TIDMMCM
RNS Number : 2400N
MC Mining Limited
21 September 2023
RESULTS FOR THE FULL YEARED 30 JUNE 2023
MC Mining Limited (MC Mining or the Company) is pleased to
provide its audited financial statements for the year ended 30 June
2023 (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/investors-and-media/financial-information/2023.
Financial review
-- The loss after tax for the Period decreased by 79% to $4.4
million or 1.46 cents per share (FY2022: loss after tax of $20.8
million or 11.41 cents per share);
-- Contributing to the loss of $4.4 million were non-cash
charges which decreased by 80% to $3.7 million (FY2022: $18.3
million) which includes the following:
o depreciation and amortisation decreased by 23% to $2.0 million (FY2022: $2.6 million)
o share based payment expense increased by 20% to $0.9 million (FY2022: $0.8 million)
o no impairment expense in FY2023 (FY2022: $14.9 million).
-- Revenue for the Period increased by 91% to $44.8 million
(FY2022: $23.5 million) and cost of sales increased by 96% to $41.2
million (FY2022: $21.0 million), resulting in a 43% increase in
gross profit (FY2023: $3.6 million vs. FY2022: $2.5 million);
-- No impairment recorded in FY2023 while the prior year
included an impairment of $14.9 million relating to 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);
-- Administrative expenses increased by 30%, from $6.8 million
in FY2022 to $8.9 million in the reporting period due to:
o Employee expenses increasing by 58% to $4.3 million (FY2022:
$2.7 million) following the increase in staff required to advance
the Makhado steelmaking hard coking coal project (Makhado Project
or Makhado) and recommencement of operations at the Vele
Colliery;
o Professional fees decreased by 53% to $0.5 million (FY2022:
$1.1 million) with the FY2022 balance including fees paid to the
Interim Chief Executive Officer who resigned in April 2022;
o Overhead expenses increased 44% to $3.9 million (FY2022: $2.7
million) due to the increased activities to advance Makhado;
-- Finance costs from borrowings and finance leases remained
flat at $1.7 million (FY2022: $1.7 million);
-- Completion of a fully underwritten Rights Issue (the Rights
Issue) in November 2022 raising net proceeds of $21.4 million and
facilitated loan repayments of $5.1 million (FY2022: $0.6 million)
including $3.4 million settled in equity as part of the Rights
Issue;
-- Unrestricted cash balances at year-end of $7.5 million (FY2022: $3.0 million);
-- Net asset value increased by 13% to $87.4 million from $77.1
million in the prior corresponding period;
-- Headline loss per share decreased by 55% from ($0.03) in
FY2022 to ($0.01) in FY2023;
-- Basic and diluted loss per share decreased by 87% from ($0.11) in FY2022 to ($0.01);
-- No dividend was declared for the year ended 30 June 2023 (FY2021: nil); and
-- Attention is drawn to the disclosure in the annual financial
statements and below on the going concern assumptions.
Operational review
Safety
-- Health and safety remains the highest priority. No fatalities
(FY2022: nil) and six lost-time injuries (LTIs) were recorded
during the Period (FY2022: six LTIs).
Uitkomst Colliery
-- The operational results for the Uitkomst steelmaking and
thermal colliery (Uitkomst or Uitkomst Colliery) compared to the
preceding period are detailed below:
FY2023 FY2022 % r
Production tonnages
Uitkomst ROM (t) 444,984 470,597 (5%)
Inventory volumes
High quality duff and peas at site (t) 50,490 15,534 225%
High quality duff and peas at port (t) - 22,169 (100%)
50,490 37,703 34%
Sales tonnages
Own ROM (t) 230,181 199,065 16%
Middlings sales 11,185 26,031 (57%)
241,366 225,096 7%
Financial metrics
Net revenue/t ($) 142 104 35%
Production costs/saleable tonnes ($)^ 123 85 44%
---------------------------------------- -------- -------- -------
-- The Uitkomst Colliery produced 444,984 tonnes (t) (FY2022:
470,597 t) of run of mine (ROM) coal during the twelve months to 30
June 2023, 5% lower than the previous year;
-- A further 50,490t (FY2022: 15,534t) of high-quality coal
remained on stockpile at Uitkomst at the end of June 2023;
-- The increase in international thermal coal prices in H1
CY2022 resulted in entering a Coal Sales & Marketing Agreement
(Marketing Agreement) with Overlooked Collieries (Pty) Ltd, a
related party;
-- Uitkomst sold 241,366t of coal in FY2023 (FY2022: 225,096t)
comprising 230,181t (FY2022: 199,065t) of premium duff and sized
peas and 11,185t (FY2022: 26,031t) of high ash, coarse discard
coal. The Marketing Agreement provided access to the more lucrative
international market and Uitkomst generated sales revenue of $34.2
million (FY2022: $23.5 million) for the year with $11.4 million
(FY2022: $nil) derived from export coal sales;
-- The sales of Uitkomst coal on the international market
resulted in net revenue per tonne increasing to $142/t (FY2022:
$104/t); and
-- The rise in Uitkomst's costs per saleable tonne to $123/t
(FY2022: $85/t) is mainly due to increase in costs for explosives,
employee, logistics and port costs amongst others, while the
increased incidence of load shedding resulted in significantly
higher energy costs associated with the use of generators at the
mine.
