Coal miner MC Mining’s 70%-owned Uitkomst colliery increased its run-of-mine production by 7% year-on-year to 124 144 t in the first quarter of the year.
Sales of high-grade peas and duff, totalling 62 751 t, were achieved in the period, up from the 53 512 t sold in the first quarter of 2021.
The sales were augmented by the sale of coal carried over from the last quarter of 2021 and the two pre-sale contracts outstanding at the end of December 2021, which were completed during the period under review.
In addition, Uitkomst also sold 8 610 t of high ash middlings coal in the period, marginally down year-on-year, while the mine had 8 373 t of high-grade duff and peas coal on hand at the end of the quarter, compared with 10 909 t at the beginning of the quarter.
MC Mining recorded 71 361 t of coal sales during the quarter, up from the 62 301 t of the first quarter of 2021; comprising 62 751 t of high-grade metallurgical and thermal coal and 8 610 t of lower-grade middlings coal.
MC Mining points out that Russia is a significant producer of coal globally and its invasion of Ukraine resulted in the prices of thermal coal attaining record highs.
Average API4 prices in the first quarter of this year were 162% higher year-on-year at $238/t; but the composition of Uitkomst’s sales mix resulted in average revenue a tonne increasing by just 53% year-on-year to $110/t.
However, these elevated prices are not being accepted in the South African domestic coal market and, as such, MC Mining is assessing alternative coal marketing strategies, including the potential production of higher-quality coal for the international pulverised coal injection market.
Uitkomst’s sales include lower-value middlings coal, as well as sales under fixed price arrangements. Production costs per saleable tonne were marginally higher than the comparative period of 2021, increasing from $73/t to $74/t.
Nonetheless, revenue per tonne sold also increased year-on-year, from $72/t in 2021 to $110/t, owing to elevated API4 coal prices recorded during the quarter.
MAKHADO & VELE
MC Mining’s flagship 67%-owned Makhado hard coking coal project recorded no lost-time injuries in the first quarter.
In the period under review, the Industrial Development Corporation, which holds a 6.7% equity interest in Baobab Mining & Exploration – MC Mining’s subsidiary that owns Makhado – agreed to extend the date for repayment of the existing R160-million loan plus interest.
This is in addition to extending the terminal drawdown date in respect of the conditional R245-million term loan facility for the development of the Makhado project to November 30. In the event MC Mining does not repay the existing loan by the repayment date, the financing documentation enables that the debt be converted into equity.
Baobab also completed the acquisition of the Lukin and Salaita properties – key surface rights for the Makhado project – with the balance of the purchase price of R35-million paid during the quarter.
The economics of the Makhado project were confirmed in the bankable feasibility study (BFS) completed by Minxcon subsequent to the end of the first quarter.
Going forward, the development of Makhado is expected to deliver positive returns for shareholders and will position MC Mining as South Africa’s pre-eminent hard coking coal producer, states MC Mining.
The project has an estimated capital cost (including contingencies) of R625-million, a peak funding requirement of R727-million and is expected to create about 650 permanent employment positions (including contractors) at steady-state production.
The BFS confirmed that Makhado has a short construction period of 12 months, positioning the project to take advantage of the current higher global coal prices.
Meanwhile, MC Mining’s fully-owned Vele semi-soft coking and thermal coal colliery remained on care and maintenance during the first quarter and recorded two lost-time injuries (LTIs) when staff members were involved in a traffic accident on a national road.
The Vele processing plant is to be refurbished and recommissioned as part of the development of the Makhado project.
MC Mining’s 74%-owned Greater Soutpansberg project recorded no LTIs or reportable activites in the period under review.