Name of the Project
Makhado hard coking coal project.

Location
Limpopo, South Africa.

Project Owner/s
MC Mining has 68% interest in the Makhado project through its subsidiary Baobab Mining & Exploration, with the Industrial Development Corporation of South Africa owning 6.7%, seven local communities owning 20% and the remaining 6% held by a black economic-empowerment industrialist.

Project Description
Makhado has measured and indicated coal resources of 296-million mineable tonnes in situ and proven and probable reserves of 69.3-million.

The base case of the bankable feasibility study (BFS) in April 2022 proposes the production of 25.6-million tonnes of saleable coal over a 22-year mine life, comprising 13.7-million tonnes of hard coking coal and 11.9-million tonnes of 5 500 kcal thermal coal.

The BFS envisages the initial mining of the West pit, which will be followed by the mining of the East and Central pits, while the existing coal processing plant (CPP) at the Vele Colliery will be modified, enabling it to simultaneously produce and export quality thermal coal.

The April BFS proposes the mining of the West, East and Central pits at a combined average rate of 3.2-million tonnes a year, with the run-of-mine (RoM) material being crushed and screened at Makhado before it is dispatched to the Vele CPP.

Over the life-of-mine, about two-million tonnes a year of crushed and screened coal will be transported 134 km to the Vele CPP, where the coal will be processed to produce two marketable products – midvolatile hard coking coal for sale domestically and internationally, and 5 000 kcal thermal coal for sale on the international market.

MC Mining released an update to the BFS in August 2022 to optimise capital expenditure and reduce operational costs at Makhado, including possibly moving the Vele CPP and modifying this at Makhado (Scenario 1); or constructing a bespoke CPP at Makhado (Scenario 2).

Both development scenarios would result in the mining of the East pit, followed by the Central and West pits and the hauling of saleable coal only 72 km from Makhado to the Musina siding. The scenarios would require additional capital expenditure, but would significantly reduce the transport costs when compared to the base case scenario. While the BFS base case is feasible and economically robust, the additional two scenarios have resulted in improved project economics.

Scenario 1 provides the most attractive financial metrics, but removes the Vele asset from MC Mining’s portfolio and limits future exploitation of the Vele colliery. Scenario 2 provides similar results, but requires additional peak funding while keeping the Vele CPP intact for future exploitation.

Potential Job Creation
The project is expected to create about 650 permanent employment positions.

Net Present Value/Internal Rate of Return
In the BFS base case, the project has an after-tax net present value (NPV), at a 6.1% discount rate, of R4-billion and an internal rate of return (IRR) of 39.2%, with a payback of 3.8 years.

Scenario 1 has an after-tax NPV, at a 6.1% discount rate, of R5.9-billion and an IRR of 45.2%, with a payback of 3.2 years.

Scenario 2 results in an after-tax NPV, at a 6.1% discount rate, of R5.8-billion and an IRR of 41%.

Capital Expenditure
In the base case, the project will require R625-million, and a peak funding requirement of R727-million.

Moving the Vele CPP to Makhado will require capital of R1.1-billion, and peak funding of R1.2-billion. Building a new CPP at Makhado will require capital of R1.2-billion and peak funding of R1.3-billion, with a payback of 3.5 years.

The increased peak funding requirement for both scenarios resulted in independent mining industry consulting firm Minxcon assessing the option of reducing the Makhado peak funding requirements through a build, own, operate and transfer (BOOT) arrangement.

Scenario 2, using a BOOT financing arrangement, is considered to be the preferred option, as it provides similar results while keeping the Vele CPP intact for future exploitation of that coal resource.

Planned Start/End Date
Construction, which is funding dependent, is expected to start in early 2023.

Latest Developments
MC Mining has reported that all regulatory approvals for the project are in place. Surface rights over the mining and processing areas have also been secured.

The company has appointed Erudite to complete the detailed planning for a full process design for the Makhado CPP. Erudite expects to complete the planning during the first half of 2023.

The plan is also required by potential funders to complete their assessments.

MC Mining has also commissioned independent consultants to review the Makhado mine plan, which forms part of the detailed execution plan. MC Mining’s directors have approved the start of early works at the project, with R71.3-million being allocated to this. It expects to have this completed at the end of the first half of the 2023.

Early works at the project started in February and include, among others, a bridge and internal roads, initial bulk earthworks, site security and communication infrastructure.

The Makhado CPP optimisation study was completed by independent experts in the six months to December 31, 2022; the results are being used in Erudite’s detailed CPP and infrastructure design work. The planned Makhado CPP yearly RoM feed capacity is expected to result in an increase in RoM capacity – from three-million to four-million tonnes a year, in addition to further refinements of the plant design.

The funding initiatives for Makhado are continuing and are expected to be finalised in the first half of 2023, following completion of the detailed designs for the Makhado CPP and updated mine plan.

Key Contracts, Suppliers and Consultants
Minxcon (BFS and potential alternative development scenarios for Makhado); and Erudite (detailed planning for a full process design for Makhado).

Contact Details for Project Information
MC Mining, tel +27 10 003 8000 or email admin@mcmining.com.