ASX-, Aim- and JSE-listed MC Mining’s directors have approved the phased development of the company’s flagship Makhado coking coal project, which will result in the start of mining operations on the west pit.
Construction of Phase 1 is set to start in the third quarter of this year.
The west pit is said to generate about three-million tonnes a year of run-of-mine (RoM) coal that will be crushed, screened and scalped at Makhado.
About two-million tonnes a year of RoM coal will be trucked to MC’s wholly-owned Vele Colliery for final processing.
Plant modifications will also start at Vele, which will result in the facility being able to produce the expected output of 540 000 t/y of hard coking coal (HCC) and 570 000 t/y of thermal coal.
The saleable coal will be trucked to the Musina siding for sale on domestic and export markets, which will use the previously tested logistics infrastructure, the miner said on Thursday.
Phase 1 will be followed by the development of Phase 2, which is the majority of the previously-published Makhado Lite project and includes the construction of the processing plant and infrastructure as well as mining of the east pit.
Progress on the development of the Makhado project was previously delayed by a lack of access to the key Lukin and Salaita properties, which was required to complete geotechnical drilling and confirm, among others, the positioning of the processing plant infrastructure.
During the period, the owners of these properties agreed to sell the properties for R70-million, or about $5-million, and the legal title to the properties was transferred to MC subsidiary, Baobab, in January.
The first tranche of R45.5-million, or about $3.2-million, has been paid and the balance is payable within a maximum period of three years.
MC completed the large diameter drilling programme on the remaining Makhado project area during the six months ended December 31, 2018, the information from which will be used to confirm the coal handling and processing plant design criteria.
A three-year offtake agreement with Chinese State-owned enterprise, HDCTC, will result in a yearly supply of up to 450 000 t of HCC from the Lukin and Salaita properties.
During the period, Baobab applied to both the Department of Mineral Resources (DMR) and the Limpopo Department of Economic Development, Environment and Tourism (LEDET) for an amendment to Makhado’s environment authorisation, to allow for the transportation of coal by road rather than rail.
The DMR and LEDET both approved the amendment, but this decision was appealed by a narrow interest group that appealed against the original Makhado environmental authorisation and lost.
This appeal has resulted in the suspensation of the amendment. Baobab is addressing the matter, MC confirmed on Thursday.
Phase 1 of the Makhado project will result in the completion of plant modifications at Vele to facilitate the simultaneous production of HCC and thermal coal. The modifications will include, among others, a new de-stoning plant, new fines circuit and froth flotation plant, as well as the conversion of the current plant feed stockpile into the new and HCC stockpiles.
The implementation of Phase 1 lowers execution risk by reducing the initial capital expenditure requirements, as well as shortening the construction period. Development of the Phase 1 pit, plant and infrastructure will take nine months, compared with Makhado Lite’s one year timeframe.
The combined Phase 1 and Phase 2 projects have a minimum life-of-mine of 46 years.
CEO David Brown said the approval of the phased development reflects further advancement of Makhado and its ability to generate significant near-term value, by positioning MC to be able to “take advantage of future global coking prices [owing] to limited supply”.
However, he lamented that policy uncertainty and other risks remain a challenge. Brown is hopeful that the Mining Charter 3 will lead to a mining industry that is “feasible and suitable” for all parties.
“MC remains committed to the sustainable development of the Makhado project, recognising its potential to drive significant socioeconomic transformation and seeking cooperation between mining, agriculture and heritage land uses,” he affirmed.