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RNS Number : 1150A
MC Mining Limited
31 January 2022
ANNOUNCEMENT 31 January 2022
ACTIVITIES REPORT FOR THE QUARTERED 31 DECEMBER 2021
FOR
MC MINING LIMITED ("MC Mining" or the "Company") AND ITS
SUBSIDIARY COMPANIES
HIGHLIGHTS
-- Health and safety remains a priority and one lost-time injury
(LTI) was recorded during the quarter (FY2022 Q1: two LTIs);
-- Measures previously implemented to restrict the spread of the
COVID-19 virus at the various group workplaces remain in place.
During the quarter, three employees (FY2022 Q1: 14) contracted the
virus;
-- A COVID-19 vaccination programme was implemented at the high
grade Uitkomst metallurgical and thermal coal mine (Uitkomst
Colliery or Uitkomst) has resulted in 82% of Uitkomst's employees
being fully vaccinated or having had at least one vaccine dose;
-- Run-of-mine (ROM) coal production at Uitkomst was marginally
lower than the December 2020 quarter (107,188 tonnes (t) vs. FY2021
Q2: 108,945t);
-- 49,063t of coal sales during the quarter (FY2021 Q2: 81,486t)
comprising 43,280t (FY2021 Q2: 72,656t) of high grade metallurgical
and thermal coal and 5,783t (FY2021 Q2: 8,830t) of lower grade
middlings coal;
-- Revenue per tonne increased to $111/t (FY2021 Q2: $66/t) due
to the much higher API4 coal prices recorded during the
quarter;
-- Limited activities were undertaken 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) during the quarter;
-- Subsequent to the end of the quarter, the Industrial
Development Corporation of South Africa Limited (IDC) extended the
repayment date for the R160 million ($10.3 million) loan plus
accrued interest from 31 January 2022 to 30 November 2022;
-- The terminal drawdown date of the additional R245 million
($15.8 million) IDC term loan for the development of Phase 1 of
Makhado was extended from 31 January 2022 to 30 November 2022, with
the drawdown remaining subject to the IDC re-affirming its due
diligence;
-- Makhado Project composite debt/equity funding initiatives,
including detailed due diligence processes by potential funders,
continued during the quarter;
-- Appointment of shareholder representative Non-Executive
Director Mr Junchao Liu, following the retirement of Mr Shangren
Ding; and
-- Available cash and facilities at quarter-end was $3.2 million
($3.5 million at 30 September 2021) and restricted cash was $0.03
million.
COMMENTARY
A number of parties are continuing their due diligence review
for providing the balance of the funding required by the Company to
develop Makhado. MC Mining remains confident that the parties
taking part in the process will commit the necessary funds to
complete the funding package, anticipated to be finalised during H1
CY2022. The Company is progressing several alternative strategies
to raise additional funding including, but not limited to, the
issue of new equity for cash in MC Mining or subsidiary companies,
or further debt funding
COVID-19
The health and safety of the MC Mining group's employees and its
contractors is a priority and measures previously implemented to
restrict the spread of COVID-19 remain in place. During the
quarter, two Uitkomst employees tested positive for the virus
(FY2022 Q1: 14 positive tests). One positive COVID-19 case was
reported at the Makhado Project and no cases were recorded at the
Vele or GSP projects.
Uitkomst Colliery - Utrecht Coalfields (70% owned)
One LTI recorded during the quarter (FY2022 Q1: two LTIs).
The Uitkomst Colliery generated 107,188t of ROM coal during the
quarter, 2% lower than the comparative Q2 FY2021 (108,945t). The
marginal decline is attributable to the suspension of mining for
three shifts following production constraints at Uitkomst's
explosives supplier, resulting in three lost underground mining
shifts reducing ROM coal production of approximately 3,000t.
Operational challenges at Uitkomst's largest customer from early
November 2021 led to sales of high grade duff and peas being 40%
lower than the FY2021 comparative period (43,280t vs. 72,656t),
with prior year volumes augmented by the disposal of coal
stockpiles. Uitkomst had 10,909t of high grade duff and peas on
hand at the end of the quarter compared to 1,727t at the beginning
of the quarter and the colliery also sold 5,783t of high ash
middlings coal during the quarter (FY2021 Q2: 8,830t).
Uitkomst's high quality coal remains in demand and the colliery
secured a customer for 10,000t of the closing stock. The customer
paid a deposit of R6.6 million ($0.4 million) in December 2021 and
commenced uplifting the coal in January 2022. Uitkomst presold
16,500t of coal during the previous quarter, realising R29.7
million ($1.9 million). During the quarter Uitkomst delivered a
further 5,500t of coal against this contract with the remaining
8,250t to be delivered between January and March 2022.
Demand for commodities continued during the three months with
continued improvement in the API4 export coal prices. Average API4
prices for the three months were 123% higher than the comparative
period ($163/t vs $73/t) and Uitkomst's average revenue per tonne
increased by 68% to $111/t (FY2021 Q2: $66/t) with the sales mix
also including lower value, fixed price arrangements. The
significant reduction in sales volumes in the quarter accounted for
approximately 75% of the increase in production costs per saleable
tonne during the quarter (FY2022 Q2: $98/t vs. FY2021 Q2: $48/t)
with higher labour, mining, processing and engineering costs also
contributing and cost optimization initiatives are being
investigated.
