Wrap Text
Report for the quarter ended 30 June 2020
MC Mining Limited
Previously Coal of Africa Limited
(Incorporated and registered in Australia)
Registration number ABN 008 905 388
ISIN AU000000MCM9
JSE share code: MCZ
ASX/AIM code: MCM
ANNOUNCEMENT 31 July 2020
REPORT FOR THE QUARTER ENDED 30 JUNE 2020
FUNDING PROCESSES CONTINUE DURING LOCKDOWN
MC Mining Limited (“MC Mining” or the “Company”) which operates in South Africa, together with its
subsidiaries, hereby provides its update for the three months ended 30 June 2020, the final quarter (the
“Quarter”) of the Company’s 2020 financial year. All figures are denominated in United States dollars unless
otherwise stated. Safety metrics are compared to the preceding quarter while financial and operational metrics
are measured against the comparable period in the previous financial year. A copy of this report is available on
the Company's website, www.mcmining.co.za.
Salient operational and corporate features
- The safety and hygiene focus continued at the high-grade Uitkomst metallurgical and thermal coal mine
(“Uitkomst Colliery” or “Uitkomst”), with one lost-time injury (“LTI”) recorded during the Quarter (FY2020
Q3: one LTI);
- The South African Government previously issued directives to contain the spread of the COVID-19 virus,
instituting a national lockdown (the “Lockdown”) from 26 March 2020. This was extended to 30 April 2020
with restrictions easing during May and June 2020;
- As a result of the Lockdown, Uitkomst was placed on care and maintenance in March and did not produce
run-of-mine (“ROM”) coal in April. The colliery was limited to 50% of labour capacity in May 2020 and
normalised pre-Lockdown production levels resumed at the end of June 2020;
- Uitkomst generated 41,536 tonnes (“t”) (FY2019 Q4: 121,742t) of ROM coal, a 66% decline on the
comparative period to end June 2019;
- The Lockdown also resulted in the majority of Uitkomst’s customers suspending operations and sales of
high-grade metallurgical, thermal and high-ash middlings coal were 74% lower than for the comparative
period in 2019 (FY2020 Q4: 19,429t 2020 vs. FY2019 Q4:75,643t);
- Uitkomst’s customers recommenced operations in June 2020 and following this, normalised order volumes
resumed in July 2020, reducing inventory stockpiles; and
- Activities at the Company’s Makhado hard coking coal project (“Makhado Project” or “Makhado”), Vele
semi-soft coking and thermal coal colliery (“Vele Colliery” or “Vele”) and Greater Soutpansberg Projects
(“GSP”) were suspended due to the Lockdown and limited activities have recommenced.
Coal market and financial features
- The COVID-19 pandemic resulted in a significant decline in API4 export thermal coal prices, reducing from
$79/t in the preceding three months to $55/t for the Quarter. This is 16% lower than the comparative June
2019 period’s $66/t;
- Uitkomst increased its ABSA Bank Limited (“ABSA”) primary lending facility from R20 million ($1.2 million)
to R40 million ($2.3 million) to cover increased working capital requirements to ramp up the operations;
- Composite debt/equity funding initiatives for the Makhado Project were delayed and are expected to be
completed in H2 CY2020; and
- Available cash at Quarter-end was $0.4 million ($1.8 million at the end of March 2020) and restricted cash
of $0.03 million.
Subsequent events
- Restructuring of the loan agreement with the Industrial Development Corporation of South Africa Limited
(“IDC”) allowing for the drawdown of R40 million ($2.4 million) of the existing facility and commitments for
a collective R15.0 million ($0.9 million) of new MC Mining equity. The equity will be issued following South
African Reserve Bank approval, anticipated in early August 2020. A further announcement confirming the
exact number of shares and warrants and date of admission to trading on the ASX, AIM and the JSE will be
made at that point.
