Name of the Project
Makhado hard coking and thermal coal project.

Location
Limpopo, South Africa.

Project Owner/s
Baobab Mining & Exploration, the owner of the mining right for the Makhado hard coking and thermal coal project (Makhado project), is majority-owned by MC Mining (69%), formerly Coal of Africa Limited.

The Industrial Development Corporation owns 5% of Baobab’s shares; 20% is held by a community trust, with seven local communities situated in the project’s vicinity being the beneficiaries. The remaining 6% is held by a black industrialist.

Project Description
Makhado is classified as an evaluation asset and has not historically been mined.

The project will be completed in two phases.

Phase 1 will start with the development of Makhado’s west pit, producing three-million tonnes a year run-of-mine (RoM) coal. The coal will be mined by an independent mining contractor using truck-and-shovel, modified terrace mining methods.

RoM coal will be partially beneficiated before being dispatched to MC Mining’s Limpopo Coal Company subsidiary’s modified Vele colliery for processing. About two-million tonnes a year of RoM coal (ex-discard) will be trucked to Vele to be processed at the colliery’s enhanced plant. Plant modifications include a new fines circuit comprising a reflux classifier in series with the existing spiral plant, a low-density secondary wash plant and a froth flotation plant to capture the ultrafine coal.

At steady state, the operation will produce 1.1-million tonnes of saleable coal – 540 000 t/y of hard coking coal and 570 000 t/y of 5 500 kcal thermal coal.

The saleable coal will be trucked to the Musina siding for railing to domestic and/or export clients.

Phase 2 involves the implementation of the Makhado Lite plan, which will produce about 1.7-million tonnes a year of saleable coal, comprising 700 000 t/y to 800 000 t/y of hard coking coal, and between 900 000 t/y and one-million tonnes a year of thermal coal. The project involves the development and mining of the east pit, the Makhado processing plant and related infrastructure.

Potential Job Creation
Phase 1 mining and processing will be outsourced to experienced third parties who have previously operated in South Africa, and is expected to create about 650 permanent employment opportunities.

Net Present Value/Internal Rate of Return
Phase 1 has an estimated internal rate of return of more than 45%, with a payback of 2.5 years.

Capital Expenditure
Phase 1 will cost about R400-million.

Planned Start /End Date
Construction at Makhado and Vele will occur simultaneously and will take nine months to complete, with construction expected to start in the third quarter of 2019.

Phase 2 will be implemented in about 2022.

Latest Developments
MC Mining has signed an offtake agreement with steel producer ArcelorMittal South Africa (AMSA), which will buy hard coking coal from Phase 1 of the Makhado coking coal project.

A sSouth Africa has a limited production of high-quality metallurgical, or coking, coal, AMSA and other coke producers currently have to import hard coking coal for the manufacture of metallurgical coke, a key ingredient in steel production.

Under the terms of the agreement, AMSA will buy at least 350 000 t/y of hard coking coal from Makhado Phase 1 and has the option to acquire a further 100 000 t/y.

The agreement spans the shorter of ten years or the Phase 1 life-of-mine.

Hard coking coal will be delivered to the Musina siding and railed to AMSA’s Vanderbijlpark and Newcastle operations.

Hard coking coal will be sold on a free-on-rail basis.

Sales prices will be calculated monthly and linked to a published international dollar-denominated HCC index.

The agreement is subject to various conditions precedent, including confirmation by December 15 that the requisite funding for the development of Phase 1 has been secured, and that, by June 30, 2020, delivery of hard coking coal will begin within six months.

The completion of the offtake agreement satisfies a key requirement for the Makhado project’s economics and allows for funding discussions to gain further traction. Construction is expected to start in the third quarter of this year and will be completed within nine months.

Phase 1 of the Makhado project will result in the development of the west pit on the Daru and Tanga farms.

Key Contracts and Suppliers
Minxcon (competent person’s report).

Proposals for full mining services have been sourced from various contract mining companies, with turnkey processing plant construction and operating quotes obtained from potential service providers.

On Budget and on Time?
Not stated.

Contact Details for Project Information
MC Mining, tel +27 10 003 8000, fax +27 11 388 8333 or email adminza@mcmining.co.za.