TIDMMCM
RNS Number : 3025I
MC Mining Limited
13 April 2022
ANNOUNCEMENT 13 April 2022
MAKHADO PROJECT BANKABLE FEASIBILITY STUDY COMPLETED
MC Mining Limited (MC Mining or the Company) is pleased to
announce the completion of a Bankable Feasibility Study (BFS) for
its fully licenced Makhado hard coking coal project (Makhado
Project or Makhado). The BFS was prepared by Minxcon (Pty) Ltd
(Minxcon), an independent mining industry consulting firm, and is a
key milestone in securing the funding for Makhado. The Company
expects to finalise the financing for the Makhado Project in Q3
CY2022 with construction commencing soon thereafter. The BFS
confirmed that Makhado has JORC/SAMREC compliant 296 million
mineable tonnes in situ (MTIS) of Measured and Indicated Coal
Resources, 7.2 million MTIS of Inferred Coal Resources and 69.3
million tonnes of Proved and Probable Coal Reserves under the
proposed open pit mining and coal processing methods.
Background
MC Mining has a 68% interest in the Makhado Project through its
subsidiary, Baobab Mining & Exploration (Pty) Ltd, with the
Industrial Development Corporation of South Africa Limited (IDC)
owning 6.7%, seven local communities owning 20% and the remaining
6% held by a Black Economic Empowerment industrialist. The
development of Makhado will provide significant direct and indirect
benefits to local communities in one of the poorest areas of South
Africa. MC Mining remains committed to the sustainable development
of Makhado Project. The Company also owns the surface rights of the
properties required for the project and has the requisite
regulatory approvals to commence mining at Makhado.
Striving to unlock near-term shareholder value, the Makhado
Project's development plan in the BFS was designed to minimise the
upfront capital expenditure by utilising existing infrastructure
that is currently on care and maintenance. The BFS envisages the
initial mining of the West Pit which is followed by mining of the
East and Central Pits while the existing coal processing plant
(CPP) at the Vele Colliery will be modified allowing it to
simultaneously produce hard coking coal (HCC) and export quality
thermal coal. The West, East and Central pits will be mined at a
combined average rate of 3.2 million tonnes per annum (Mtpa) with
the run of mine (ROM) material being crushed and screened at
Makhado prior to dispatch to the Vele CPP. Over the life-of-mine
(LOM), approximately 2.0 Mtpa of crushed and screened coal will be
transported 134km, to the Vele CPP where the coal will be processed
to produce two marketable products - a mid-volatile HCC for sale
domestically and internationally and, a 5,500 kcal (API3) thermal
coal for sale on the international market. Makhado has an offtake
agreement with ArcelorMittal South Africa Limited for the domestic
supply of up to 450,000 tonnes of HCC per annum and has also
commenced off-take discussions with various parties for the balance
of the HCC as well as the export of the thermal coal.
The salient features of the Makhado Project are:
-- Coal Resources of 296 MTIS in the Measured and Indicated categories
-- Coal Reserves of 69.3 million tonnes in the Proved and Probable categories
-- Overall stripping ratio over the LOM is 2.48:1.0 (bank cubic
metres of waste: tonne of coal)
-- 25.6 million tonnes (Mt) of saleable coal produced over the LOM comprising:
o 13.7 Mt of HCC
o 11.9 Mt of 5,500kcal thermal coal
-- Approximately 22 years LOM
-- Outsourcing of mining and processing operations to
experienced third parties that currently operate several other
sites in South Africa
-- Creation of an estimated 650 permanent employment positions (including contractors)
-- Capital cost (including contingencies) of ZAR625 million
($41.7 million) and a peak funding requirement of ZAR727 million
($51.7 million)
-- Confirms Makhado's robust economics with a positive post-tax
internal rate of return (IRR) and an estimated payback period of
3.8 years
-- Positions the project to take advantage of the current higher global coal prices
-- Generation of significant cash flows for MC Mining from the
development of Makhado's Resources.