Brenda Berlin, Acting CEO commented:
“The spread of the COVID-19 virus impacted MC Mining’s Uitkomst Colliery, corporate office, Makhado, Vele
and GSP sites. The virus resulted in the South African Government declaring a nationwide Lockdown in late
March 2020 and we implemented measures to safeguard our people at our sites and limit the potential spread
of the virus. The Company also initiated contingency programmes, with key activities continuing remotely in
isolated, safe environments. The Uitkomst Colliery was placed on care and maintenance, halting coal production
and processing with key customers also suspending operations in late March 2020.
The Lockdown measures were eased progressively during the Quarter, allowing Uitkomst to return to steady-
state production by the end of June with orders returning to pre-COVID-19 levels in July 2020.
The adverse effects of the Lockdown on working capital requirements led to Uitkomst having to increase its
ABSA primary lending facility and the Company undertook exhaustive negotiations with the IDC to restructure
the current debt facilities. The parties reached agreement during July 2020, and drawdowns will commence in
August 2020.
The Company also continued to interact with potential domestic and international funders and we anticipate
that the process to secure the balance of the capital required to develop Makhado Phase 1 will be completed in
H2 CY2020, with construction commencing shortly thereafter.”
QUARTERLY COMMENTARY
National Lockdown
The health and safety of MC Mining’s employees is a prevailing priority and the Company implemented
Lockdown regulations promulgated by the South African Government. This had a significant impact on the
Company’s activities and resulted in the implementation of a ‘no work, no pay’ policy for non-essential staff.
Only staff undertaking essential services were permitted on site and non-essential employees received a portion
of their wages from the South African Government’s Temporary Employer/Employee Relief Scheme.
The Government began reducing Lockdown restrictions in May 2020, allowing Uitkomst operations to
recommence but only at 50% of the mine’s labour capacity. The colliery resumed steady-state production at the
end of June 2020 but Lockdown measures prevented key customers from returning to production and sales
volumes only normalised in July 2020.
Uitkomst Colliery – Utrecht Coalfields (70% owned)
The focus on health and safety continued at Uitkomst and the colliery recorded one LTI during the Quarter
(FY2020 Q3: one LTI).
The colliery was significantly affected by the Lockdown and ROM coal production was 66% lower than for the
comparative period (41,536t vs 121,742t). This also resulted in a halt in domestic steel production and sales of
high-grade metallurgical and thermal coal declined to 16,707t (FY2019 Q4: 75,643t) while 2,722t of high-ash
middlings coal were sold (FY2019 Q4: 0t) during the Quarter.
The global effects of COVID-19 adversely affected API4 thermal coal prices with average prices for the Quarter
16% lower than the comparative period in 2019 ($55/t vs $66/t). The reduced coal prices were partially offset
by a 25% weakening of the ZAR:US$ exchange rate and revenue per tonne declined by 18% ($58/t vs. $71/t)
during the three months. A large proportion of Uitkomst’s cost base is fixed and the negative impact of the
reduced volumes was offset by the weakening of the exchange rate, resulting in production costs declining
marginally to $48/t (FY2019 Q4: $49/t).
Quarter to end-Jun Quarter to end-Jun
2020 2019 %?
Production tonnages
Uitkomst ROM (t) 41 536 121 742 (66%)
Sales tonnages
Own ROM (t) 16 707 75 643 (78%)
Middlings sales 2 722 - 100%
19 429 75 643 (74%)
Quarter financial metrics
Revenue/t ($) 57.88 70.87 (18%)
Revenue/t (ZAR) 1 040 1 019 2%
Production cost/ROM tonnes ($)^ 48.23 48.90 (1%)
^ costs are all South African Rand based
The Uitkomst Colliery has an estimated 15-year life-of-mine (“LOM”) which includes the development of a north
adit (horizontal shaft). The colliery is in the process of re-assessing options regarding the design of the planned
north adit.
Makhado Hard Coking Coal Project – Soutpansberg Coalfield (69% owned)
The fully permitted Makhado Project recorded no LTIs (FY2020 Q3: nil) during the Quarter.
