TIDMMCM
RNS Number : 0416T
MC Mining Limited
15 March 2023
ANNOUNCEMENT 15 March 2023
HALF-YEAR RESULTS FOR PERIODED 31 DECEMBER 2022
MC Mining Limited (MC Mining or the Company) is pleased to
announce its interim financial report for the six months ended 31
December 2022. All figures are denominated in United States dollars
unless otherwise stated and the full interim report is available on
the Company's website, www.mcmining.co.za .
Financial review
-- The loss after tax for the Period was $1.3 million or 0.50
cents per share (FY2022 H1: loss after tax of $0.8 million or 0.54
cents per share) primarily due to an income tax expense of $1.0
million (FY2022 H1: credit of $0.5 million);
-- Revenue of $14.0 million (FY2022 H1: $13.0 million) and cost
of sales of $10.1 million (FY2022 H1: $10.9 million), resulting in
a gross profit of $3.9 million (FY2022 H1: gross profit of $2.1
million);
-- Administrative expenses of $4.1 million (FY2022 H1: $2.9
million) which included non-cash employee expenses of $0.6 million
(FY2022 H1: $0.4 million);
-- Finance costs of $1.1 million (FY2022 H1: $0.9 million);
-- Fully underwritten Rights Issue completed in November 2022
raising net proceeds of $21.4 million;
-- Loan repayments of $5.1 million (FY2022 H1: $0.6 million)
including $3.5 million settled in equity as part of the Rights
Issue; and
-- Cash and cash equivalents of $20 million compared to cash and
cash equivalents of $3 million at 30 June 2022.
Godfrey Gomwe, Managing Director & Chief Executive Officer,
commented:
"The Company made pleasing progress during the six months, the
most notable achievements being the completion of the A$40 million
Rights Issue, the recommencement of operations at the Vele
Colliery, extension of the Marketing Agreement with Overlooked and
commencement of detailed planning for the construction of the
Makhado Project.
The completion of the underwritten Rights Issue confirmed the
continued robust support of our anchor shareholders and provided an
opportunity for new equity investors to participate in the
Company's growth strategy. This was completed despite the current
volatile market and uncertain economic environment. The additional
capital transformed the Company's balance sheet and facilitated the
settlement of over $5.1 million of debt. The Rights Issue is a
further key milestone towards raising the financing required for
the flagship Makhado Project as it unlocks other sources of
funding, enabling the positioning of MC Mining as the only
large-scale producer of hard coking coal in South Africa.
The Makhado CPP optimisation study was completed during the
period, confirming the benefits of increasing the Makhado CPP
annual ROM feed capacity from 3 million tonnes per annum to 4
million tonnes per annum. These indicative volumes have been used
in the detailed Makhado CPP and infrastructure design work as well
as revised mine plans that are on track to be completed by the end
of Q1 CY2023 and includes increased confidence levels for capital
and operating cost estimates. The Company's directors approved
expenditure of ZAR71.3 million ($4.1 million) on early works at
Makhado and this commenced in February 2023 while the funding
initiatives for the balance of the capital required continued
during the period and t hese are expected to be finalised as
previously guided in first half of CY2023.
The Vele Aluwani Colliery had been on care and maintenance for
almost ten years and during this time the Company assessed various
strategies to utilise the asset. During December 2022, the Company
signed the Mining Agreement with HOS and coal sales commenced in
January 2023 with ramp-up to full production expected in April/May
2023. The recommissioning of Vele created 303 permanent job
positions and the resumption of production will also alleviate any
'use it or lose it' risk associated with unutilised mining assets
in South Africa."
Operational review
Uitkomst Colliery - Utrecht, KwaZulu-Natal (84% owned)
Safety continues to be a key focus and three lost-time injuries
(LTIs) reported at the Uitkomst metallurgical and thermal coal
colliery (Uitkomst Colliery or Uitkomst) during the Period (FY2022
H1: three LTIs).
Uitkomst sells an up to 40mm (duff) product into the
metallurgical domestic market for use as pulverised coal. The
colliery also sells unsized thermal coal into the export coal
market via the Coal Sales and Marketing Agreement (Marketing
Agreement) with Overlooked Collieries (Pty) Ltd (Overlooked).
Uitkomst supplies sized coal (peas) products to local energy
generation facilities and also sells smaller volumes of a high-ash,
coarse discard coal (middlings) product. The initial Marketing
Agreement with Overlooked was signed in July 2022 and was due to
expire on 31 December 2022 and has been extended for a further six
months to June 2023.