Makhado Project
-- MC Mining's flagship Makhado steelmaking hard coking coal
(HCC) project has the required regulatory approvals and surface
rights over the mining and processing areas and is 'shovel
ready';
-- The development of Makhado is expected to deliver positive
returns for shareholders and position MC Mining as South Africa's
pre-eminent steelmaking HCC producer resulting in obvious
advantages for domestic steel producers;
-- The 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;
-- An owner's team was appointed in Q1 FY2023 to drive the
planning and development of the Makhado Project;
-- The Makhado coal handling and processing plant (CHPP)
optimisation study was completed by independent experts, resulting
in the annual capacity increasing from 3.2 million tonnes per annum
(Mtpa) to 4.0Mtpa; and
-- The Company subsequently appointed Erudite (Pty) Ltd
(Erudite) to complete the detailed designs for the Makhado
CHPP.
Implementation Plan
-- The five-year Makhado Project implementation plan
(Implementation Plan) was completed in April 2023 with the goal of
improving the accuracy of Makhado feasibility studies from +/-30%
accuracy to an estimated accuracy of +/-10%; and
-- The Implementation Plan is for the first five years of
production and includes a detailed execution plan for the
construction of the East Pit and related infrastructure and a
detailed mine plan.
Updated LOM Plan and Coal Reserve
-- Subsequent to the Implementation Plan, the Company prepared
an updated life of mine (LOM) plan and Coal Reserve estimate for
Makhado;
-- The LOM plan expands on the five-year Implementation Plan and
incorporates the exploitation of all portions of the East, Central
and West Pit coal deposits that are mineable by surface mining
methods;
-- The updated Coal Reserve estimate was derived from the
updated LOM plan using updated costs, macro-economic fundamentals
and coal price assumptions;
-- The updated LOM plan extended the Makhado LOM from 22 years
to 28 years (27% increase), despite the 25% higher annual ROM coal
production rate and improved production metrics, including:
o 25% increase in the targeted mining rate from 3.0 to 4.0Mtpa of ROM coal;
o 100% increase in CHPP capacity, from 2.0 to 4.0 Mtpa;
o 60% increase of total saleable coal products from 26 to 41
million tonnes over the mine life;
o Time to first production increasing from 12 to 18 months owing
to the construction of the new, larger CHPP whilst keeping the
payback period materially unchanged at 3.5 years from the start of
construction; and
o 11% increase in the estimated project peak funding
requirements to US$100 million (ZAR1.8 billion).
The Makhado Project metrics over the LOM are detailed in the
table below.
