TIDMMCM
RNS Number : 5532X
MC Mining Limited
26 April 2023
ANNOUNCEMENT 26 April 2023
MAKHADO PROJECT UPDATE
MC Mining Limited (MC Mining or the Company) is pleased to
provide an update on its fully licensed, shovel ready Makhado hard
coking coal project (Makhado Project or the Makhado).
The salient features of the Makhado Project are:
-- JORC Code compliant Coal Resources of 296 mineable tonnes in
situ (MTIS) [1] in the Measured and Indicated categories
-- JORC Code compliant run of mine (ROM) Coal Reserves of 69.3
million tonnes (Mt) in the Proved and Probable categories, which is
expected to increase following completion of the implementation
plans for Scenario 2
-- Creation of an estimated 650 permanent employment positions when in full production
The Bankable Feasibility Study (BFS) was completed in April 2022
by independent mining consultancy Minxcon (Pty) Ltd and was
followed by two alternative development scenarios that
significantly improved the baseline BFS economic outcomes, as
announced by the Company on 30 August 2022 and were supplementary
chapters to the BFS. The alternative scenarios were assessed at
pre-feasibility level and would require additional capital
expenditure compared to the BFS base case scenario (Base Case).
While the Base Case scenario was feasible and economically robust,
the alternative scenarios resulted in improved project economics.
The Base Case comprised the mining of the West Pit, followed by the
East and Central Pits, the crushing and screen of the ROM coal to
Makhado and the transportation of the screened material 135km to
the modified Vele Colliery plant for processing.
Scenario 2, included as part of the BFS, was selected by the
Board for implementation and included the initial mining of the
East Pit, followed by the Central and West Pits, and the
construction of a coal handling and processing plant (CHPP) at
Makhado, rather than at the existing Vele facility, with an annual
CHPP throughput capacity of two million tonnes per annum (Mtpa).
Following this, the Company appointed Erudite (Pty) Ltd (Erudite)
to complete the detailed study work for a full process plant design
of the Makhado CHPP for Scenario 2.
The Company completed various studies in Q4 CY2022, enhancing
the development plans for Scenario 2, including an optimization
study on the Makhado CHPP. This optimisation study increases the
Makhado CHPP annual run of mine feed capacity from 2.0Mtpa to
4.0Mtpa. The mine plans have been revised, as has the detailed CHPP
and infrastructure design work which was completed by Erudite.
Implementation Plan completed
The Company has also made notable progress towards the
completion of a detailed implementation plan (Implementation Plan)
for the first five years of mining and processing operations. The
Company has limited technical execution capacity and with a
strategy to limit fixed overhead costs, has secured this execution
capacity by contracting an outsourced owner's team and has also
engaged key service providers to manage the Implementation
Plan.
The Implementation Plan includes a detailed execution plan for
the construction of the East Pit, Makhado CHPP, related
infrastructure and a detailed mine plan for the first five years of
operations. The key inputs of the Makhado Project were
independently peer reviewed, and the Implementation Plan has been
value-engineered improving the accuracy of the studies from the
pre-feasibility study's +/-30% accuracy to an estimated accuracy of
+/-10%. In addition, the noteworthy improvements to Scenario 2
under the Implementation Plan include:
-- Revision of the mine plan resulting in the ROM from 3.2Mtpa
to 4.0Mtpa, facilitating improved volume efficiencies and the
planned ROM coal feed to the CHPP has increased by 30%. Previous
development plans incorporated a crushing and screen plant that
would have removed 1.2Mtpa of discard material prior to processing
in the CHPP;
-- The full ROM feed stream (4.0Mtpa) will now be processed
through the CHPP to maximise coal yields, in contrast to the BFS's
Base Case and Scenario 2 plans where the ROM coal was pre-screened
and 2.0Mtpa crushed and screened coal was planned to be
processed;
-- Improved accuracy in interpreting the depth of oxidation to
the top of the target coal seams from recent supplementary diamond
core drilling. The limit of oxidation in the East Pit occurs at an
average of 28 metres (m) below surface, compared to an average of
17m estimated for the West Pit which, in the BFS, was scheduled to
be mined first. As a result, the strip ratio for the first five
years of mining has increased from 2.7 to 3.0 (waste BCM: ROM
tonne);
-- The East Pit has higher compensating coal yields and is
expected to have a life-of-mine (LOM) in excess of 13 years. The
mining of the higher yielding East Pit and project enhancements
results in hard coking coal (HCC) yields in the first five years of
mining increasing from 19.4% as per the BFS, to 22.6%, a 16%
improvement, in Scenario 2. Thermal coal yields increase by 9%
(from 16.1% to 17.6%); and
-- As a result of the above, Makhado would produce an average of
880,000t per annum (tpa) of HCC, compared to 540,000tpa in the BFS
(an increase of 63%), while thermal coal production increases from
570,000tpa to an average of 650,000tpa (an increase of 14%) during
the first five years of operation.
