JOHANNESBURG (miningweekly.com) – Coal exploration, development and mining company MC Mining, which has painstakingly removed many obstacles in its path in the last five years, is targeting the acquisition of a second suitable operational coal mine in the mould of the cash-generative Uitkomst, taking strong steps to secure access to key properties to advance the Makhado hard coking coal project, and marking time for a government-led special economic zone (SEZ) to be constructed that is expected to provide viability to the Vele soft coking coal and thermal coal mine on care and maintenance.
The Aim-, ASX- and JSE-listed company, which reported a normalised after-tax loss of $9.8-million in the 12 months to June 30, benefitted in the period from a 26%-higher average price of $63.52/t for the 475 079 t of Uitkomst coal sold, as well as from the $12.9-million on the disposal of the Mooiplaats thermal coal colliery. (Also watch attached Creamer Media video).
“It’s been a long five years to remove the many obstacles and the vision now for the future is to build on the Uitkomst acquisition and we’re looking at the north adit expansion in the next 18 months or so, which again will add to the production profile,” MC Mining CEO David Brown told Mining Weekly Online in an interview.
Uitkomst thermal and metallurgical colliery sold $32.7-million worth of product at prices that rose in the period and sale of the noncore Mooiplaats Colliery will yield an estimated yearly operational cost saving of $1.4-million, with the aggregate sale proceeds of $12.9-million earmarked for Makhado.
“On the other side of the coin is making further progress with the Makhado project, our flagship hard coking coal project, which needs to get done, and then we’re also potentially looking at a second acquisition,” he said.
While Uitkomst has been a successful acquisition, it does not cover the company's full overhead, which is scoped up for a slightly bigger operation.
More cash-generating assets would likely change the market view of MC Mining as being a fairly risky alternative.
The last year has already seen a remarkable change in the way banks view the company, highlighted by the $1.5-million general banking facility secured from Rand Merchant Bank for Uitkomst and the $1-million revolving asset finance facility from Absa Bank for equipment at Uitkomst. Half of the $18.4-million three-year Industrial Development Corporation of South Africa Limited loan was available at year-end.
“We see that the next stage of the fruition of the strategy really will get us to the point where there will be another sea change on how banking institutions view us,” Brown commented.
Meanwhile, the Makhado project is being held up by the company being refused access to two properties where confirmatory geotechnical drilling needs to be completed.
Access under the mining right is expected to take from June 2019 through to early 2020 to resolve.
“Time is a factor so we’re keeping the commercial door open with the land owner. We’ve had a number of discussions and we’ll continue following that line. For us, it makes the most sense, both in terms of timing and in terms of extra costs that both parties are going to have to bear if we go the full legal process,” Brown explained.
Attempts are also being made to finalise marketing offtake agreements for both Makhado’s hard coking coal and its thermal coal byproduct.
The project will more than likely produce 1.8-million tonnes of saleable product, of which coking coal will be about 800 000 t to 900 000 t.
“We’re talking to one of the domestic steel champions to look to supply them. We think we can play a positive role in substituting imported coking coal,” he said.
The offtake agreements are expected to be finalised in the next three to four months, followed by the sourcing of $100-million in funding for the development of Makhado, which is being buoyed by the current favourable pricing of the commodity.
The date of Vele’s return to production is expected to coincide with the planned coal-intensive SEZ being operational.
In addition to a semi-soft coking coal, Vele’s thermal coal is also expected to be a good fit for the SEZ.
The exploration and development of the Greater Soutpansberg coking and thermal coal opportunity is on a longer time horizon, with mining right applications in for the Mopane, Generaal and Chapudi projects.