MC Mining’s flagship Makhado Project has very favourable economics and its phased development will deliver
positive returns for shareholders. Makhado has a LOM in excess of 46 years and construction of the project will
position MC Mining as South Africa’s pre-eminent hard coking coal (“HCC”) producer.
Phase 1 of the Makhado Project comprises the development of the west pit and modifications to the existing
Vele Colliery processing plant. MC Mining previously secured a conditional R245 million ($14.4 million) term loan
facility from the IDC (“Phase 1 Loan Facility”) for the construction of Phase 1. This is the initial step in the
composite Phase 1 debt/equity funding process and during the Quarter the Company advanced various
initiatives to secure the balance of the R535 million ($30.6 million) required to construct Phase 1. Significant
progress was made prior to the Lockdown and the Company anticipates that this will be finalised during H2
CY2020.
The Company has an existing R240 million ($13.8 million) loan facility from the IDC, secured in March 2017. This
facility was granted to develop Makhado and MC Mining previously utilised R120 million ($6.9 million) of this
facility, progressing the project to fully permitted status and acquiring the required surface rights. The balance
remained undrawn and negotiations to restructure this commenced during the Quarter. Following this and in
July 2020, the parties agreed to a conditional restructure of the existing facility, allowing the Company to
drawdown R40 million ($2.3 million) with the Phase 1 Loan Facility still available as part of the composite funding
package. This drawdown is conditional upon the Company raising R15.0 million ($0.9 million) in the form of new
equity, which was also finalised during July 2020, with closing and settlement subject to South African Reserve
Bank approval.
Vele Semi-Soft Coking and Thermal Coal Colliery – Limpopo (Tuli) Coalfield (100% owned)
The Vele Colliery remained on care and maintenance during the Quarter and no LTIs were recorded during the
period (FY2020 Q3: nil).
There were no further developments to report during the Quarter and the Vele processing plant is expected to
be refurbished and recommissioned as part of Phase 1 of the Makhado Project.
Greater Soutpansberg Project – Soutpansberg Coalfield (74% owned)
The GSP recorded no LTIs (FY2020 Q3: nil) during the Quarter.
The GSP comprises the Chapudi, Mopane and Generaal areas that are MC Mining’s longer-term coking and
thermal coal projects. There were no further developments to report during the Quarter.
Markets
The spread of COVID-19 globally has resulted in countries implementing an array of lockdown measures, leading
to reduced demand for commodities and declines in metallurgical and thermal coal prices. Average premium
HCC prices reduced to $112/t during the Quarter, 45% lower than the $203/t in the comparative June 2019
period. Demand for South African coal was similarly affected and the average API4 price for the Quarter was
$55/t, 16% lower than the $66/t recorded in Q4 FY2019 (FY2020 Q3: $79/t).
Brenda Berlin
Acting Chief Executive Officer
This announcement has been approved by the Company’s Disclosure Committee.
This announcement is inside information for the purposes of Article 7 of Regulation 596/2014.
For more information contact:
Brenda Berlin Acting Chief Executive MC Mining Limited +27 10 003 8000
Officer
Tony Bevan Company Secretary Endeavour Corporate +61 08 9316 9100
Services
Company advisors:
Ross Allister/David McKeown Nominated Adviser and Peel Hunt LLP +44 20 7418 8900
Broker
James Duncan Financial PR (South R&A Strategic +27 11 880 3924
Africa) Communications
Investec Bank Limited is the nominated JSE Sponsor
About MC Mining Limited:
MC Mining is an AIM/ASX/JSE-listed coal exploration, development and mining company operating in South
Africa. MC Mining’s key projects include the Uitkomst Colliery (metallurgical coal), Makhado Project (hard coking
coal). Vele Colliery (semi-soft coking and thermal coal), and the Greater Soutpansberg Projects (coking and
thermal coal).
Forward-looking statements
This Announcement, including information included or incorporated by reference in this Announcement, may
contain "forward-looking statements" concerning MC Mining that are subject to risks and uncertainties.