[NB: RNS Team - please insert link to pdf attachment]
Makhado Hard Coking Coal Project - Soutpansberg Coalfield (67%
owned post Black Economic Empowerment transaction)
The fully permitted Makhado Project recorded no LTIs (FY2022 Q1:
nil) during the quarter.
MC Mining's flagship Makhado Project has favourable economics
and its development is expected to deliver positive returns for
shareholders and will position the Company as South Africa's
pre-eminent hard coking coal (HCC) producer. The IDC which holds a
6.7% equity interest in Baobab Mining & Exploration (Pty) Ltd
(Baobab), the owner of Makhado, remains committed to the Company's
growth. Subsequent to the end of the quarter, the IDC agreed to
extend the date for repayment of the existing R160 million ($10.3
million) loan plus interest as well as to extend the terminal draw
down date in respect of the conditional R245 million ($15.8
million) term loan facility for the development of the Makhado
Project, to 30 November 2022. In the unlikely event that the
Company does not repay the existing loan by the repayment date, the
financing documentation allows for the debt to be converted into
equity.
During January 2019, Baobab completed the acquisition of the
Lukin and Salaita properties, being the key surface rights for the
Makhado Project. The balance of the purchase price of R35 million
($2.2 million) (plus interest) (the Deferred Payment) was payable
by Baobab on 10 January 2022. The Company paid an instalment of R6
million ($0.4 million) on 12 January 2022 which will be deducted
from the Deferred Payment, and the vendor agreed to extend the due
date for payment of the balance, to 28 February 2022. MC Mining is
currently resolving the funding required for the Deferred Payment
and interest on the unpaid Deferred Payment will accrue at the
effective annual rate of 15.2% from 10 January 2022.
The Company continues to work with Baobab and its advisers to
complete the funding requirement for development of the Makhado
Project. A further announcement will be made in due course, as and
when applicable.
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 (FY2022 Q1:
nil). The Vele processing plant is to be refurbished and
recommissioned as part of Phase 1 development of the Makhado
Project.
Greater Soutpansberg Project (GSP)- Soutpansberg Coalfield (74%
owned)
GSP recorded no LTIs (FY2022 Q1: nil) during the quarter and no
reportable activities occurred during the period.
Markets
The demand for coal continued during the quarter, leading to a
rise in the price of quality South African export thermal coal with
average API4 prices improving to $163/t compared to $73/t recorded
in Q2 FY2021 (FY2022 Q1: $139/t). Demand for hard coking coal also
increased with average prices of $368/t compared to $111/t in Q2
FY2021.
Directorate changes
Appointment of Mr Junchao Liu as a Non-Executive Director of MC
Mining following the retirement of long standing Non-Executive
Director Mr Shangren Ding. Mr Liu is the Board representative of
Haohua Energy International (Hong Kong) Co. Ltd (HEI), MC Mining's
largest shareholder. Mr Liu is the Deputy Director of Business
Development of Beijing Haohua Energy Resource Company and Deputy
General Manager of HEI.
Appendix 5B - Quarterly Cash Flow Report
The cash balance as at 31 December 2021 was $1.9 million with a
further $1.3 million of available facilities. The aggregate amount
of payments to related parties and their associates as disclosed at
item 6.1 of the December quarter Appendix 5B was $63k, comprising
executive director remuneration.
In order to meet its working capital requirements, the Group is
exploring and progressing on several alternative strategies to
raise additional funding including, but not limited to:
-- The issue of new equity for cash in the Company to current
and new shareholders, of which the MC Mining Group has a
demonstrated history of success in this regard;
-- The issue of new equity for cash in subsidiary companies
which own the Makhado Project;
-- Further debt funding;
-- Further contractor BOOT (build, own, operate, transfer) funding arrangements; and
-- The sale of a minority stake in the subsidiary companies
holding the Makhado Project.
The Group also has the capacity if necessary to reduce its
operating cost structure in order to minimise its working capital
requirements and defer the timing of any future capital raising.
The conclusion of the debt and equity raise is by its nature an
involved process and is subject to successful negotiations with the
external funders and shareholders. Any equity raise is likely to be
subject to a due diligence process. The Group has a history of
successful capital raisings to meet the Group's funding
requirements.
Sam Randazzo
Chief Executive Officer
This announcement has been approved by the Company's Disclosure
Committee.
All figures are in South African rand or United States dollars
unless otherwise stated.
For more information contact:
Sam Randazzo CEO Endeavour Corporate +61 408 945010
Tony Bevan Company Secretary Services +61 08 9316 9100
Company advisors:
James Harris Strand Hanson
/ James Dance Nominated Adviser Limited +44 20 7409 3494
Rory Scott Broker (AIM) Tennyson Securities +44 20 7186 9031
Financial PR R&A Strategic
James Duncan (South Africa) 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 and thermal
coal), Makhado Project (hard coking coal), Vele Colliery (semi-soft
coking and thermal coal), and the Greater Soutpansberg Projects
(coking and thermal coal).
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.
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
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