REG - MC Mining Limited - ACTIVITIES REPORT FOR THE QUARTER ENDED 31 MAR 24
30/04/2024 09:30
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RNS Number : 5801M MC Mining Limited 30 April 2024
ANNOUNCEMENT
30 April 2024
ACTIVITIES REPORT FOR THE QUARTER ENDED 31 MARCH 2024 (FY2024 Q3)
FOR MC Mining Limited (MC MINING OR THE COMPANY)
AND ITS SUBSIDIARY COMPANIES
HIGHLIGHTS
Operations
· Health and safety remains a priority and we continue the goal to zero
harm with one lost-time injury (LTI) recorded during the quarter (FY2024 Q2:
nil LTIs);
· Run-of-mine (ROM) coal production at the Uitkomst steelmaking and
thermal coal mine (Uitkomst Colliery or Uitkomst) was 14% higher than the
March 2023 quarter at 115,909 tonnes (t) (FY2023 Q3: 101,616t);
· Uitkomst sold 75,590t of high-grade coal during the quarter (FY2023
Q3: 75,231t). No sales of lower grade middlings coal (FY2023 Q3: 2,801);
· Uitkomst had 5,763t (FY2023 Q3: 39,975t) of high-grade coal
inventories at the end of the quarter;
· Limited activities at the Makhado steelmaking hard coking coal
project (Makhado Project or Makhado) during the quarter;
· The downscaling of operations at the Vele Aluwani Colliery (Vele
Colliery or Vele) was completed during January 2024 and the Operation
Shandukani optimisation strategy was initiated during the period; and
· Limited activities at the Greater Soutpansberg Project (GSP).
Market Conditions
· Depressed international thermal coal prices continued with average API4
index prices of US$97/t for the three months, compared to US$116/t in Q2
FY2024 and US$146/t in Q3 of FY2023; and
· Premium steelmaking hard coking coal (HCC) prices, however, remained
elevated, averaging US$312/t for the quarter (FY2023 Q2: US$280/t).
Corporate
· The Company received an A$0.16 off-market takeover offer (Takeover
Offer) from Goldway Capital Investment Limited (Goldway) for all of the shares
in MC Mining not already owned by associates of Goldway; and
· Available cash and facilities of US$2.2 million at the period end
(FY2024 Q2: US$3.4 million).
Events subsequent to the end of the quarter
· Subsequent to the end of the quarter on 8 April 2024, the Takeover
Offer was declared unconditional, as Goldway had attained a relevant interest
of 83.67% of MC Mining's issued shares (including shares already owned by
associates of Goldway);
· Conclusion of a term sheet between Uitkomst and Paladar Resources
Proprietary Limited (Paladar) for an initial three-month offtake, with the
option to extend for a further 12 months, for all of the high-quality coal
produced by the colliery;
· Resignation of Mr Khomotso Mosehla as Independent Non-Executive
Director of MC Mining on 19 April 2024; and
· Resignation of Mr Nhlanhla Nene as Non-Executive Director and Chairman
of MC Mining on 26 April 2024.
Godfrey Gomwe, Managing Director & Chief Executive Officer, commented:
"The Uitkomst Colliery turnaround plan continues to yield very pleasing
results, and ROM coal production significantly exceeded the comparative period
in 2023. Production at the underground colliery remains challenging due to the
geological conditions and extended travel time to the mining areas and
unfortunately the mine recorded one lost-time injury during the quarter. The
international and domestic thermal coal markets remain under pricing pressure
and, during the period, the colliery continued to assess alternative marketing
strategies, resulting in the signing of an offtake term sheet with Paladar in
April 2024.
The Company was notified of the Takeover Offer process during September 2023
following the receipt of a non-binding indicative offer and the Bidder's
Statement was received in early February 2024. The takeover process adversely
impacted the progress of the Makhado Project. This included the suspension of
early works and early coal initiatives as well as the managed tender processes
for the selection and appointment of the outsourced mining, plant and
laboratory operators at Makhado. The Takeover Offer also resulted in the
cessation of funding activities for the development of the project. Activities
are expected to be reinitiated once the Takeover Offer process is complete.
