Operational review of MC Mining’s Vele Colliery
The Vele Colliery, Tuli Coalfield, Limpopo (100% owned), contains over 324 million tonnes (in situ) of semi-soft coking and thermal coal Reserves. The colliery was recommissioned in December 2022 after having been on care and maintenance since late CY2013. The outsourcing of operations at the colliery was identified as the optimal strategy given the significant capital and technical investment required to restart and optimise production at the colliery. The Contract Mining Agreement was concluded with Hlalethembeni Outsource Services (HOS). This secured the necessary investment from a third party to de-water the opencast pit, modify and recommission the CHPP and remove a significant portion of the ongoing costs associated with the colliery. HOS is responsible for all mining and processing costs while the Company remains responsible for the colliery’s regulatory compliance, rehabilitation guarantees, relationships with authorities and communities as well as the supply of electricity and water.
The recommencement of operations at Vele created approximately 245 permanent employment positions and also alleviated potential ‘use it or lose it’ risk associated with unutilised mining assets in South Africa. The colliery produced 119,799t of saleable thermal coal in H1 FY2024 (H1 FY2023: nil t).
HOS notified the Company during December 2023 that, due to production challenges, combined with elevated logistics costs and the depressed API4 coal price, it would exercise the hardship clause in the Contract Mining Agreement. This resulted in HOS downscaling operations, which was completed during January 2024, and the commencement of a production optimisation strategy. This strategy (Operation Shandukani) will potentially include, amongst others, changes to the mining methodology, as well as further modifications to the CHPP as well as securing access to rail transport at competitive prices. The evaluation of these measures is expected to take place in H2 FY2024 with the intention of improving profitability at the colliery.
The colliery’s CHPP does not have the requisite fines circuits that would allow for the simultaneous production of semi-soft coking coal (SSCC) and thermal coal. A further significant opportunity at Vele is the addition of a fines circuit to the CHPP to produce SSCC, a higher value product.