Unit of Measure LOM Plan
Key Production Metrics
----------------- ---------
Mining Production Rate - (Average) Mtpa 3.9
----------------- ---------
Total ROM Mined (over the mine life) Mt 106
----------------- ---------
Total Waste Mined (over the mine life) BCM (million) 260
----------------- ---------
Stripping Ratio (Waste: ROM) BCM:tonnes 2.5
----------------- ---------
Steelmaking HCC yield % 21.2
----------------- ---------
Thermal coal yield % 17.6
----------------- ---------
Total Coal Sales - all products Mt 41.2
----------------- ---------
Coal Sales 5,500 kcal TC - Export Mt 18.7
----------------- ---------
Coal Sales - Steelmaking HCC (Domestic and
Export) Mt 22.5
----------------- ---------
Steelmaking HCC - Domestic Mt 11.2
----------------- ---------
Steelmaking HCC - Export Mt 11.3
----------------- ---------
Key Financial Evaluation Outcomes
----------------- ---------
Peak Funding Requirements ZAR 'Bn 1.8
----------------- ---------
Free cashflow (post tax) ZAR 'Bn 17.6
----------------- ---------
Post-tax IRR % 37
----------------- ---------
Post-tax NPV (6%) ZAR 'Bn 6.8
----------------- ---------
Post-tax NPV (10%) ZAR 'Bn 4
----------------- ---------
Average payback period Years 3.5
----------------- ---------
Engineering and operational tenders
-- Erudite are in the process of completing the detailed designs
for the Makhado mine infrastructure and CHPP and commenced
obtaining detailed execution quotes for the construction of the
CHPP;
-- This process is expected to be finished in H2 CY2023 and will
also cater for the enlarged mining and processing footprint;
-- Makhado will be contractor-operated. During the Period the
Company initiated the managed tender processes to select a mining
contractor, CHPP operating contractor and the analytical laboratory
operator. These processes are expected to be completed in H2
CY2023; and
-- First coal production is expected 18 months from commencement
of construction, which is expected during H1 CY2024.
Early works
-- MC Mining Board approved the commencement of early works of
ZAR71.3 million ($3.9 million), ZAR45.0 million ($2.4 million) for
placement of orders for long lead items and a further ZAR55 million
($3.0 million) for electricity supply infrastructure;
-- Various work streams commenced during the period include, amongst others:
o detailed design, procurement and construction of the power
supply overhead transmission line, with construction team mobilised
onsite - a critical path activity;
o refurbishment of onsite accommodation to house project construction crews;
o placement of orders for key long-lead time items, including
the payment of a deposit of ZAR19.0 million ($1.0 million);
o mobilisation of contractors for the construction of the main
access road, main bridge and civil works for bulk water
reticulation; and
o progress with erection of fencing to secure the project site.
Vele Aluwani Colliery
-- Due to the global economic downturn and lower coal prices,
Vele was placed on care and maintenance from August 2013;
-- The Vele Coal Resource comprises both steelmaking semi-soft
coking coal (SSCC) and export quality thermal coal;
-- Vele's CHPP does not have the requisite fines circuits that
would allow for the simultaneous production of SSCC and thermal
coal;
-- Construction of a CHPP at Makhado and improved market
conditions created optionality for the potential recommencement of
operations at Vele as previous Makhado development strategies
incorporated the processing of Makhado crushed and screened ROM
coal at Vele;
-- To take advantage of this opportunity, a Contract Mining
Agreement was concluded with Hlalethembeni Outsource Services
Proprietary Limited (HOS) and the recommissioning of Vele in
December 2022;
-- With limited financial and human capital requirements, the
recommissioning of Vele adds a further cash generating unit to MC
Mining's portfolio with limited financial or human capital
contributions and by the end of June 2023, had created 333
permanent jobs.
-- HOS is responsible for all mining and processing costs and MC
Mining remains responsible for the colliery's regulatory
compliance, rehabilitation guarantees, relationships with
authorities and communities as well as the supply of electricity
and water;
-- Construction of the overhead electricity line was completed
in April 2023 and the Vele CHPP was connected to the national power
grid in May 2023;
-- HOS completed the de-watering of the Vele Colliery open-cast
pit and produced 96,673t (FY2022: nil t) of thermal coal during H2
FY2023; and
-- Ramp-up to full production is expected to occur in H2 CY2023
with HOS targeting monthly production of 60,000t of saleable
thermal coal from Vele.
Greater Soutpansberg Projects
-- Exploration and development of the three Soutpansberg
coalfield projects namely the Chapudi, Mopane and Generaal project
areas, is the catalyst for the long-term growth of the Company;
-- The South African Department of Mineral Resources &
Energy has granted mining rights for the three project areas
comprising the GSP, which collectively contain over 7.0 billion
gross tonnes in situ of inferred steelmaking HCC, SSCC and thermal
coal resources;
-- Exploration and development of the GSP positions the Company
to be a potential long-term domestic and export steelmaking coal
supplier; and
-- MC Mining anticipates commencing with the various studies
required for the outstanding water and environmental regulatory
approvals following the construction of the Makhado Project.
