MC Mining revenue for the year ended 30 June 2020 decreased by 35% to $17.2 million from $26.4 million in the prior corresponding period. Operating loss before interest decreased by 66% to $9.9 million from the $28.9 million in the prior corresponding period. The company’s net asset value decreased by 25% to $98.9 million from 132.1 million in the prior corresponding period. All figures are denominated in United States dollars.
MC Mining is a coal exploration, development and mining company operating in South Africa. Its key projects include the Uitkomst Colliery (metallurgical coal), Makhado Project (hard coking coal). Vele Colliery (semi-soft coking coal), and the Greater Soutpansberg Projects (coking and thermal coal).
The Uitkomst metallurgical and thermal colliery produced 431,354 tonnes (FY2019: 472,647t) of run-of-mine (ROM) coal during the period. The colliery sold 254,193t (FY2019: 309,401t) of coal, generating sales revenue of $17.2 million (FY2019: $26.4 million);
Uitkomst’s average revenue per tonne declined 20% to $65/t (FY2019: $81/t) following 22% lower year-on-year API4 prices. Production costs per saleable tonne reduced by 16% to $63/t (FY2019: $75/t), due to successful cost containment measures as well as a 10% weakening of the ZAR:US$ exchange rate.
The company received new loan of R245 million ($17 million) from the Industrial Development Corporation of South Africa Limited (IDC), the initial step in the funding package for the construction of Phase 1 of the Makhado hard coking coal project.
The Vele semi-soft coking coal colliery remained on care and maintenance and the colliery’s existing processing plant will be modified as part of Phase 1 of the Makhado Project.
The South African Department of Mineral Resources and Energy (DMRE) granted a Mining Right (MR) for the Generaal coking and thermal coal project, one of the three projects comprising the Company’s longer-term Greater Soutpansberg Project (GSP).
Average hard coking coal (“HCC”) prices declined 32% following the slowing in the global economy due to the COVID-19 pandemic. Thermal coal prices also experienced a significant decline during FY2020 with average prices 22% lower than the prior year due to lower demand as a result of the pandemic.
UITKOMST COLLIERY (70% OWNED)
The Uitkomst Colliery is a high-grade coal deposit with metallurgical and thermal applications. The Lockdown resulted in the Uitkomst Colliery being placed on care and maintenance on 27 March 2020 with only essential activities undertaken at site. Limited activities recommenced on 4 May 2020 utilising 50% of labour capacity and full production only resumed at the end of June 2020 with customer order levels normalising one month later.
Revised mining cycles, changes in mine management and optimisation initiatives implemented in H1 FY2020 resulted in Uitkomst’s ROM coal production improving by 11% on the comparative period in FY2019 (262,696t vs. 237,715t). With the declaration of the Lockdown during March, Uitkomst did not produce any coal in April and the colliery’s ROM coal production for the 12 months was 9% lower than the prior year (431,354t vs. 485,113t).
No ROM coal was purchased from third parties due to supply contracts expiring previously (FY2019: 12,466t).
The majority of Uitkomst’s customers also suspended operations, adversely impacting sales, with 228,206t (FY2019: 295,051t) derived from ROM coal sold during the Period. Uitkomst completed modifications to its processing plant during H2 FY2019, allowing for the production of an additional high ash, coarse discard coal and the sales of this type of coal was 25,987t (FY2019: 8,315t).
Due to the 22% year-on-year decline in average API4 coal prices, revenue per tonne reduced by 20%. The colliery has a Rand denominated cost base and production costs benefited from the implementation of cost control measures as well as the 10% weakening of the Rand against the US dollar during the Period.
MAKHADO HARD COKING COAL PROJECT (69% OWNED)
The Makhado Project will be developed in phases, reducing execution risk and capital expenditure while ensuring scalability. Both phases have compelling returns. Phase 1 will produce approximately 3.0 million tonnes per annum (Mtpa) of ROM coal that will be crushed, screened and scalped at Makhado.
The resultant 2.0Mtpa of scalped ROM coal will be transported to the existing Vele Colliery for final processing, yielding approximately 0.54Mtpa of HCC and 0.57Mtpa of an export quality thermal coal by-product.
Phase 2 is expected to commence in circa CY2023, funding and market dependent, and will result in 4.0Mtpa of ROM coal, producing approximately 1.7Mtpa of saleable HCC and thermal coal.
VELE COKING AND THERMAL COAL COLLIERY (100% OWNED)
The Vele Colliery remained on care and maintenance. The colliery has all the regulatory approvals required to recommence operations and the existing processing plant will be modified as part of Phase 1 of the Makhado Project.
These modifications include circuits to capture the fine coal fraction and will facilitate the simultaneous production of two products, namely HCC and a thermal coal by-product. The Company anticipates that, following the nine-year Makhado Phase 1 life-of-mine in circa 2029, the Vele Colliery will be ideally positioned to potentially supply semi-soft coking coal and thermal coal to the government gazetted Limpopo Special Economic Zone.
GREATER SOUTPANSBERG PROJECT (74% OWNED)
The exploration and development of the three GSP areas, namely Chapudi, Mopane and Generaal, is the catalyst for MC Mining’s long-term growth. The Company applied for MRs for the three project areas during 2013 and the Chapudi Project MR was granted in December 2018 and was subsequently appealed.
The DMRE granted the Generaal MR during the Period and the Company is hopeful that the Mopane MR will be granted during FY2021.