MC Mining implemented optimisation initiatives at the Uitkomst Colliery during the six months to December 31, which yielded very positive results, with run-of-mine (RoM) coal production increasing by 11% year-on-year, acting CEO Brenda Berlin said, releasing the company’s reviewed interim financial results on Friday.
“The initiatives also led to a more predictable production profile and, notwithstanding revenue being adversely affected by the 30% decline in API4 coal prices, Uitkomst was cash generative for the period.
“The colliery also undertook a review of its cost base to ensure that costs are aligned to its production profile and the cost per RoM tonne was 22% lower than in the first half of the year,” she said.
She indicated that MC had completed significant milestones required for the development of its flagship, fully-permitted Makhado project, facilitating the continuation of Phase 1 funding initiatives.
“The first step was a $17.4-million term loan from the Industrial Development Corporation of South Africa (IDC) and reflects their support for the project. This loan is a significant contribution towards securing the $37-million required to develop Phase 1.
“Following this, discussions with potential funders for the balance are progressing and we anticipate that this process should be completed in the first half of 2020, with construction commencing in the third quarter of 2020. The completion of Phase 1 will result in MC Mining being the pre-eminent South African producer of hard coking coal,” said Berlin.
These milestones, however, also came in a period when the company had to contend with a 30% decline in API4 coal prices, noted Berlin, which resulted in revenue decreasing to $11.4-million, and despite a reduction in the cost of sales, gross profit declined to $0.3-million.
The slowdown in the global economy adversely affected metallurgical coal markets and average premium hard coking coal prices during the period were $148/t.
API4 thermal coal prices remained under pressure with prices averaging $61/t for the first three months of the period.
The high-grade Uitkomst metallurgical and thermal coal mine recorded seven lost-time injuries (LTIs) during the period.
As a result, the company introduced a mandatory safety re-training programme which all staff have participated in.
Uitkomst’s RoM coal production increased by 11% compared with the first half of 2019 to 262 696 t, as a result of optimisation initiatives and changes in mine management.
Sales of high-grade metallurgical and thermal coal derived from Uitkomst RoM coal were 147 234 t.
Further, 14 587 t of high-ash middlings coal was sold during the period.
Steady progress was recorded in composite debt/equity funding initiatives for Makhado which the company anticipates will be completed in the first half of this year.
The Vele semi-soft coking and thermal coal colliery remained on care and maintenance. Its processing plant to be refurbished and recommissioned as part of Phase 1 of the Makhado project.
The South African Department of Mineral Resources and Energy granted a mining right for the 74%-owned Generaal coking and thermal coal project, one of the three projects comprising the company’s Greater Soutpansberg project.
MC recorded a loss for the period of $7.1-million. It had cash equivalents of $3.8-million on hand at the end of the period.