TIDMMCM
RNS Number : 6805U
MC Mining Limited
31 July 2020
ANNOUNCEMENT 31 July 2020
REPORT FOR THE QUARTERED 30 JUNE 2020
FUNDING PROCESSES CONTINUE DURING LOCKDOWN
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 June 2020, the final
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 and corporate features
-- The safety and hygiene focus continued at the high-grade
Uitkomst metallurgical and thermal coal mine ("Uitkomst Colliery"
or "Uitkomst"), with one lost-time injury ("LTI") recorded during
the Quarter (FY2020 Q3: one LTI);
-- The South African Government previously issued directives to
contain the spread of the COVID-19 virus, instituting a national
lockdown (the "Lockdown") from 26 March 2020. This was extended to
30 April 2020 with restrictions easing during May and June
2020;
-- As a result of the Lockdown, Uitkomst was placed on care and
maintenance in March and did not produce run-of-mine ("ROM") coal
in April. The colliery was limited to 50% of labour capacity in May
2020 and normalised pre-Lockdown production levels resumed at the
end of June 2020;
-- Uitkomst generated 41,536 tonnes ("t") (FY2019 Q4: 121,742t)
of ROM coal, a 66% decline on the comparative period to end June
2019;
-- The Lockdown also resulted in the majority of Uitkomst's
customers suspending operations and sales of high-grade
metallurgical, thermal and high-ash middlings coal were 74% lower
than for the comparative period in 2019 (FY2020 Q4: 19,429t 2020
vs. FY2019 Q4:75,643t);
-- Uitkomst's customers recommenced operations in June 2020 and
following this, normalised order volumes resumed in July 2020,
reducing inventory stockpiles; and
-- Activities at the Company's Makhado hard coking coal project
("Makhado Project" or "Makhado"), Vele semi-soft coking and thermal
coal colliery ("Vele Colliery" or "Vele") and Greater Soutpansberg
Projects ("GSP") were suspended due to the Lockdown and limited
activities have recommenced.
Coal market and financial features
-- The COVID-19 pandemic resulted in a significant decline in
API4 export thermal coal prices, reducing from $79/t in the
preceding three months to $55/t for the Quarter. This is 16% lower
than the comparative June 2019 period's $66/t ;
-- Uitkomst increased its ABSA Bank Limited ("ABSA") primary
lending facility from R20 million ($1.2 million) to R40 million
($2.3 million) to cover increased working capital requirements to
ramp up the operations;
-- Composite debt/equity funding initiatives for the Makhado
Project were delayed and are expected to be completed in H2 CY2020;
and
-- Available cash at Quarter-end was $0.4 million ($1.8 million
at the end of March 2020) and restricted cash of $0.03 million.
Subsequent events
-- Restructuring of the loan agreement with the Industrial
Development Corporation of South Africa Limited ("IDC") allowing
for the drawdown of R40 million ($2.4 million) of the existing
facility and commitments for a collective R15.0 million ($0.9
million) of new MC Mining equity. The equity will be issued
following South African Reserve Bank approval, anticipated in early
August 2020. A further announcement confirming the exact number of
shares and warrants and date of admission to trading on the ASX,
AIM and the JSE will be made at that point.
Brenda Berlin , Acting CEO commented :
"The spread of the COVID-19 virus impacted MC Mining's Uitkomst
Colliery, corporate office, Makhado, Vele and GSP sites. The virus
resulted in the South African Government declaring a nationwide
Lockdown in late March 2020 and we implemented measures to
safeguard our people at our sites and limit the potential spread of
the virus. The Company also initiated contingency programmes, with
key activities continuing remotely in isolated, safe environments.
The Uitkomst Colliery was placed on care and maintenance, halting
coal production and processing with key customers also suspending
operations in late March 2020.
The Lockdown measures were eased progressively during the
Quarter, allowing Uitkomst to return to steady-state production by
the end of June with orders returning to pre-COVID-19 levels in
July 2020.
The adverse effects of the Lockdown on working capital
requirements led to Uitkomst having to increase its ABSA primary
lending facility and the Company undertook exhaustive negotiations
with the IDC to restructure the current debt facilities. The
parties reached agreement during July 2020, and drawdowns will
commence in August 2020.
The Company also continued to interact with potential domestic
and international funders and we anticipate that the process to
secure the balance of the capital required to develop Makhado Phase
1 will be completed in H2 CY2020, with construction commencing
shortly thereafter ."
QUARTERLY COMMENTARY
National Lockdown
The health and safety of MC Mining's employees is a prevailing
priority and the Company implemented Lockdown regulations
promulgated by the South African Government. This had a significant
impact on the Company's activities and resulted in the
implementation of a 'no work, no pay' policy for non-essential
staff. Only staff undertaking essential services were permitted on
site and non-essential employees received a portion of their wages
from the South African Government's Temporary Employer/Employee
Relief Scheme.
The Government began reducing Lockdown restrictions in May 2020,
allowing Uitkomst operations to recommence but only at 50% of the
mine's labour capacity. The colliery resumed steady-state
production at the end of June 2020 but Lockdown measures prevented
key customers from returning to production and sales volumes only
normalised in July 2020.