Uitkomst produced 225,389 tonnes (t) (H1 FY2022: 217,228t) of
run of mine (ROM) coal during the period and the colliery had
27,058t (H1 FY2022: 10,803t; FY2022: 15,534t) of saleable product
at site at the end of the period with a further 36,764t at port (H1
FY2022: nil t; FY2022: 22,169t). Uitkomst sold 104,855t of coal
during the six months consisting of 98,924t of high-grade peas and
duff, with 71,955t exported (H1 FY2022: nil t) and the balance sold
domestically. The exported volumes are 5,352t lower than previously
reported following the subsequent receipt of an updated third-party
confirmation. The colliery also sold 5,931 tonnes of lower grade
middlings coal (H1 FY2022: 11,655t).
Despite the challenging geological conditions and increased
incidence of electricity outages due to lack of supply from Eskom,
the state power utility, Uitkomst generated pleasing results for
the period with revenue of $14.0 million (H1 FY2022: $13.0 million)
yielding a gross profit of $3.9 million (H1 FY2022: $2.1
million).
FY2023 H1 FY2022 H1 %
Production volumes
Uitkomst ROM (t) 225,389 217,228 4%
Inventory volumes
High quality duff and peas at site (t) 27,058 10,803 >100%
High quality duff and peas at port (t) 36,764 - 100%
63,822 10,803 >100%
Sales tonnages
Domestic high-quality duff and peas (t) 26,969 107,953 (75%)
Export high-quality duff and peas (t) 71,955 - 100%
Middlings sales (t) 5,931 11,655 (49%)
104,855 119,608 (12%)
Quarter financial metrics
Net revenue/t ($) 134 109 23%
Net revenue/t (ZAR) 2,321 1,636 42%
Production cost/saleable tonnes ($) 105 85 24%
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MC Mining increased its interest in the Uitkomst Colliery during
the period when it bought back the 14% interest belonging to a
black industrialist shareholder, for $0.5 million. The terms of the
transaction ensure that the Uitkomst equity purchased satisfies the
'once empowered, always empowered' principle in South Africa.
Makhado Coking Coal Project - Soutpansberg Coalfield, Limpopo
(67.3% owned)
No LTIs were recorded at Makhado during the period (H1 FY2022:
nil LTIs).
MC Mining's flagship Makhado hard coking coal project (Makhado
Project or Makhado) has secured the regulatory approvals and
surface rights over the mining and processing areas. MC Mining is
heavily invested in the Makhado Project as the complex regulatory
environment in South Africa demanded significant capital and time
investment to achieve its current 'shovel ready' status.
The development of the Makhado Project is expected to deliver
positive returns for shareholders and position MC Mining as South
Africa's pre-eminent hard coking coal (HCC) producer. During the
period, the Company appointed Erudite (Pty) Ltd (Erudite) to
complete the detailed planning for a full process design for the
Makhado coal processing plant (CPP). Erudite expects to complete
the planning during H1 CY2023 and this plan is also required by
potential funders to complete their assessments.
The Company also employed independent consultants to review the
Makhado mine plan and this forms part of the detailed execution
plan. MC Mining's directors approved the commencement of early
works Makhado and the Company allocated ZAR71.3 million ($4.1
million) to this and expects to have this completed at the end of
H1 CY2023. The early works commenced in February 2023 and include
amongst others, a bridge and internal roads, initial bulk
earthworks, site security and communication infrastructure.
The Makhado CPP optimisation study was completed by independent
experts during the period and the results of this study are being
used in Erudite's detailed CPP and infrastructure design work. The
planned Makhado CPP annual ROM feed capacity is expected to
increase from 3.0 million tonnes per annum (Mtpa) to 4.0 Mtpa in
addition to further refinement of the CPP design.
Makhado is expected to produce HCC with an ash content of less
than 10% and would be the only significant HCC producer in South
Africa resulting in obvious advantages for South African steel
producers. Development of Makhado is also expected to have a
positive impact on employment and the general Limpopo province
economy resulting in the creation of approximately 650 direct jobs.
The funding initiatives for Makhado continued during the period and
these are expected to be finalised in first half of CY2023
following completion of the detailed designs for the Makhado CPP
and updated mine plan.
Vele Colliery - Tuli Coalfield, Limpopo (100% owned)
The Vele Colliery recorded no LTIs during the period (H1 FY2022:
nil LTIs) .
The Vele Colliery had been on care and maintenance since late
CY2013 and the Company assessed various strategies to utilise the
asset. These assessments confirmed the significant capital and
technical investment required to optimise production at the
colliery. Following the increase in international thermal coal
prices in CY2022, the outsourcing of operations at Vele was
identified as the optimal strategy as this would secure the
necessary investment from a third party to de-water the opencast
pit, modify and recommission the CPP and remove a significant
portion of the ongoing costs associated with the colliery.
The assessment of outsourcing opportunities resulted in the
conclusion of a five-year Contract Mining Agreement (Mining
Agreement) with Hlalethembeni Outsourcing Services (Pty) Ltd (HOS)
in December 2022. HOS is mining in terms of an agreed mine plan on
an exclusive basis until 22 December 2027 and is targeting monthly
production of 60,000t of saleable thermal coal from Vele. HOS is
responsible for all mining and processing costs while the Company
remains responsible for the colliery's regulatory compliance,
rehabilitation guarantees, relationships with authorities and
communities as well as the supply of electricity and water.