Corporate Activities
-- Completion of a fully underwritten 1.012 for 1 renounceable
Rights Issue raising gross proceeds of A$40 million (equivalent to
approximately $26.6 million) from the issue of 200,026,719 new MC
Mining ordinary shares. The proceeds of the Rights Issue are being
used to fund the continued development of Makhado and for general
working capital;
-- Rights Issue facilitated the repayment of the ZAR60 million
Standby Facility ($3.2 million) owing to Dendocept (Pty) Ltd
(Dendocept) and ZAR20 million ($1 million) loan owing to the Senosi
Group Investment Holdings (Proprietary) Limited (SGIH);
-- Appointment of Dendocept Consortium shareholder
representative Non-Executive Director, Ms Yi (Christine) He. The
Dendocept Consortium collectively owns 23.9% of the Company's
ordinary shares;
-- Appointment of Mr Julian Hoskin as an Independent
Non-Executive Director of MC Mining; and
-- Resignation of shareholder representative Non-Executive Director, Mr Junchao Liu.
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 annual 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 annual
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 or its
subsidiary that owns the Makhado project;
-- Convertible MC Mining equity funding;
-- Further debt funding including composite debt/equity instruments;
-- Production based funding and inventory prepayment funding facilities;
-- Cash generated from the Company's collieries; and
-- Further contractor BOOT funding or construction-based (EPC) 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 and completed an A$40 million fully underwritten
rights offer during the reporting period. The Company has
historically successfully negotiated extensions to the repayment of
outstanding debt facilities. 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 its obligations as and when they fall
due.
Subsequent events
-- The Industrial Development Corporation of South Africa
Limited (IDC) agreed to extend the repayment date for the R160
million ($8.5 million) loan plus accrued interest to 30 September
2023. A further application for an extension to the repayment
period is under consideration by the IDC. If the outstanding loan
is not repaid, the IDC can convert the outstanding balance to
equity in Baobab Mining & Exploration (Pty) Ltd (Baobab), the
owner of the Makhado Project or, MC Mining. The conversion into MC
Mining equity will be based on a 10% discount to the 30-day
weighted average price and a conversion would result in the IDC
being a significant shareholder in either MC Mining or Baobab;
-- The additional, conditional July 2019 R245 million ($13
million) facility for the development Makhado, remained subject to
the IDC confirming its due diligence and credit approval and in
July 2023 the Company was informed that this facility had not been
extended; and
-- The MC Mining Directors approved the grant of 3,119,632
performance rights to staff in terms of the Company's shareholder
approved Performance Rights plan. These performance rights are in
lieu of a deferred cash bonus and will vest in July 2026 if the
recipient remains an employee of MC Mining.
Godfrey Gomwe, Chief Executive Officer and Managing Director of
MC Mining, commented:
"MC Mining made pleasing progress during FY2023 including the
completion of the A$40 million Rights Issue, the recommencement of
operations at the Vele Colliery and the detailed planning for the
construction of the Makhado Project. The conclusion of the
Marketing Agreement ensured the Uitkomst Colliery could take
advantage of favourable international thermal coal prices during H1
FY2023.
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. The additional capital transformed the
Company's balance sheet and facilitated the settlement of over $3.9
million of debt. The Rights Issue is a further key milestone
towards raising the financing required for our flagship Makhado
Project as it unlocks other sources of funding, enabling the
positioning of MC Mining as the only large-scale producer of
steelmaking HCC in South Africa.
The Makhado CHPP optimisation study was completed during the
Period, confirming the benefits of increasing the CHPP annual ROM
feed capacity from 3.2Mtpa to 4.0Mtpa. The increase in volumes were
used in the detailed CHPP and infrastructure design work while
revised mine plans were completed during FY2023.
The Company's directors approved expenditure of ZAR71.3 million
($3.9 million) on early works at Makhado and this commenced during
the Period while the funding initiatives for the balance of the
capital required continued and are expected to be finalised in H2
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. Operations at the colliery were
outsourced during the Period and coal sales commenced in January
2023 with ramp-up to full production expected in early Q4 CY2023.
The recommissioning of Vele created 333 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."
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
BSM 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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