Uitkomst Colliery - Utrecht Coalfields (70% owned)
The focus on health and safety continued at Uitkomst and the
colliery recorded one LTI during the Quarter (FY2020 Q3: one
LTI).
The colliery was significantly affected by the Lockdown and ROM
coal production was 66% lower than for the comparative period
(41,536t vs 121,742t). This also resulted in a halt in domestic
steel production and sales of high-grade metallurgical and thermal
coal declined to 16,707t (FY2019 Q4: 75,643t) while 2,722t of
high-ash middlings coal were sold (FY2019 Q4: 0t) during the
Quarter.
The global effects of COVID-19 adversely affected API4 thermal
coal prices with average prices for the Quarter 16% lower than the
comparative period in 2019 ($55/t vs $66/t). The reduced coal
prices were partially offset by a 25% weakening of the ZAR:US$
exchange rate and revenue per tonne declined by 18% ($58/t vs.
$71/t) during the three months. A large proportion of Uitkomst's
cost base is fixed and the negative impact of the reduced volumes
was offset by the weakening of the exchange rate, resulting in
production costs declining marginally to $48/t (FY2019 Q4:
$49/t).
Quarter to Quarter to
end-Jun 2020 end-Jun 2019 %
Production tonnages
Uitkomst ROM (t) 41 536 121 742 (66%)
Sales tonnages
Own ROM (t) 16 707 75 643 (78%)
Middlings sales 2 722 - 100%
19 429 75 643 (74%)
Quarter financial metrics
Revenue/t ($) 57.88 70.87 (18%)
Revenue/t (ZAR) 1 040 1 019 2%
Production cost/ROM tonnes
($)^ 48.23 48.90 (1%)
---------------------------- -------------- -------------- ------
^ costs are all South African Rand based
The Uitkomst Colliery has an estimated 15-year life-of-mine
("LOM") which includes the development of a north adit (horizontal
shaft). The colliery is in the process of re-assessing 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 (FY2020 Q3:
nil) during the Quarter.
MC Mining's flagship Makhado Project has very favourable
economics and its phased development will deliver positive returns
for shareholders. Makhado has a LOM in excess of 46 years and
construction of the project will position MC Mining as South
Africa's pre-eminent hard coking coal ("HCC") producer.
Phase 1 of the Makhado Project comprises the development of the
west pit and modifications to the existing Vele Colliery processing
plant. MC Mining previously secured a conditional R245 million
($14.4 million) term loan facility from the IDC ("Phase 1 Loan
Facility") for the construction of Phase 1 . This is the initial
step in the composite Phase 1 debt/equity funding process and
during the Quarter the Company advanced various initiatives to
secure the balance of the R535 million ($30.6 million) required to
construct Phase 1. Significant progress was made prior to the
Lockdown and the Company anticipates that this will be finalised
during H2 CY2020.
The Company has an existing R240 million ($13.8 million) loan
facility from the IDC, secured in March 2017. This facility was
granted to develop Makhado and MC Mining previously utilised R120
million ($6.9 million) of this facility, progressing the project to
fully permitted status and acquiring the required surface rights.
The balance remained undrawn and negotiations to restructure this
commenced during the Quarter. Following this and in July 2020, the
parties agreed to a conditional restructure of the existing
facility, allowing the Company to drawdown R40 million ($2.3
million) with the Phase 1 Loan Facility still available as part of
the composite funding package. This drawdown is conditional upon
the Company raising R15.0 million ($0.9 million) in the form of new
equity, which was also finalised during July 2020, with closing and
settlement subject to South African Reserve Bank approval.
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 (FY2020 Q3:
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 GSP recorded no LTIs (FY2020 Q3: nil) during the
Quarter.
The GSP comprises the Chapudi, Mopane and Generaal areas that
are MC Mining's longer-term coking and thermal coal projects. There
were no further developments to report during the Quarter.
Markets
The spread of COVID-19 globally has resulted in countries
implementing an array of lockdown measures, leading to reduced
demand for commodities and declines in metallurgical and thermal
coal prices. Average premium HCC prices reduced to $112/t during
the Quarter, 45% lower than the $203/t in the comparative June 2019
period . Demand for South African coal was similarly affected and
the average API4 price for the Quarter was $55/t, 16% lower than
the $66/t recorded in Q4 FY2019 (FY2020 Q3: $79/t).
Brenda Berlin
Acting Chief Executive Officer
This announcement has been approved by the Company's Disclosure
Committee.
This announcement is inside information for the purposes of
Article 7 of Regulation 596/2014.
For more information contact:
Brenda Berlin Acting Chief Executive Officer MC Mining Limited +27 10 003 8000
Tony Bevan Company Secretary Endeavour Corporate Services +61 08 9316 9100
Company advisors:
Ross Allister/David McKeown Nominated Adviser and Broker Peel Hunt LLP +44 20 7418 8900
James Duncan 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 (hard coking coal). Vele Colliery (semi-soft 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 does 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 Kweekspruit No.
prospects 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
Vele Colliery and (Remaining Extent, 3, 4, 5, 6, 13,
prospects 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 State
Tshikunda 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 Black Economic Empowerment (BBBEE) transaction
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END
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