Name of the Project
Makhado hard coking coal project.

Location
Limpopo, South Africa.

Project Owner/s
MC Mining has 68% interest in the Makhado project through its subsidiary Baobab Mining & Exploration, with the Industrial Development Corporation of South Africa owning 6.7%, seven local communities owning 20% and the remaining 6% held by a black economic-empowerment industrialist.

Project Description
Makhado has measured and indicated coal resources of 296-million mineable tonnes in situ and proven and probable reserves of 69.3-million.

The bankable feasibility study (BFS) has proposed the production of 25.6-million tonnes of saleable coal over a 22-year mine life comprising 13.7-million tonnes of hard coking coal and 11.9-million tonnes of 5 500 kcal of thermal coal. The BFS is a key milestone in securing funding for the project.

The BFS envisages the initial mining of the West pit , which will be followed by the mining of the East and Central pits, while the existing coal processing plant (CPP) at the Vele Colliery will be modified, enabling it to simultaneously produce and export-quality thermal coal.

The West, East and Central pits will be mined at a combined average rate of 3.2-million tonnes a year, with the run-of-mine material being crushed and screened at Makhado before it is dispatched to the Vele CPP.

Over the life-of-mine, about two-million tonnes a year of crushed and screened coal will be transported 134 km to the Vele CPP, where the coal will be processed to produce two marketable products – midvolatile hard coking coal for sale domestically and internationally, and 5 000 kcal thermal coal for sale on the international market.

Potential Job Creation
The project is expected to create about 650 permanent employment positions.

Net Present Value/Internal Rate of Return
The project has an after-tax net present value of R4-billion and internal rate of return of 38.2%.

Capital Expenditure
R625-million, and a peak funding requirement of R727-million.

Planned Start/End Date
The project is expected to take 12 months to complete.

Latest Developments
Following shareholders’ rejection of a second tranche of funding by resources investor Senosi Group Investment Holdings (SGIH) on July 15, MC Mining has agreed to repay SGIH the $20-million it had advanced as part of a broader $40-million second tranche loan.

MC Mining entered into a staged R86.04-million (about $5.6-million) convertible advance and subscription agreement with SGIH on February 1, 2022.

As part of the funding deal, MC Mining agreed to issue SGIH with up to 71.70-million new ordinary shares of no par value, following which SGIH initially loaned R46.04-million (about $3-million) to MC Mining, which made up SGIH’s first tranche of funding to the miner.

Subsequently, this was converted by MC Mining into 38.36-million new ordinary shares – issued to SGIH on April 6 – resulting in the investor’s acquiring 19.9% of MC Mining’s issued share capital.

As part of the funding agreement, SGIH also conditionally agreed to loan MC Mining a further R40-million as part of a second-tranche package that would, subject to the receipt of all required approvals, convert into an additional 33.33-million new ordinary shares at R1.20 apiece.

The first two installments of the second-tranche funding, totalling R20-million ($1.3-million), were advanced to MC Mining in April and May.

However, the second-tranche package was subject to MC Mining shareholder approval, which was not obtained during a meeting held on July 15.

As such, the final two installments of the second-tranche funding will not be advanced and the amount already advanced under the second-tranche funding deal now becomes repayable by MC Mining within 30 days.

MC Mining will repay this R20-million loan from SGIH using part of the R60-million standby loan facility with Dendocept, as well as in-house cash resources.

The company notes that, by using funds from the Dendocept loan and considering the prevailing forward API4 coal prices and management of group facilities, the company’s cash runway is expected to extend to beyond November.

MC Mining is pursuing several alternative options to secure the necessary funding for the construction of its Makhado project.

Key Contracts, Suppliers and Consultants
Minxcon (BFS).

Contact Details for Project Information
MC Mining, tel +27 10 003 8000 or email adminzamcmining.com.