TIDMMCM
RNS Number : 3363B
MC Mining Limited
30 September 2022
ANNOUNCEMENT 30 September 2022
RESULTS FOR THE FULL YEARED 30 JUNE 2022
MC Mining Limited (MC Mining or the Company) is pleased to
provide its audited financial statements for the year ended 30 June
2022 (the Period). All figures are denominated in United States
dollars unless otherwise stated and the full report is available on
the Company's website,
https://www.mcmining.co.za/component/jdownloads/send/102-2022/1724-booklet-afs-year-ended-30-june-2022
.
Financial review
-- The loss after tax for the Period was $20.8 million or 12.65
cents per share (FY2021: loss after tax of $11.8 million or 7.76
cents per share);
-- Contributing to the loss of $20.8 million were non-cash
charges of $18.3 million (FY2021: $9.6 million) which includes the
following:
o net impairment expense of $14.9 million (FY2021: $6.8
million)
o depreciation and amortisation of $2.6 million (FY2021: $2.6
million)
o share based payment expense of $0.8 million (FY2021: $0.2
million).
-- Revenue of $23.5 million (FY2021: $20.7 million) and cost of
sales of $21.0 million (FY2021: $20.3 million) resulted in a gross
profit of $2.6 million (FY2021: $0.4 million) for the Period;
-- The carrying value of an exploration asset neighbouring the
Vele semi-soft coking and thermal coal colliery (Vele Colliery or
Vele) and rights that form part of the Greater Soutpansberg Project
(GSP) were assessed during the Period, resulting in an impairment
of $14.9 million. The Vele Colliery was impaired by $6.5 million in
the prior year;
-- Administrative expenses increased from $5.3 million in FY2021
to $6.8 million in the reporting period due to:
o Employee expenses increasing to $2.7 million (FY2021: $2.3
million) due to the non-cash share based payment of $0.8 million
(FY2021: $0.2 million);
o The detailed studies completed on the Makhado hard coking coal
project (Makhado Project or Makhado) contributed to professional
fees increasing to $1.1 million (FY2021: $0.2 million);
o Overhead expenses increased 10% to $2.7 million (FY2021: $2.5
million);
-- Finance costs from borrowings and finance leases increased
marginally to $1.7 million (FY2021: $1.6 million);
-- MC Mining entered into a Convertible Advance and Subscription
Agreement (the CAS Agreement) with South African based mining
group, Senosi Group Investment Holdings (Proprietary) Limited
(SGIH) and under the terms of the CAS Agreement, received ZAR46
million ($3.5 million) and the Company subsequently converted this
amount to equity by issuing 38.4 million ordinary shares to SGIH;
and
-- Unrestricted cash balances at year-end of $3.0 million (FY2021: $3.2 million).
Operational review
-- Health and safety remains the highest priority and there were
no fatalities (FY2021: nil) and six lost-time injuries (LTIs) were
recorded during the Period (FY2021: six LTIs);
-- The operational results for the Uitkomst metallurgical and
thermal colliery (Uitkomst or Uitkomst Colliery) compared to the
preceding period are detailed below:
FY2022 FY2021 % r
Production tonnages
Uitkomst ROM (t) 470,597 490,100 (4%)
Inventory volumes
High quality duff and peas at site (t) 15,534 4,553 241%
High quality duff and peas at port (t) 22,169 - N.M.