HOS recommissioned the Vele CPP in late December 2022 and first
coal sales commenced in early CY2023. Operations at the colliery
are expected to ramp-up to full production during Q2 CY2023. The
recommissioning of the Vele Colliery adds a further cash generating
unit to MC Mining's portfolio, with limited financial or human
capital contributions and is a potential funding contributor for
Makhado. The recommencement of operations at Vele created 303
permanent job positions and also alleviates any 'use it or lose it'
risk associated with unutilised mining assets in South Africa.
Greater Soutpansberg Projects - Soutpansberg Coalfield, Limpopo
(74% owned)
The GSP reported no LTIs during the period (H1 FY2022: nil
LTIs).
The So uth African Department of Mineral Resources & Energy
has granted mining rights for the three project areas comprising
the GSP, namely, Chapudi, Mopane and Generaal .
The three GSP project areas contain over 7.0 billion gross
tonnes in situ of inferred HCC, semi-soft coking coal and thermal
coal resources. The exploration and development of the GSP is the
catalyst for MC Mining's long-term growth and positions the Company
to be a potential long-term domestic and export metallurgical coal
supplier. The Company anticipates commencing with the various
studies required for the outstanding water and environmental
regulatory approvals following the construction of the Makhado
Project.
Corporate
IDC loans
The Industrial Development Corporation of South Africa Limited
(IDC) is a 6.7% shareholder in MC Mining's subsidiary, Baobab
Mining & Exploration (Pty) Ltd, the owner of the Makhado
Project. The bank continues to provide support for the development
of Makhado. MC Mining previously utilised the existing IDC loan
facility to develop the project and during the period, the IDC
extended the date for repayment of the ZAR160 million loan ($9.4
million) plus interest thereon, as well as the terminal draw down
date of the new ZAR245 million ($14.4 million) loan facility, to 30
June 2023. Draw down of the additional ZAR245 million ($14.4
million) loan facility remains subject to the IDC confirming its
due diligence and credit approval.
Fully underwritten Rights Issue
In November 2022, MC Mining completed a fully underwritten 1.012
for 1 renounceable rights issue (the Rights Issue) of new ordinary
shares of no par value in the Company (each, a New Share) at an
issue price of A$0.20 per New Share for eligible shareholders in
Australia and New Zealand, and at ZAR2.36 per New Share for
eligible shareholders in South Africa. The Rights Issue raised
gross proceeds of A$40 million (equivalent to approximately ZAR472
million) from the issue of 200,026,719 New Shares.
The proceeds of the Rights Issue are being used to fund the
equity contribution requirement for the continued development of
Makhado and to meet the Company's equity contribution required for
the IDC's proposed debt funding. The funds will also be used for an
enhanced development strategy that optimises HCC production and
capex and, general working capital. The Rights Issue also resulted
in a reduction of debt owed under the ZAR60 million Standby
Facility ($3.5 million) owing to Dendocept (Pty) Ltd (Dendocept)
and the Company also repaid the ZAR20 million ($0.4 million) loan
owing to the Senosi Group Investment Holdings (Proprietary) Limited
during the period.
Subsequent events
Director resignation
Mr Junchao Liu, Haohua Energy International (Hong Kong) Co.
Ltd's ( HEI ) shareholder representative director, resigned as a
Non-Executive Director on 10 March 2023. HEI is MC Mining's sixth
largest shareholder, owning 5.8% of the issued shares.
Appointment of Non-Executive Directors
Ms Yi (Christine) He and Julian Hoskin were appointed as
Non-Executive Directors of the Company on 10 March 2023. Ms He is
the Managing Director of Dendocept, a 7.1% shareholder in the
Company and holds a further 2.2% in her personal capacity and joins
the board as a shareholder nominee Director for the Dendocept
Consortium, which collectively holds 23.9% of MC Mining's issued
shares. Mr Hoskin was appointed as an Independent Non-Executive
Director and is an Australian resident.
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.
For more information contact:
Endeavour Corporate
Tony Bevan Company Secretary Services +61 08 9316 9100
---------------- ------------------- ------------------------------- ------------------
James Harris
/ James Dance Nominated Adviser Strand Hanson Limited +44 20 7409 3494
---------------- ------------------- ------------------------------- ------------------
Rory Scott Broker (AIM) Tennyson Securities +44 20 7186 9031
---------------- ------------------- ------------------------------- ------------------
Financial PR
Marion Brower (SA) R&A Strategic Communications +27 11 880 3924
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About MC Mining
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).
JSE Sponsor: Investec Bank Limited
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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IR FIFFDVDIELIV
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