PERTH (miningweekly.com) – Coal miner MC Mining will spend some $4.9-million to acquire the mining equipment from independent mining contractor Khethekile Mining, allowing the company to transition to an owner-operator model at its Uitkomst colliery, in South Africa.

The equipment includes a conveyor system and coal mining and transportation equipment, with MC Mining also agreeing to employ some 340 Khethekile employees currently working at the colliery, as well as acquiring the contractor’s Newcastle office.

The consideration will consist of a $1.2-million cash payment, of which $500 000 will be payable on the closing of the transaction, and $700 000 payable in 27 monthly installments.

Furthermore, MC Mining will also assume loans, trade payables and accrued expensed valued at some $3.7-million, including a $1.5-million loan from Pan African Resources Management Services.

MC Mining told shareholders that with the insourcing of underground mining operations at Uitkomst was an opportunity to progress the overall performance at the operation, and facilitate a number of initiatives, including enhanced control of production costs as well as improved asset availability.

“MC Mining acquired Uitkomst during 2017 and has implemented substantial changes at the colliery resulting in improvements and cost savings. However, more recently, mining production has been adversely affected by contractor equipment availability and challenges and the company investigated potential solutions,” said MC Mining CEO David Brown.

“This resulted in the conclusion of negotiations with Khethekile’s owners to acquire the mining assets and take over the operations. The increase in run-of-mine production evidenced in the June quarter is attributable to augmented Uitkomst management oversight at the colliery during this process,” he added.

With the South African Competition Commission’s approval, the transaction closed on August 1, with MC Mining taking full operational control of underground mining activities on this date.

The Uitkomst colliery has a remaining mine life of some 16 years, which includes a mine extension.

The direct control of the mining operation is expected to result in a steady increase in output, and the colliery is expected to exceed its 2018 production levels in the 2019 financial year.