37,703 4,553 728%
Sales tonnages
Own ROM (t) 199,065 265,879 17%
Middlings sales 26,031 26,382 2%
225,096 292,261 15%
Financial metrics
Revenue/t ($) 104 70 49%
Production costs/saleable tonnes ($)^ 85 60 41%
---------------------------------------- -------- -------- -----
^all costs are incurred in South African Rand
-- The Uitkomst Colliery produced 470,597 tonnes (t) (FY2021:
490,100 t) of run of mine (ROM) coal during the twelve months to 30
June 2022, 4% lower than the previous year;
-- 22,169t (FY2021: 0t) of coal were at the Durban port at the
end of June 2022 for export under the terms of the Coal Sales &
Marketing Agreement (Marketing Agreement) with Overlooked
(Proprietary) Limited (Overlooked), announced by the Company in
July 2022;
-- A further 15,534t (FY2021: 4,553t) of high-quality coal was
at Uitkomst at the end of June, available for export under the
Marketing Agreement;
-- Uitkomst sold 225,096t of coal in FY2022 (FY2021: 292,261t)
comprising 199,065t (FY2021: 265,879t) of premium duff and sized
peas and 26,031t (FY2021: 26,382t) of high ash, coarse discard coal
- generating sales revenue of $23.5 million (FY2021: $20.7
million);
-- Payment of the final instalment of ZAR35 million
(approximately $2.3 million) for the key Lukin and Salaita
properties, ensuring MC Mining owns all surface rights required for
the Makhado Project mining area;
-- Makhado Project composite debt/equity funding initiatives
continued, including detailed due diligence processes by potential
funders and included the completion of the Makhado Project Bankable
Feasibility Study (BFS) 'Base Case' by independent mining
consultancy firm, Minxcon (Proprietary) Limited (Minxcon). The Base
Case scenario confirms the project's robust economic fundamentals,
a key input in the due diligence process for potential funders;
-- Limited activities at the Company's Makhado Project, Vele Colliery and GSP during FY2022;
-- The Industrial Development Corporation of South Africa
Limited (IDC) agreed to extend the repayment date for the R160
million ($9.8 million) loan plus accrued interest, to 30 November
2022;
-- The terminal drawdown date of the additional R245 million
($15.0 million) IDC term loan for the development of Makhado, was
also extended to 30 November 2022, subject to the IDC re-affirming
its financial due diligence and credit approval;
-- The API4 coal price improved during FY2022, with the average
price for the 12-months increasing from $81/t in FY2021 to $213/t
for the reporting period, resulting in Uitkomst's revenue per tonne
increasing (FY2022: $104/t vs. FY2021: $70/t) despite the
proportionally lower year-on-year sales volumes of higher quality
peas and duff; and
-- The increase in Uitkomst's production costs per saleable
tonne is due to increased explosives, fuel and employee costs as
well as the 23% reduction in year-on-year sales volumes.
Corporate features
-- Appointment of shareholder representative Non-Executive
Director, Mr Junchao Liu, following the retirement of Mr Shangren
Ding;
-- Resignation of long standing non-executive Chairman Bernard Pryor;
-- Appointment of Mr Nhlanhla Nene as Non-Executive Director and Chairman of MC Mining;
-- Appointment of Mr Godfrey Gomwe as Managing Director and
Chief Executive Officer (CEO) and resignation of Sam Randazzo as
Director and Interim CEO;
-- Appointment of Mr Matthews Senosi of SGIH as a Non-Executive Director of the Company; and
-- Securing of a ZAR60 million ($3.5 million) Standby Loan
Facility (the Standby Facility) from Dendocept (Proprietary)
Limited, a 1.4% shareholder in MC Mining.
Going concern
Attention is drawn to the disclosure in the annual financial
statements on the going concern assumption (refer note 1 of the
annual financial statements), noting that there is a material
uncertainty that may cast significant doubt on the Group's ability
to continue as a going concern and, therefore, that the entity may
be unable to realise its assets and discharge its liabilities in
the normal course of business.
The directors are satisfied however, at the date of signing the
financial report, that there are reasonable grounds to believe that
the Group will be able to continue to meet its debts as and when
they fall due and that it is appropriate for the financial
statements to be prepared on a going concern basis. The directors
have based this on a number of assumptions which are set out in
detail in note 1 to the financial report. In order to meet its
working capital requirements, the Group is exploring and
progressing 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 Group has a demonstrated history
of success in this regard. On 27 September 2022, the Company
commenced with a fully underwritten, renounceable Rights Offer that
will raise gross proceeds of A$40 million (refer to 'Subsequent
events' in Note 10 of the annual financial statements);
-- The issue of new equity for cash in the subsidiary company that owns the Makhado project;
-- Further debt funding;
-- Cash generated from the Company's collieries; and
-- Further contractor BOOT funding arrangements.
