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%).

MC Mining has concluded a conditional loan restructuring agreement with the Industrial Development Corporation (IDC) of South Africa, which has increased the IDC’s project-level interest in the Makhado coal project to 6.7%.

The company first secured a R240-million loan facility from the IDC in March 2017 for its subsidiary, Baobab Mining and Exploration, to develop the Makhado project.

The loan facility resulted in the IDC’s becoming a 5% shareholder in Baobab and also receiving warrants equating to 2.5% of MC Mining’s issued share capital.

MC Mining previously used R120-million of the initial loan facility to develop the project, including taking it to fully permitted status and acquiring surface rights for the Makhado mining area.

The remaining R120-million, or second tranche, of the loan remained undrawn.

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 for processing 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 1 is a critical step in the development of Phase 2 of the Makhado project.

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 and west pits, the Makhado processing plant and associated infrastructure.

The entire Makhado project has a minimum life-of-mine of 46 years.

Potential Job Creation
Phase 1 mining and processing will be outsourced to experienced third parties that 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 R700-million.

Planned Start/End Date
Construction of Phase 1 is expected to start in 2020 and is expected to take nine months, with first coal-sales expected in the first half of 2021.

Phase 2 will be implemented in about 2022.

Latest Developments
MC Mining has submitted a formal application to the IDC to extend the repayment period for its loan facilities with the institution.

The IDC has since acknowledged the application, but no agreement has been reached yet between the parties.

The initial drawdown and second drawdown plus accrued interest were due for repayment by November 30.

Negotiations between the parties are ongoing to align the repayment of the first drawdown with the positive cash flows generated by the project, while repaying the second drawdown from the proceeds raised to build Phase 1 of the project.

Key Contracts, Suppliers and Consultants
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.

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