Generally, the words "will", "may", "should", "continue", "believes", "expects", "intends", "anticipates" or
similar expressions identify forward-looking statements. These forward-looking statements involve risks and
uncertainties that could cause actual results to differ materially from those expressed in the forward-looking
statements. Many of these risks and uncertainties relate to factors that are beyond MC Mining’s ability to control
or estimate precisely, such as future market conditions, changes in regulatory environment and the behaviour
of other market participants. MC Mining cannot give any assurance that such forward-looking statements will
prove to have been correct. The reader is cautioned not to place undue reliance on these forward-looking
statements. MC Mining assumes no obligation and does not undertake any obligation to update or revise
publicly any of the forward-looking statements set out herein, whether as a result of new information, future
events or otherwise, except to the extent legally required.
Statements of intention
Statements of intention are statements of current intentions only, which may change as new information
becomes available or circumstances change.
MC Mining has ensured that the mineral resources quoted are subject to good governance arrangements and
internal control. The Company has engaged external independent consultants to update the mineral resource
in accordance with the JORC Code 2012 and SAMREC 2016. The units of measure in this report are metric, with
Tonnes (t) = 1,000kg. Technical information that requires subsequent calculations to derive subtotals, totals and
weighted averages may involve a degree of rounding and consequently introduce an error. Where such errors
occur MC Mining does not consider them to be material.
Tenements held by MC Mining and its Controlled Entities
Change
Project during
Name Tenement Number Location Interest Quarter
Chapudi Albert 686 MS Limpopo~ 74%
Project* Bergwater 712 MS 74%
Remaining Extent and Portion 2 of Bergwater 74%
697 MS
Blackstone Edge 705 MS 74%
Remaining Extent & Portion 1 of Bluebell 480 74%
MS
Remaining Extent & Portion 1 of Bushy Rise 74%
702 MS
Castle Koppies 652 MS 74%
Chapudi 752 MS 74%
Remaining Extent, Portions 1, 3 & 4 of 74%
Coniston 699 MS
Driehoek 631 MS 74%
Remaining Extent of Dorps-rivier 696 MS 74%
Enfield 512 MS (consolidation of Remaining 74%
Extent of Enfield 474 MS, Brosdoorn 682 MS
& Remaining Extent of Grootvlei 684 MS)
Remaining Extent and Portion 1 of 74%
Grootboomen 476 MS 74%
Grootvlei 684 MS 74%
Kalkbult 709 MS 74%
Remaining Extent, Remaining Extent of 74%
Portion 2, Remaining Extent of Portion 3,
Portions 1, 4, 5, 6, 7 & 8 of Kliprivier 692 MS
Remaining Extent of Koodoobult 664 MS 74%
Koschade 657 MS (Was Mapani Kop 656 MS) 74%
Malapchani 659 MS 74%
Mapani Ridge 660 MS 74%
Melrose 469 MS 74%
Middelfontein 683 MS 74%
Mountain View 706 MS 74%
M'tamba Vlei 654 MS 74%
Remaining Extent & Portion 1 of Pienaar 635 74%
MS