Key metrics for the Implementation Plan (first five operating
years of the Makhado Project) compared to Scenario 2 of the BFS are
summarised in the table below:
Parameter Units Implementation Scenario 2 Variance Variance
Plan
-------------- --------------
Nominal annual
throughput (annual) Mtpa 4.0(1) 3.2(2,3) +0.8 +25%
------------ -------------- -------------- -------- --------
Strip ratio (five Waste (BCM):
years/LOM) RoM (t) 3.0 (1) 2.5(2) +0.9 +42%
------------ -------------- -------------- -------- --------
Yield - mid-vol
64 HCC (five years/LOM) % 22.6(1) 19.4 (2) +3.2 +16%
------------ -------------- -------------- -------- --------
Yield - thermal
Coal (five years/LOM) % 17.6(1) 16.1 (2) +1.5 +9%
------------ -------------- -------------- -------- --------
Saleable Coking
Coal
(first five years) Mt 4.0(4) 3.1(5) +0.9 +30%
------------ -------------- -------------- -------- --------
Saleable Thermal
Coal
(first five years) Mt 3.1(4) 2.6(5) +0.5 +21%
------------ -------------- -------------- -------- --------
(1) Production for the first five years from the East Pit in
terms of the Implementation Plan
(2) The mining plan envisaged 3.2Mtpa ROM mined that would have
been crushed and screened and only 2.0Mtpa processed in the Makhado
processing plant
(3) Average for the 21-year LOM which included the mining of the
West, East and Central Pits
(4) Saleable coal production for the first five years of mining
the East Pit
(5) Saleable coal production for the first five years of mining
the West Pit and early mining of the East Pit
Project expenditure
The higher volume of coal mined as well as CHPP processing
capacity is anticipated to result in higher capital expenditure.
Erudite has completed the detailed designs for the mine
infrastructure and CHPP and is in the process of obtaining detailed
execution quotes for the construction of the CHPP. This process is
expected to be finished in July 2023 and will also cater for the
enlarged mining and processing footprint. EHL Engineering (Pty) Ltd
(EHL) has been engaged to design and construct the bulk power
supply infrastructure, a process on the construction critical path.
Enprotech (Pty) Ltd (Enprotech) has commenced the design and
procurement of the flotation and filtration plant, a key part of
the CHPP required to extract the HCC. The flotation and filtration
plant is expected to cost R155 million (US$8.6 million) and the
Company has agreed in-principle with Enprotec that this part of the
plant will be constructed on a build, own, operate, transfer (BOOT)
basis.
The Makhado Project will be contractor-operated and, following
the revised 4.0Mtpa mine plan, the Company has commenced an open
tender process to select a mining contractor. The Company also
anticipates commencing the processes to identify and appoint an
outsourced CHPP operating contractor and analytical laboratory
operator. These processes are expected to be completed in early Q3
CY2023. First coal production is expected 18 months from
commencement of construction, which is expected to occur in H2
CY2023.
Commencement of early works
Early works associated with the Implementation Plan commenced in
February 2023, as planned, and these workstreams consist of
activities with long lead times or to ensure that social and
regulatory licenses are complied with. This includes the
commissioning of the power line works, order placements for key
long lead CHPP items and equipment, construction of the main access
road and bridge, as well as accommodation and administration
upgrades and fencing to secure the mine site. As previously
announced, during November 2022 the Board approved an expenditure
budget of ZAR71.3 million (US$4.1 million) for Makhado early works.
The Board also approved the commitment of a further R45.0 million
(US$2.5 million) for the long lead time items.
Godfrey Gomwe, Managing Director and Chief Executive Officer,
commented:
"Substantial progress has been made to convert the previous
mining studies into an Implementation Plan for the first five years
of mining operation that is sufficiently detailed for the project
execution with attractive economics. We are also pleased to now
have an owner's team in place, as well as a reputable and expert
Engineering, Procurement & Construction Manager in Erudite. The
peer-reviewed studies completed in late CY2022 and Q1 CY2023 have
resulted in increased processing capacity leading to higher
production of hard coking coal as well as the thermal coal
by-product. The increase in product yields is also very pleasing
and enhances the project economics.
The Company anticipates that the funding arrangements will be
concluded in early Q3 CY2023 with the tender adjudication for major
contractors, notably the mining contractor and CHPP operator, in
early Q3 2023, followed by the final investment decision soon
thereafter, ensuring that the Makhado Project execution processes
are broadened from early works to include full scale
implementation. First coal production is expected 18 months from
CHPP construction start-date.
The appointment of EHL to proceed with the design and
construction of the 14 km power line ensures that the supply of
electricity to Makhado is in place for prior to the commencement of
operations."
Godfrey Gomwe
Managing Director and Chief Executive Officer
For more information contact:
Endeavour Corporate
Tony Bevan Company Secretary Services +61 8 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
---------------- ------------------- ------------------------------ -----------------
BSM Sponsors Proprietary Limited is the nominated JSE Sponsor
----------------------------------------------------------------------------------------
This announcement has been approved by the Company's Disclosure
Committee.
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) No. 596/2014, as
it forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018, as amended.
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).
Glossary
Term Definition
CHPP Coal handling & 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 principal 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.
[1] Makhado Resources per the Company's 30 June 2022 Resources
& Reserves Statement
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END
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