MC Mining pushes ahead with Makhado


MC Mining pushes ahead with Makhado

Published Date: 2019-03-15 | Source: Stephen Gunnion | Author: Stephen Gunnion | Comments

MC Mining pushes ahead with Makhado

The coal producer says phase one of its flagship project has been approved in time to take advantage of positive coking coal prices.

MC Mining says Phase 1 of its flagship Makhado hard coking and thermal coal project in Limpopo has been approved in time for it to take advantage of positive future global coking coal prices. The coal producer is gearing up now to deliver saleable coal to market so that it can generate positive returns for shareholders in the near-term.

The project was delayed for about a year mainly due to lack of access to two key properties where the east pit, processing and other infrastructure for the mine will be located. However, in January MC received the surface rights for Makhado after acquiring the Lukin and Salaita properties, with an initial payment of R35 million.

MC has a 69% stake in Baobab Mining & Exploration, owner of Makhado, with the balanced held by the Industrial Development Corporation (IDC).

Meanwhile, MC's also had to clear hurdles at its operational Ultkomst colliery. MC bought Uitkomst from Pan African Resources Coal in June 2017 to generate cash during the pre-production phase of Mahkado.

Releasing results for the six months to end-December, MC said run-of-mine coal production at Uitkomst declined by 10.5% after it switched the colliery to an owner-operator model after acquiring the operations of underground mining contractor Khethekile Mining. Insourcing the underground mining operators resulted in reduced asset availability and workforce integration issues. Uitkomst sold 47% less coal due to the lack of availability of third-party coal. However, it benefited from favourable coal prices. The mine generated R46.3 million of earnings before interest, tax, depreciation, and amortisation, up 2.4%.

The group reported a $3.6 million loss for the six months, down from a $97.3 million loss. The initial payment for Lukin and Salaita was the biggest contributor to a decline in its cash balance from $10.9 million to $5.5 million.

MC Mining has already reached a coal purchase agreement with Huadong Coal Trading Centre for the uptake of 450,000 tonnes a year of Makhado's hard coking coal. Makhado is eventually expected to produce up to 800 000 tonnes of hard coking coal annually as well as between 900,000 and one million tonnes of export quality thermal coal.

MC said it was considering various debt and equity funding options regarding the R120 million plus interest owed to the IDC.

Its shares closed unchanged at R9.50 yesterday.

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