MC Mining reports significant drop in coal production

The spread of the COVID-19 virus impacted MC Mining’s Uitkomst Colliery, corporate office, Makhado, Vele and GSP sites. The Uitkomst Colliery was placed on care and maintenance, halting coal production and processing with key customers also suspending operations in late March 2020.

MC Mining is a 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).

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;


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).

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.


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 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.


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.


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.


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).

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