Remaining Extent & Portion 1 of Prince's Hill 74%
704 MS
Qualipan 655 MS 74%
Queensdale 707 MS 74%
Remaining Extent & Portion 1 of Ridge End 74%
662 MS
Remaining Extent & Portion 1 of Rochdale 74%
700 MS
Sandilands 708 MS 74%
Portions 1 & 2 of Sandpan 687 MS 74%
Sandstone Edge 658 MS 74%
Change
Project during
Name Tenement Number Location Interest Quarter
Remaining Extent of Portions 2 & 3 of 74%
Sterkstroom 689 MS
Sutherland 693 MS 74%
Remaining Extent & Portion 1 of Varkfontein 74%
671 MS
Remaining Extent, Portion 2, Remaining 74%
Extent of Portion 1 of Vastval 477 MS
Vleifontein 691 MS 74%
Ptn 3, 4, 5 & 6 of Waterpoort 695 MS 74%
Wildebeesthoek 661 MS 74%
Woodlands 701 MS 74%
Kanowna M27/41 Coolgardie^ 2.99%
West and M27/47 2.99%
Kalbara M27/59 2.99%
M27/72,27/73 2.99%
M27/114 2.99%
M27/181 7.24%
M27/196 2.99%
M27/414,27/415 2.99%
P27/1826-1829 2.99%
P27/1830-1842 2.99%
P27/1887 2.99%
Abbotshall ML63/409,410 Norseman^ Royalty
Royalty
Kookynie ML40/061 Leonora^ Royalty
Royalty ML40/135,136 Royalty
Makhado Fripp 645 MS Limpopo~ 69%#
Project Lukin 643 MS 69%#
Mutamba 668 MS 69%#
Salaita 188 MT 69%#
Tanga 849 MS 69%#
Daru 848 MS 69%#
Windhoek 847 MS 69%#
Generaal Beck 568 MS-- Limpopo~ 74%
Project* Bekaf 650 MS- 74%
Remaining Extent & Portion 1 of Boas 642 74%
MS-
Chase 576 MS- 74%
Coen Britz 646 MS- 74%
Fanie 578 MS- 74%
Portions 1, 2 and Remaining Extent of 74%
Generaal 587 MS-
Joffre 584 MS- 74%
Juliana 647 MS 74%
Kleinenberg 636 MS- 74%
Remaining Extent of Maseri Pan 520 MS- 74%
Change
Project during
Name Tenement Number Location Interest Quarter
Remaining Extent and Portion 2 of Mount 100%
Stuart 153 MT--
Nakab 184 MT-- 100%
Phantom 640 MS-- 74%
Riet 182 MT-- 100%
Rissik 637 MS- 100%
Schuitdrift 179 MT- 100%
Septimus 156 MT-- 100%
Solitude 111 MT- 74%
Stayt 183 MT-- 100%
Remaining Extent & Portion 1 of Terblanche 100%
155 MT--
Van Deventer 641 MS- 74%
Wildgoose 577 MS- 74%
Mopane Ancaster 501 MS-- Limpopo~ 100%
Project* Banff 502 MS- 74%
Bierman 599 MS- 74%
Cavan 508 MS 100%
Cohen 591 MS-- 100%
Remaining Extent, Portions 1 & 2 of Delft 499 74%
MS-
Dreyer 526 MS-- 74%
Remaining Extent of Du Toit 563 MS- 74%
Faure 562 MS 74%
Remaining Extent and Portion 1 of Goosen 74%
530 MS --
Hermanus 533 MS- 74%
Jutland 536 MS-- 100%
Krige 495 MS- 74%
Mons 557 MS- 100%
Remaining Extent of Otto 560 MS (Now 74%
Honeymoon)-
Remaining Extent & Portion 1 of Pretorius 74%
531 MS-
Schalk 542 MS- 74%
Stubbs 558 MS- 100%
Ursa Minor 551 MS-- 74%
Van Heerden 519 MS-- 74%
Portions 1, 3, 4, 5, 6, 7, 8, 9, Remaining Extent 74%
of Portion 10, Portions 13, 14, 15, 16, 17, 18,
19, 20, 21, 22, 23, 24, 26, 27, 29, 30, 35, 36,
37, 38, 39, 40, 41, 44, 45, 46, 48, 49, 50, 51,
52 & 54 of Vera 815 MS
Remaining Extent of Verdun 535 MS- 74%
Voorburg 503 MS— 100%
Scheveningen 500 MS- 74%
Portion 3 (of 2) of Kweekspruit No. 22 70%
Change
Project during
Name Tenement Number Location Interest Quarter
Uitkomst Portion 8 (of 1) of Kweekspruit No. 22 KwaZulu- 70%
Colliery and Natal~
