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MC MINING LIMITED - Makhado Phase 1 Hard Coking Coal off-take concluded

Release Date: 19/06/2019 08:00
Code(s): MCZ     PDF:  
Wrap Text
Makhado Phase 1 Hard Coking Coal off-take concluded

MC Mining Limited
Previously Coal of Africa Limited
(Incorporated and registered in Australia)
Registration number ABN 008 905 388
JSE share code: MCZ

ANNOUNCEMENT                                                                       19 June 2019


MC Mining Limited (“MC Mining”) is pleased to announce the completion of a major milestone for the
company through the signing of an off-take agreement (the “Agreement”) with ArcelorMittal South
Africa Limited (“AMSA”). The Agreement results in AMSA purchasing hard coking coal (“HCC”) that
will be produced from Phase 1 of the Makhado coking coal project (“Makhado Project” or

The Agreement reaffirms the quality of Makhado’s HCC and follows the April 2019 announcement of
an off-take with one of the world’s largest producers and marketers of seaborne traded coal for all
the by-product thermal coal to be produced by Phase 1. Completion of these off-takes satisfies a key
requirement for the Makhado Project’s economics and allows funding discussions to gain further
traction with construction anticipated to commence in Q3 CY2019.

South Africa has a very limited production of high-quality metallurgical (coking) coal, resulting in AMSA
and other coke producers having to import HCC for the manufacture of metallurgical coke, a key
ingredient in the production of steel. The key highlights of the Agreement are:
•   AMSA will purchase a minimum of 350,000 tonnes (“t”) of Phase 1 HCC annually and has the right
    to acquire a further 100,000t per year;
•   the Agreement will endure for the shorter of ten years or the Phase 1 life-of-mine;
•   HCC will be delivered to the Musina siding and railed to AMSA’s Vanderbijlpark and Newcastle
•   The HCC will be sold on a FOR (free on rail) basis; and
•   sales prices will be calculated on a monthly basis and are linked to a published, international US
    dollar denominated HCC index.

The Agreement is subject to various conditions precedent, including:

•   confirmation by 15 December 2019 that the requisite funding for the development of Phase 1 has
    been secured; and
•   confirmation by 30 June 2020 that delivery of HCC will commence within six months.

Phase 1 of the Makhado Project will result in the development of the west pit on the Daru and Tanga
farms with a nine-month construction period expected to commence in Q3 CY2019 and will be
followed by a one-month ramp-up. This phase will generate approximately three million tonnes per
annum (“Mtpa”) of run-of-mine (“ROM”) coal that will undergo preliminary processing at the mine,
yielding an estimated 2Mtpa of residual coal. The residual coal will be transported to the existing,
modified Vele Colliery for final processing, producing approximately 0.54Mtpa of HCC and 0.57Mtpa
of export quality thermal coal that will be trucked to the Musina siding for dispatching to customers.

As stated, the conclusion of this Agreement ensures off-takes for Phase 1 are completed, a key
component for the launch of the project. This also ensures that MC Mining can contemplate the
development of Phase 2 of the Makhado Project (Makhado ‘Lite’) that also has significant positive
economics. The construction of Phase 2 in circa CY2022 will include the development of the east and
central pits on the recently acquired Lukin and Salaita properties and is expected to produce some
4Mtpa of ROM coal. This will yield approximately 0.8Mtpa of HCC and between 0.9Mtpa and 1.0Mtpa
of export quality thermal coal. MC Mining has secured an initial three-year off-take for a minimum of

0.4Mtpa of Phase 2 HCC with Huadong Coal Trading Center Co, Ltd (“HDCTC”), a Chinese state-owned
enterprise. HDCTC has logistics and bulk commodity interests and traded in excess of 5,000,000t of
iron ore and coal during the past two years which necessities that circa 50% of the Phase 2 HCC is also
subject to off-take agreements.

David Brown, CEO commented:
“The signing of the Phase 1 HCC off-take agreement with AMSA is a massively positive step for
Makhado. MC Mining is now positioned to become South Africa’s pre-eminent producer of high-grade
metallurgical coal and the Makhado coking coal will partially replace coking coal currently imported.

The phased development of Makhado reduces execution risk by utilising the existing Vele Colliery
processing facility as well as previously tested logistics infrastructure and generates a significant
number of employment opportunities in the Limpopo province. The Agreement, together with the
announcement in April 2019 of the Phase 1 thermal coal off-take agreement, reaffirms the world-class
quality of the Makhado coal and satisfies a key requirement for funders. The long-term viability of
Makhado’s HCC is supported by global steel demand that is expected to grow over the next ten years,
with economic development and urbanisation driving increases in per capita steel usage.

Negotiations for a composite debt and equity funding arrangement continue. We anticipate that these
processes will be completed in Q3 CY2019, with construction of Phase 1 of our flagship Makhado
Project commencing later in the same period.”

Authorised by
David Brown
Chief Executive Officer

This announcement is inside information for the purposes of Article 7 of
Regulation 596/2014.

For more information contact:
 David Brown               Chief Executive                  MC Mining Limited            +27 10 003 8000
 Brenda Berlin             Chief Financial                  MC Mining Limited            +27 10 003 8000

 Tony Bevan                  Company Secretary    Endeavour Corporate      +61 08 9316 9100

Company advisors:
 Jos Simson/Emily Fenton     Financial PR (United  Tavistock                +44 20 7920
                             Kingdom)                                       3150
 Ross Allister               Nominated Adviser and Peel Hunt LLP            +44 20 7418
                             Broker                                         8900
 Charmane Russell/Olwen      Financial PR (South   Russell & Associates     +27 11 880
 Auret                       Africa)                                        3924 or
                                                                            +27 82 372
Investec Bank Limited is the nominated JSE Sponsor

About MC Mining Limited:
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 coking and thermal coal project, Vele
Colliery (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 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.


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