
692 MS 74%
Remaining Extent of Koodoobult
664 MS 74%
Koschade 657 MS (Was Mapani
Kop 656 MS) 74%
Malapchani 659 MS 74%
Mapani Ridge 660 MS 74%
Melrose 469 MS 74%
Middelfontein 683 MS 74%
Mountain View 706 MS 74%
M'tamba Vlei 654 MS 74%
Remaining Extent & Portion 1
of Pienaar 635 MS 74%
Remaining Extent & Portion 1
of Prince's Hill 704 MS 74%
Qualipan 655 MS 74%
Queensdale 707 MS 74%
Remaining Extent & Portion 1
of Ridge End 662 MS 74%
Remaining Extent & Portion 1
of Rochdale 700 MS 74%
Sandilands 708 MS 74%
Portions 1 & 2 of Sandpan 687
MS 74%
Sandstone Edge 658 MS 74%
Remaining Extent of Portions 2
& 3 of Sterkstroom 689 MS 74%
Sutherland 693 MS 74%
Remaining Extent & Portion 1
of Varkfontein 671 MS 74%
Remaining Extent, Portion 2,
Remaining Extent of Portion 1
of Vastval 477 MS 74%
Vleifontein 691 MS 74%
Ptn 3, 4, 5 & 6 of Waterpoort
695 MS 74%
Wildebeesthoek 661 MS 74%
Woodlands 701 MS 74%
------------------------------- ----------------------------------------------- --------- ----------------------
Kanowna West and
Kalbara M27/41 Coolgardie^ 2.99%
----------------
M27/47 2.99%
-----------------------------------------------
M27/59 2.99%
M27/72,27/73 2.99%
M27/114 2.99%
M27/181 7.24%
M27/196 2.99%
M27/414,27/415 2.99%
P27/1826-1829 2.99%
P27/1830-1842 2.99%
P27/1887 2.99%
------------------------------- ----------------------------------------------- --------- ----------------------
Abbotshall Royalty ML63/409,410 Norseman^ Royalty
------------------------------ ------------------------------- ---------------- --------- ----------------------
Kookynie Royalty ML40/061 Leonora^ Royalty
------------------------------
ML40/135,136 Royalty
------------------------------ ------------------------------- ---------------- --------- ----------------------
Makhado Project Fripp 645 MS Limpopo 69%(#)
Lukin 643 MS 69%(#)
Mutamba 668 MS 69%(#)
Salaita 188 MT 69%(#)
Tanga 849 MS 69%(#)
Daru 848 MS 69%(#)
Windhoek 847 MS 69%(#)
Generaal Project* Beck 568 MS-- Limpopo 74%
Bekaf 650 MS- 74%
Remaining Extent & Portion 1
of Boas 642 MS- 74%
Chase 576 MS- 74%
Coen Britz 646 MS- 74%
Fanie 578 MS- 74%
Portions 1, 2 and Remaining
Extent of Generaal 587 MS- 74%
Joffre 584 MS- 74%
Juliana 647 MS 74%
Kleinenberg 636 MS- 74%
Remaining Extent of Maseri Pan
520 MS- 74%
Remaining Extent and Portion 2
of Mount Stuart 153 MT-- 100%
Nakab 184 MT-- 100%
Phantom 640 MS-- 74%
Riet 182 MT-- 100%
Rissik 637 MS- 100%
Schuitdrift 179 MT- 100%
Septimus 156 MT-- 100%
Solitude 111 MT- 74%
Stayt 183 MT-- 100%
Remaining Extent & Portion 1
of Terblanche 155 MT-- 100%
Van Deventer 641 MS- 74%
Wildgoose 577 MS- 74%
------------------------------- ----------------------------------------------- --------- ----------------------
Mopane Project* Ancaster 501 MS-- Limpopo 100%
Banff 502 MS- 74%
Bierman 599 MS- 74%
Cavan 508 MS 100%
Cohen 591 MS-- 100%
Remaining Extent, Portions 1 &
2 of Delft 499 MS- 74%
Dreyer 526 MS-- 74%
Remaining Extent of Du Toit
563 MS- 74%
Faure 562 MS 74%
Remaining Extent and Portion 1
of Goosen 530 MS -- 74%
Hermanus 533 MS- 74%
Jutland 536 MS-- 100%
Krige 495 MS- 74%
Mons 557 MS- 100%
Remaining Extent of Otto 560
MS (Now Honeymoon)- 74%
Remaining Extent & Portion 1
of Pretorius 531 MS- 74%
Schalk 542 MS- 74%
Stubbs 558 MS- 100%
Ursa Minor 551 MS-- 74%
Van Heerden 519 MS-- 74%
Portions 1, 3, 4, 5, 6, 7, 8,
9, Remaining Extent of
Portion 10, Portions 13, 14,
15, 16,
