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MC Mining achieves interim revenue growth despite challenging coal market

MC Mining MD and CEO Godfrey Gomwe

MC Mining MD and CEO Godfrey Gomwe

15th March 2024

By: Tasneem Bulbulia

Senior Contributing Editor Online

     

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Coal miner MC Mining’s strong revenue growth through the six months ended December 31, 2023 were “very pleasing” considering the challenging coal market, MD and CEO Godfrey Gomwe avers.

During the period, the company experienced revenue growth from the prior corresponding period, primarily owing to strong sales volumes at the Uitkomst colliery and the restart of operations at Vale.

Overall, MC Mining achieved an 80% increase in revenue to $25.2-million from $14-million in the six months ended December 31, 2022, despite the 58% decline in average API4 thermal coal prices to $112/t from $265/t in the prior comparable period.

Uitkomst’s sales volumes were 94% higher at 202 715 t of coal compared with 104 855 t, generating revenue of $16.3-million.

The 58% decline in average coal prices resulted in the colliery’s revenue only improving by 16%.

Operations at the Vele Aluwani colliery restarted in December 2022 but the depressed API4 prices during the period limited the operation’s revenue generation to $9-million.

Despite the increase in revenue, MC Mining saw an increase in overall cost of sales primarily as a result of higher volumes of coal sold at Uitkomst and the restart of operations at Vele.

Group cost of sales for the period was $24.1-million, compared with $10.1-million in the prior comparable period.

The increase in sales volumes resulted in Uitkomst’s cost of sales increasing by 45% to $14.8-million from $10.1-million.

During the period, MC Mining achieved a gross profit of $1.1-million.

The loss after tax for the period was $5.8-million.

On November 2, 2023, MC Mining announced the receipt of a notice of intention to make a takeover from a consortium of shareholders representing in aggregate 64.3% of the company’s issued shares.

Post-period, on February 2, it received a bidder’s statement for an off-market takeover bid by Goldway Capital, on behalf of the consortium, at $0.16 a share.

The established Independent Board Committee (IBC) has recommended that shareholders take no action at the current time and expects to issue a supplementary target's statement and accompanying independent expert's report on or before March 18. 

“Our ability to continue to move product is important and we are seeing some signs of increased demand from thermal coal buyers. Although having some impact on our overall result, we continued to make worthwhile, long-term investment decisions in our flagship Makhado project, which we believe will benefit shareholders in the future.

“The company achieved these results whilst maintaining a focus on safety with no incidents recorded during the period,” Gomwe points out.

He says production at the underground Uitkomst colliery is challenging owing to the extended travel time to the mining areas but the optimisation plan implemented in June 2023 has resulted in increased mining time and run-of-mine coal production and sales volumes increased considerably. 

“These results were achieved despite the ongoing electricity loadshedding implemented by Eskom, the state power utility. The international and domestic thermal coal markets remain under pricing pressure, resulting in considerably lower sales prices achieved during the period,” Gomwe avers.

The company continued to progress the Makhado project, with the start of early works to secure the site and construction of a bridge across the Mutamba river along with water infrastructure for the processing plant.

It also launched a managed tender process to select outsourced mining, plant and laboratory operators at Makhado.

It has also started assessing various scenarios to facilitate an accelerated start of coal production at Makhado, subject to further funding, with no impact to the existing project plan, Gomwe outlines.

“The significant progress on the Makhado project over the last two years has resulted in a development plan that can be implemented within a short period once the necessary funding is secured.

“We progressed the funding initiatives during the period and were at an advanced stage of securing the cornerstone funds for the development of the project, prior to being notified of the off-market takeover corporate action. This funding would have been the catalyst for the composite equity and debt funding required for the construction of Makhado,” Gomwe informs.

Operation at the Vele Aluwani colliery continued during the period and in December 2023 the outsource agent notified the company that owing to production challenges at the colliery, combined with elevated logistics costs and the depressed API4 coal price, it intended downscaling operations at the colliery while it progressed a production optimisation strategy.

“We progressed the regulatory status of the group’s long-term Greater Soutpansberg exploration projects with the legal execution of mining rights for the Mopane and Generaal project areas.

“We anticipate executing the Chapudi mining right in calendar year 2024 half, with the required studies for the project commencing later in calendar year 2024,” Gomwe says. 

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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