MC MINING LIMITED - Transition to Owner-Operated Colliery at Uitkomst

Release Date: 02/08/2018 08:00
Code(s): MCZ
 
Wrap Text
Transition to Owner-Operated Colliery at Uitkomst

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                                                                     2 August 2018


                    TRANSITION TO OWNER-OPERATED COLLIERY AT UITKOMST


MC Mining Limited (“MCM” or “MC Mining” or the “Company”) which operates in
South Africa, is pleased to announce a sale of business agreement (the “Sale
of Business Agreement”) with the independent mining contractor at the
Uitkomst metallurgical and thermal coal colliery (“Uitkomst Colliery” or
“Uitkomst” or the “Colliery”) that will result in the Colliery becoming an
owner-operated mine.


The underground operations at Uitkomst have historically been undertaken by
independent mining contractor, Khethekile Mining (Pty) Ltd (“Khethekile”).
Under the terms of the Sale of Business Agreement Uitkomst has acquired all
of Khethekile’s mining equipment (including conveyor systems and coal mining
and transportation equipment) (the “Mining Assets”) and took transfer, in
accordance with section 197 of the Labour Relations Act of South Africa, of
some 340 Khethekile employees working at the Colliery and at Khethekile’s
Newcastle offices (the “Transaction”).


The acquisition of Khethekile’s mining assets will cost R65 million (US$4.9
million), which will be settled from ongoing business cash flows and
includes:


-   Cash consideration of R16.4 million (US$1.2 million) of which R6.9 million
    (US$0.5 million) was payable on closing, and the balance of R9.5 million
    (US$0.7 million) is, in the event that there are no downward adjustments
    thereto, payable in 27 monthly instalments; and
-   Assumption of the face value, as at 1 August 2018, of loans, trade payables
    and accrued expenses (together totalling R48.6 (US$3.7 million) including
    a   R20.4    million   (US$1.5 million) loan from Pan African Resources
    Management Services (Pty) Ltd.

The South African Competition Commission has approved the Transaction and
all other conditions precedent have been met. Accordingly, the Transaction
closed on 1 August 2018 and Uitkomst assumed full operational control of
underground mining activities on this date.


The Uitkomst Colliery has a remaining life of mine of approximately 16 years,
including a planned mine extension and the coal produced is sold into the
domestic metallurgical and thermal markets. The insourcing of underground
mining operations at Uitkomst is an opportunity to progress the overall
performance at the Colliery and facilitates the implementation of a number
of initiatives, including enhanced control of production costs as well as
improved asset availability leading to increased run-of-mine (“ROM”) coal
production.


Uitkomst is a high-grade thermal export quality coal deposit with
metallurgical applications, which is situated in the Utrecht coalfields in
KwaZulu-Natal. Uitkomst consist of an existing underground coal mine
(Uitkomst - South Mine) and a planned life of mine extension into the northern
area (Klipspruit - North Mine). The South Mine is an easily accessible and
well-established operating mine. Existing infrastructure such as power
supply, water supply, buildings, workshops, weighbridge, water storage and
management facilities are all in place.


The Company acquired Uitkomst in June 2017 and has subsequently undertaken
various initiatives at the mine, including aligning operations with best
practice by increasing the Black Economic Empowerment ownership to 30%, in
accordance with the draft Broad-Based Socio-Economic Empowerment Charter for
the Mining and Minerals Industry in South Africa.
David Brown, CEO commented:
“MC Mining acquired Uitkomst during 2017 and has implemented substantial
changes at the Colliery, resulting in improvements and cost savings. However,
more recently, mining production has been adversely affected by contractor
equipment availability challenges and the Company investigated potential
solutions. This resulted in the conclusion of negotiations with Khethekile’s
owners to acquire the Mining Assets and take over the operations. The increase
in ROM production evidenced in the June 2018 quarter is attributable to
augmented Uitkomst management oversight at the Colliery during this process.


The Transaction results in employees previously employed by Khethekile being
employed directly by Uitkomst with no disruption to operations and we are
confident that the operational cost efficiencies, asset availability and
production improvements will be realised. The direct control of Uitkomst
mining operations is expected to result in a steady increase in output and
the Colliery is expected to exceed FY2018’s production levels during FY2019.


MC Mining has undergone a substantial transformation with the purchase of
the Uitkomst Colliery and this is set to be advanced with the insourcing of
mining operations. A significant feature has been the evolving strength of
the Uitkomst management team and I am confident that they will deliver on
the integration of the Khethekile business as well as the various improvement
initiatives.”



Authorised by
David Brown
Chief Executive Officer


For more information contact:
David Brown             Chief Executive      MC Mining Limited     +27 10 003 8000
                        Officer
Brenda Berlin           Chief Financial      MC Mining Limited     +27 10 003 8000
                        Officer
Tony Bevan              Company Secretary    Endeavour Corporate   +61 08 9316
                                             Services              9100

Company advisors:
Jos Simson/ Gareth      Financial PR        Tavistock              +44 20 7920
Tredway                 (United Kingdom)                           3150
Ross Allister/David     Nominated Adviser    Peel Hunt LLP          +44 20 7418
McKeown/James Bavister and Broker                                   8900
Charmane Russell/Olwen Financial PR          R&A Strategic          +27 11 880 3924
Auret                   (South 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. MCM’s key projects include the Uitkomst Colliery
(metallurgical coal), Makhado Project (coking and thermal coal). Vele Colliery (coking
and thermal coal), and the Greater Soutpansberg Projects (MbeuYashu).


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 MCM’s ability to control or estimate precisely,
such as future market conditions, changes in regulatory environment and the behaviour
of other market participants. MCM 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. MCM assumes no obligation and do
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.

Date: 02/08/2018 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
 information disseminated through SENS.

Email this JSE Sens Item to a Friend.

Share This Story