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RNS Number : 8932K
MC Mining Limited
23 December 2022
ANNOUNCEMENT 23 December 2022
OUTSOURCING OF THE VELE ALUWANI COLLIERY
MC Mining Limited (MC Mining or the Company) is pleased to
announce that it has today signed a Contract Mining Agreement with
Hlalethembeni Outsourcing Services (Pty) Ltd (HOS) to recommission,
upgrade and operate the Company's Vele Aluwani Colliery (Vele or
the Vele Colliery) coal processing plant (CPP) and undertake mining
in terms of an agreed mine plan.
Background
The Vele Colliery is located in the Thuli coalfield and is owned
by Limpopo Coal Company (Pty) Ltd (LCC), a 100% held subsidiary of
MC Mining. Vele has a life of mine in excess of 40 years. Vele was
placed on care and maintenance in 2013 due to weak thermal coal
prices and the requirement for modifications to the colliery's CPP
that would facilitate the extraction of the smaller coal fraction
and the simultaneous production of semi-soft coking coal and
thermal coal. The Vele Colliery incurred high logistics costs when
operational during 2012/2013, as the nearest export terminal is
Maputo, which is 760km away. The colliery currently incurs care and
maintenance costs of approximately R21 million ($1.2 million) per
year. The Vele plant modifications were anticipated to take place
as part of the previously envisaged phased development of the
Company's flagship Makhado hard coking coal project (Makhado
Project or Makhado) and in terms of this development plan,
Makhado's crushed and screened run of mine coal would be processed
at Vele, producing hard coking coal and a thermal by-product.
However, and following completion of the Makhado Bankable
Feasibility Study in April 2022 and subsequent alternative
development scenario study completed in August 2022, the MC Mining
Board approved the construction of a new CPP at Makhado, meaning
that Makhado run-of-mine coal would no longer be processed at the
Vele Colliery. This decision created optionality tfor the potential
recommencement of operations at Vele, particularly given the
improvement in coal prices during CY2022. The Vele CPP requires a
fit-for-purpose new crushing circuit as well as a flotation circuit
to extract the higher quality fine coal, with this equipment
estimated to cost R158.4 million ($9.1 million) (the Equipment) to
optimise the CPP.
MC Mining has evaluated the various options to recommence
operations at Vele and, given the capital and working capital
required, and particularly in the light of the Company's focus on
the development of its flagship Makhado Project, the outsourcing of
operations at the colliery was considered the optimal strategy.
Contract Mining Agreement
As a result of these strategic initiatives, the Company is
pleased to announce that it has signed a Contract Mining Agreement
(the Agreement) with Hlalethembeni Outsourcing Services (Pty) Ltd
(HOS), a company owned by Mzwandile Themba Masondo. Mr Masondo has
a MSc. in Mining Engineering and over 30 years' experience in coal
mining, with over twenty years at mine management and Chief
Operating Officer level. The key terms of the Agreement are:
1. HOS will recommission, upgrade and operate the Vele Colliery
CPP and undertake mining in terms of an agreed mine plan.
2. The Agreement is on an exclusive basis to produce thermal
coal for an initial five-year period, until 22 December 2027. HOS
undertakes to operate the Vele CPP at nameplate capacity.
3. HOS is targeting monthly production of 60,000 tonnes (t) of
saleable thermal coal from Vele but there are no minimum or maximum
coal production volumes.
4. LCC will earn R200/t (excluding VAT) ($11/t) for each tonne of saleable coal produced.
5. HOS is responsible for all mining and processing costs at
Vele while LCC remains responsible for the colliery's regulatory
compliance, rehabilitation guarantees, relationships with
authorities and communities as well as the supply of electricity
and water.
6. HOS is entitled to subcontract operations at the Vele
Colliery and JCI Mining Services (Pty) Ltd: Ingwenya Minerals
Processing (Pty) Ltd, both reputable operators, have been
appointed.
7. HOS will fund the acquisition of and install the Equipment
and maintain the Vele CPP assets in line with recommended practice
and, at the end of the contract period, LCC shall pay HOS a sum
equivalent to these assets' 'value-in-use' to return exclusive use
of them to LCC.
Godfrey Gomwe, Managing Director & Chief Executive Officer,
commented:
"MC Mining has made significant progress in CY2022, advancing
the development of our flagship Makhado Project. Any development of
the Vele Colliery was originally planned to take place subsequent
to the construction and ramp-up of Makhado. The Company has
assessed various strategies to utilise the Vele asset or its
processing plant as the colliery has been on care and maintenance
for almost ten years. These assessments confirmed the significant
capital and technical investment required to optimise production at
the Vele Colliery and the outsourcing of operations at the colliery
has been identified as the optimal strategy in the short and
medium-term.
The outsourcing of Vele operations secures the necessary
investment from a third party to modify the CPP and also removes a
significant portion of the ongoing costs associated with Vele. The
recommissioning will also add a further cash generating unit to MC
Mining's portfolio with limited financial or human capital
contributions, delivering positive cash returns for
shareholders.
We are proud to partner with HOS, a 100% black-owned firm, and
look forward to utilising Mr Masondo's extensive experience. HOS
has commenced recommissioning the Vele CPP and first coal sales are
expected in Q1 CY2023 with the ramp-up to full production during Q2
CY2023. The cash generated from Vele will be used for Group general
working capital requirements and can also potentially contribute
funding for the construction of Makhado. The recommissioning of
Vele is expected to generate approximately 245 permanent job
positions and will also alleviate any 'use it or lose it' risk
associated with unutilised mining assets in South Africa."
Godfrey Gomwe
Managing Director and 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.
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) 596/2014, as it
forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018 (as amended).
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 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. A copy of this announcement 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.
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