Key features of the Makhado BFS:
Makhado BFS
=================================
LOM 22 years*
------------------------------------------- ---------------------------------
HCC production 13.7 Mt
------------------------------------------- ---------------------------------
Thermal coal production 11.9 Mt
------------------------------------------- ---------------------------------
Construction capital ZAR625 million ($41.7 million)
------------------------------------------- ---------------------------------
Peak funding ZAR727 million ($51.7 million)
------------------------------------------- ---------------------------------
Construction period Approximatively 12 months
------------------------------------------- ---------------------------------
Long term ZAR:USD exchange rate used R15.47
------------------------------------------- ---------------------------------
Real long term premium HCC price/t $212.10**
------------------------------------------- ---------------------------------
Real long term API4 thermal coal price/t $105.50***
------------------------------------------- ---------------------------------
Post-tax IRR 38.2%
------------------------------------------- ---------------------------------
Post-tax NPV ZAR4.0 billion ($268.1 million)
------------------------------------------- ---------------------------------
*Revised Makhado economic parameters included in the Minxcon
BFS
**$594/t at the end of March 2022
***$260/t at the end of March 2022
Sam Randazzo, Interim Chief Executive Officer of MC Mining,
commented :
"The completion of the BFS reflects a key advancement of Makhado
and confirms the project's robust economics. The BFS is based on
the project plan with the lowest capital cost options and results
in Makhado's ROM coal being transported to the Vele Colliery for
processing for the entire LOM. The forecast HCC and thermal coal
prices used in the BFS were sourced from independent advisors and
are considerably lower than current index prices, reflecting
Makhado's robust economics and significant upside. The BFS is a key
milestone in securing the funding for Makhado."
Sam Randazzo
Interim Chief Executive Officer
This announcement has been approved by the Company's Disclosure
Committee.
This announcement is inside information for the purpose s of
Article 7 of the Market Abuse Regulation (EU) No. 596/2014, as
amended by the Market Abuse (Amendment) (EU Exit) Regulations
2019.
All numbers are in South African rand or United States dollars
unless stated otherwise.
For more information contact:
Sam Randazzo Interim CEO MC Mining Limited +61 408 945010
Tony Bevan Company Secretary Endeavour Corporate Services +61 08 9316 9100
Company advisors:
James Harris / James Dance Nominated Adviser (AIM) Strand Hanson Limited +44 20 7409 3494
Rory Scott Broker (AIM) Tennyson Securities +44 20 7186 9031
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 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).
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.
Glossary
Term Definition
CPP coal processing plant
HCC hard coking coal
JORC Australasian Code of Reporting of Exploration
Results, Mineral Resources and Ore Reserves,
2012 Edition
Indicated Coal Maximum distance between points of observation
Resource of 1,000 metres (m) and a maximum Halo radius
of 500m
Inferred Coal Maximum distance between points of observation
Resource of 4,000m and a maximum Halo radius of 2,000m
Measured Coal Maximum distance between points of observation
Resource of 500m and a maximum Halo radius of 250m
MTIS mineable tonnes in situ
LOM life of mine
Probable Coal A Probable Coal Reserve is the economically
Reserves mineable part of an Indicated, and in some
circumstances, a Measured Coal Resource. The
confidence in the modifying factors applying
to a Probable Coal Reserve is lower than that
applying to a Proved Coal Reserve.
Proved Coal Reserve A Proved Coal Reserve is the economically mineable
part of a Measured Coal Resource. A Proved
Coal Reserve implies a high degree of confidence
in the Modifying Factors.
ROM run of mine
SAMREC South African Code for the Reporting of Exploration
Results, Mineral Resources and Mineral Reserves
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.
The Company's principle competent person is Mr J.C.H.K. Sparrow
who is in full time employ of MC Mining as the Group Geologist. Mr
Sparrow, who is a registered professional scientist of good
standing with the South African Council for Natural Scientific
Professions (SACNASP) (400109/03) and acts the Competent Person
under the AIM Rules - Note for Mining and Oil & Gas Companies,
he has read and approved the technical disclosures in this
announcement.
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END
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