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. The directors believe that at the date of signing the
annual financial statements there are reasonable grounds to believe
that they will be successful in achieving the matters set out above
and that the Group will therefore have sufficient funds to meet
their obligations as and when they fall due.
Subsequent events
-- MC Mining shareholders voted against the issue of a further
33.3 million new ordinary shares to SGIH and the Company repaid
ZAR10 million ($0.6 million) of the ZAR20 million ($1.2 million)
already advanced by SGIH, subsequent to year-end, with the balance
due in October 2022;
-- Marketing Agreement entered into with Overlooked, expiring on
31 December 2022 which facilitates the export of at least 20,000t
of API4 (6,000k/cal) coal from Uitkomst on a monthly basis,
allowing the Company to take advantage of international coal
prices;
-- Completion of a study by Minxcon assessing potential
alternative development scenarios for Makhado to optimise capital
expenditure and reduce operational costs. The scenarios assessed
included possibly moving the Vele coal processing plant (CPP) and
modifying this at Makhado or, the construction of a bespoke CPP at
Makhado. Both additional development scenarios were developed to
pre-feasibility level and would require additional capital
expenditure but would significantly reduce the transport costs when
compared to the Base Case scenario. While the BFS Base Case is
economically robust, the additional two scenarios resulted in
improved project economics;
-- Commencement of a fully underwritten 1.012 for 1 renounceable
rights issue offer (Rights Offer) of new ordinary shares of no par
value in MC Mining (each, a New Share) at an issue price of A$0.20
($0.14) per New Share for Eligible Shareholders in Australia (and
New Zealand) and ZAR2.36 per New Share for eligible shareholders in
South Africa. The rights issue will raise gross proceeds of A$40.0
million via the issue of approximately 200 million New Shares. The
Rights Issue is expected to be completed in early November
2022.
Godfrey Gomwe, Chief Executive Officer and Managing Director of
MC Mining, commented :
"The 2022 financial year was challenging for our Uitkomst
Colliery which was affected by the civil unrest in KwaZulu-Natal
during July 2021. Furthermore, the colliery's largest customer
commenced with major maintenance and did not order any stock from
March 2022. This led to Uitkomst commencing with production tests
of a low ash coal for international steel mills as well as, the
production of API4 coal to take advantage of favourable
international thermal coal prices. The conclusion of the Standby
Facility in June 2022 ensured that MC Mining had sufficient
liquidity to fund the build-up of inventory, and this allowed for
signature of a CAS Agreement in July 2022 and the first export of
Uitkomst thermal coal during August 2022.
The Company advanced the Makhado Project during FY2022 and
SGIH's investment in MC Mining in early CY2022 facilitated the
payment of the outstanding balance for the two remaining properties
required for the Makhado Project. MC Mining also completed the
Makhado Project BFS on the low-capital, Base Case development
scenario. The study was subsequently enhanced and alternative
development strategies assessed, following which the Company has
committed to the construction of a processing plant at Makhado.
This development strategy has a higher peak funding requirement
compared to the Base Case but generates improved returns for
shareholders due to the lower operating, particularly transport
costs.
The Makhado Project is shovel ready and the Company made
significant progress to secure the cornerstone funding for the
project during FY2022. This resulted in the launch of the fully
underwritten Rights Issue in September 2022 and the MC Mining aims
to conclude arrangements for the balance of the funding in Q4
Y2022, allowing the construction of the Makhado Project to commence
in early CY2023."
Authorised by
Godfrey Gomwe
Managing Director & Chief Executive Officer
This announcement has been approved by the Company's Disclosure
Committee.
All figures are in South African rand, United States dollars or
Australian dollars unless otherwise stated.
For more information contact:
Tony Bevan Company Secretary Endeavour Corporate Services +61 08 9316 9100
Company advisors:
James Harris / James Dance Nominated Adviser Strand Hanson Limited +44 20 7409 3494
Rory Scott Broker (AIM) Tennyson Securities +44 20 7186 9031
Marion Brower 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
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.
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END
ACSURUWRUKUKORR
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