17, 18, 19, 20, 21, 22, 23,
24, 26, 27, 29, 30, 35, 36,
37, 38, 39, 40, 41, 44, 45,
46, 48,
49, 50, 51, 52 & 54 of Vera
815 MS 74%
Remaining Extent of Verdun 535
MS- 74%
Voorburg 503 MS- 100%
Scheveningen 500 MS- 74%
Uitkomst Colliery and Portion 3 (of 2) of
prospects Kweekspruit No. 22 KwaZulu-Natal 70%
Portion 8 (of 1) of
Kweekspruit No. 22 70%
Remainder of Portion 1 of
Uitkomst No. 95 70%
Portion 5 (of 2) of Uitkomst
No. 95 70%
Remainder Portion1 of Vaalbank
No. 103 70%
Portion 4 (of 1) of Vaalbank
No. 103 70%
Portion 5 (of 1) of Vaalbank
No. 103 70%
Remainder of Portion 1 of
Rustverwacht No. 151 70%
Remainder of Portion 2 of
Rustverwacht No. 151 70%
Remainder of Portion 3 (of 1)
of Rustverwacht No. 151 70%
Portion 4 (of 1) Rustverwacht
No.151 70%
Portion 5 (of 1) Rustverwacht
No. 151 70%
Remainder of Portion 6 (of 1)
of Rustverwacht No. 151 70%
Portion 7 (of 1) of
Rustverwacht No. 151 70%
Portion 8 (of 2) of
Rustverwacht No. 151 70%
Remainder of Portion 9 (of 2)
of Rustverwacht No. 151 70%
Portion 11 (of 6) of
Rustverwacht No. 151 70%
Portion 12 (of 9) of
Rustverwacht No. 151 70%
Portion 13 (of 2) of
Rustverwacht No. 151 70%
Portion 14 (of 2) of
Rustverwacht No. 151 70%
Portion 15 (of 3) of
Rustverwacht No. 151 70%
Portion 16 (of 3) of
Rustverwacht No. 151 70%
Portion 17 (of 2) of
Rustverwacht No. 151 70%
Portion 18 (of 3) of Waterval
No. 157 70%
Remainder of Portion 1 of
Klipspruit No. 178 70%
Remainder of Portion 4 of
Klipspruit No. 178 70%
Remainder of Portion 5 of
Klipspruit No. 178 70%
Portion 6 of Klipspruit No.
178 70%
Portion 7 (of 1) of Klipspruit
No. 178 70%
Portion 8 (of 1 )of Klipspruit
No. 178 70%
Portion 9 of Klipspruit No.
178 70%
Remainder of Portion 10 (of 5)
of Klipspruit No. 178 70%
Portion 11 (of 5) of
Klipspruit No. 178 70%
Portion 13 (of 4) of
Klipspruit No. 178 70%
Remainder of Portion 14 of
Klipspruit No. 178 70%
Portion 16 (of 14) of
Klipspruit No. 178 70%
Portion 18 of Klipspruit No.
178 70%
Portion 23 of Klipspruit No.
178 70%
Remainder of Portion 1 of
Jackalsdraai No. 299 70%
Remainder of Jericho B No. 400 70%
Portion 1 of Jericho B No. 400 70%
Portion 2 of Jericho B No. 400 70%
Portion 3 of Jericho B No. 400 70%
Remainder of Jericho C No. 413 70%
Portion 1 of Jericho C No. 413 70%
Remainder of Portion 1 of
Jericho A No. 414 70%
Remainder of Portion 2 (of 1)
of Jericho A No. 414 70%
Portion 3 (of 1) of Jericho A
No. 414 70%
Portion 4 (of 1) of Jericho A
No. 414 70%
Portion 5 (of 2) of Jericho A
No. 414 70%
Portion 6 (of 1) of Jericho A
No. 414 70%
Margin No. 420 70%
Portions of Overvlakte 125 MS
(Remaining Extent, 3, 4, 5,
Vele Colliery and prospects 6, 13, 14) Limpopo 100%
Bergen Op Zoom 124 MS 100%
Semple 155 MS 100%
Voorspoed 836 MS 100%
Alyth 837 MS 100%
------------------------------- ----------------------------------------------- --------- ----------------------
Certain portions of Unsurveyed
Tshikunda State Land known as Mutale Limpopo 60%
------------------------------ ------------------------------- ---------------- --------- ----------------------
* Form part of the Greater Soutpansberg Projects
- Lapsed - Mining Right Application Lodged
-- Valid - Mining Right Application Lodged
Tenement located in the Republic of South Africa
^ Tenement located in Australia
(#) MC Mining's interest will reduce to 69% on completion of the
26% Broad Based BEE transaction
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