Coal miner MC Mining says the financial year ended June 30 was challenging for its Uitkomst Colliery, which was affected by the civil unrest in KwaZulu-Natal during July 2021, as well as the colliery’s largest customer beginning with major maintenance and not ordering any stock from March.
“This led to Uitkomst starting with production tests of a low-ash coal for international steel mills and the production of API4 coal to take advantage of favourable international thermal coal prices.
CEO and MD Godfrey Gomwe says the conclusion of the standby facility in June 2022 ensured that MC Mining had sufficient liquidity to fund the build-up of inventory, and this allowed for signature of an agreement in July 2022 and the first export of Uitkomst thermal coal during August 2022.
He says the group also advanced the Makhado project and that SGIH’s investment in MC Mining facilitated the payment of the outstanding balance for the two remaining properties required for the project’s development.
MC Mining also completed the Makhado Project bankable feasibility study (BFS) on the low-capital base case development scenario.
The study was subsequently enhanced and alternative development strategies assessed, following which the company has committed to the construction of a processing plant at Makhado.
“This development strategy has a higher peak funding requirement compared with the base case but generates improved returns for shareholders due to the lower operating, particularly transport costs,” Gomwe outlines.
He notes that Makhado is shovel ready and the company made considerable progress to secure the cornerstone funding for the project during the period.
This resulted in the launch of the fully underwritten rights issue in September and MC Mining aims to conclude arrangements for the balance of the funding in the fourth quarter, allowing the construction of Makhado to begin early in the 2023 calendar year.
MC Mining recorded a loss after tax for the period of $20.8-million or $0.13c apiece.
Contributing to this were noncash charges of $18.3-million.
Revenue was $23.5-million and cost of sales was $21-million, resulting in a gross profit of $2.6-million.
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) were assessed during the period, resulting in an impairment of $14.9-million.
The Vele Colliery was impaired by $6.5-million in the prior year.
Administrative expenses increased from $5.3-million in the previous year to $6.8-million in the year under review.
MC Mining entered into a convertible advance and subscription agreement with South African based mining group Senosi Group Investment Holdings, and received R46-million subsequently to equity by issuing 38.4-million ordinary shares to SGIH.
MC Mining had an unrestricted cash balances at year-end of $3-million.
There were no fatalities for the period but the company suffered six lost-time injuries.
Uitkomst produced 470 597 t of run-of-mine (RoM) coal during the year, 4% lower than the previous year.
There was 22 169 t of coal at the Durban port at period-end for export under the terms of the Coal Sales & Marketing Agreement with Overlooked, announced by the company in July.
A further 15 534 t of high-quality coal was at Uitkomst at the end of June, available for export under the marketing agreement.
Uitkomst sold 225 096 t of coal in the period, generating sales revenue of $23.5-million.
The company completed payment of the final instalment of R35-million for the key Lukin and Salaita properties, ensuring it owns all surface rights required for the Makhado project mining area.
Makhado composite debt/equity funding initiatives continued, including detailed due diligence processes by potential funders and included the completion of the Makhado BFS ‘base case’ by independent mining consultancy firm, Minxcon.
The base case scenario confirms the project’s robust economic fundamentals, a key input in the due diligence process for potential funders, MC Mining points out.
The Industrial Development Corporation (IDC) of South Africa agreed to extend the repayment date for the R160-million loan plus accrued interest, to November 30.
The terminal drawdown date of the additional R245-million IDC term loan for the development of Makhado, was also extended to November 30, subject to the IDC reaffirming its financial due diligence and credit approval.
The API4 coal price improved during the period, resulting in Uitkomst’s revenue per tonne increasing despite the proportionally lower year-on-year sales volumes of higher-quality peas and duff.
The increase in Uitkomst’s production costs per saleable tonne is owing to increased explosives, fuel and employee costs, as well as the 23% reduction in year-on-year sales volumes.