prospects Remainder of Portion 1 of Uitkomst No. 95 70%
Portion 5 (of 2) of Uitkomst No. 95 70%
Remainder Portion1 of Vaalbank No. 103 70%
Portion 4 (of 1) of Vaalbank No. 103 70%
Portion 5 (of 1) of Vaalbank No. 103 70%
Remainder of Portion 1 of Rustverwacht No. 70%
151
Remainder of Portion 2 of Rustverwacht No. 70%
151
Remainder of Portion 3 (of 1) of 70%
Rustverwacht No. 151
Portion 4 (of 1) Rustverwacht No.151 70%
Portion 5 (of 1) Rustverwacht No. 151 70%
Remainder of Portion 6 (of 1) of 70%
Rustverwacht No. 151
Portion 7 (of 1) of Rustverwacht No. 151 70%
Portion 8 (of 2) of Rustverwacht No. 151 70%
Remainder of Portion 9 (of 2) of 70%
Rustverwacht No. 151
Portion 11 (of 6) of Rustverwacht No. 151 70%
Portion 12 (of 9) of Rustverwacht No. 151 70%
Portion 13 (of 2) of Rustverwacht No. 151 70%
Portion 14 (of 2) of Rustverwacht No. 151 70%
Portion 15 (of 3) of Rustverwacht No. 151 70%
Portion 16 (of 3) of Rustverwacht No. 151 70%
Portion 17 (of 2) of Rustverwacht No. 151 70%
Portion 18 (of 3) of Waterval No. 157 70%
Remainder of Portion 1 of Klipspruit No. 178 70%
Remainder of Portion 4 of Klipspruit No. 178 70%
Remainder of Portion 5 of Klipspruit No. 178 70%
Portion 6 of Klipspruit No. 178 70%
Portion 7 (of 1) of Klipspruit No. 178 70%
Portion 8 (of 1 )of Klipspruit No. 178 70%
Portion 9 of Klipspruit No. 178 70%
Remainder of Portion 10 (of 5) of Klipspruit 70%
No. 178
Portion 11 (of 5) of Klipspruit No. 178 70%
Portion 13 (of 4) of Klipspruit No. 178 70%
Remainder of Portion 14 of Klipspruit No. 178 70%
Portion 16 (of 14) of Klipspruit No. 178 70%
Portion 18 of Klipspruit No. 178 70%
Portion 23 of Klipspruit No. 178 70%
Remainder of Portion 1 of Jackalsdraai No. 70%
299
Remainder of Jericho B No. 400 70%
11
Change
Project during
Name Tenement Number Location Interest Quarter
Portion 1 of Jericho B No. 400 70%
Portion 2 of Jericho B No. 400 70%
Portion 3 of Jericho B No. 400 70%
Remainder of Jericho C No. 413 70%
Portion 1 of Jericho C No. 413 70%
Remainder of Portion 1 of Jericho A No. 414 70%
Remainder of Portion 2 (of 1) of Jericho A No. 70%
414
Portion 3 (of 1) of Jericho A No. 414 70%
Portion 4 (of 1) of Jericho A No. 414 70%
Portion 5 (of 2) of Jericho A No. 414 70%
Portion 6 (of 1) of Jericho A No. 414 70%
Margin No. 420 70%
Vele Colliery Portions of Overvlakte 125 MS (Remaining Limpopo~ 100%
and Extent, 3, 4, 5, 6, 13, 14)
prospects Bergen Op Zoom 124 MS 100%
Semple 155 MS 100%
Voorspoed 836 MS 100%
Alyth 837 MS 100%
Tshikunda Certain portions of Unsurveyed State Land Limpopo~ 60%
known as Mutale
* Form part of the Greater Soutpansberg Projects
- Lapsed – Mining Right Application Lodged
-- Valid – Mining Right Application Lodged
~ Tenement located in the Republic of South Africa
^ Tenement located in Australia
#
MC Mining’s interest will reduce to 69% on completion of the 26% Broad Based Black Economic
Empowerment (BBBEE) transaction
Date: 31-07-2020 08:00:00
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