The outsource agent at the Vele Colliery notified the Company during December
2023 that it intended to downscale operations due to production challenges
combined with elevated logistics costs and depressed API4 coal prices. The
downscaling of operations at the Vele Colliery were completed in January 2024
and the Company is working with the outsource contractor to develop a
production optimisation strategy for Vele."
DETAILED QUARTERLY OPERATIONS REPORTS
Uitkomst Colliery - Utrecht Coalfields (84% owned)
One LTI was recorded during the quarter (FY2024 Q2: nil LTIs) and the colliery
has renewed its focus on leading indicators to improve safety performance.
Uitkomst produced 115,909t of ROM coal during the quarter (FY2023 Q3:
101,616t). The 14% increase in ROM coal production is due to the Operation
Phenduka optimisation plan implemented in June 2023. Uitkomst sold 75,590t
(FY2023 Q3: 75,231t) of high-grade duff and peas coal during the quarter. The
fixed-price contract for the sale of high-ash, lower value middlings coal
expired during FY2023 Q4 and Uitkomst sold nil t (FY2023 Q3: 2,801t) during
the three months. The colliery had 5,763t (FY2023 Q3: 39,975t) of high-grade
coal inventory at the end of the quarter.
Quarter to end-Mar 2024 Quarter to end-Mar 2023 %▲
Production volumes
Uitkomst ROM (t) 115,909 101,616 14%
Inventory volumes
High quality duff and peas (t) 5,763 39,975 (86%)
Sales tonnages
High quality duff and peas (t) 75,590 75,231 0%
Middlings sales (t) - 2,801 (100%)
75,590 78,032 (3%)
Quarter financial metrics
Net revenue/t (US$) 80 70 14%
Net revenue/t (ZAR) 1,517 1,242 22%
Production cost/saleable tonne (US$)^ 69 65 6%
^ costs are all South African Rand (ZAR) based
The change in sales mix resulted in revenue per tonne increasing by 14%
compared to FY2023 Q3 despite significantly lower API4 coal prices. The
colliery's production costs per saleable tonne increased by 6% to US$69/t
(FY2023 Q3: US$65/t).
International thermal coal prices remained under pressure, with an average
price of US$97/t during the quarter, 34% lower than FY2023 Q3 (US$146/t). The
depressed international coal prices combined with the continued poor
performance of the state utility responsible for rail and port logistics
impacted Uitkomst's revenue generation. The lack of reliable domestic rail
transport has resulted in higher quality coal that would normally be exported,
being sold in the domestic market.
These challenging market conditions led to a reassessment of the colliery's
marketing strategy and the identification of potential partners who would
reduce the variability of Uitkomst's revenue and improve its working capital
cycle. Following this, Uitkomst signed a term sheet with Paladar in April
2024. The salient features of the term sheet are:
· Paladar will have the exclusive right to market Uitkomst's high
quality coal;
· Initial three-month trial period from May to July 2024 with the joint
ability to extend for a further 12 months (i.e. to July 2025);
· Fixed sales price for the trial period and adjustments linked to the
API4 price should the agreement be extended;
· Minimum price payable to Uitkomst should the API4 price decline
significantly; and
· Paladar will pay 90% of the invoice amount in the week following
production, with the remaining balance due a maximum of 30 days later.
The Paladar term sheet is expected be converted to a formal offtake agreement
in FY2024 Q4.
Makhado Hard Coking Coal Project - Soutpansberg Coalfield (67% owned)
The development of the Company's flagship fully licensed and shovel-ready
Makhado Project is expected to position MC Mining as South Africa's
pre-eminent steelmaking HCC producer. Makhado recorded no LTIs (FY2024 Q2:
nil) during the quarter.
The Makhado Project remains a significant strategic asset for the Company that
has the potential to take the Company's production profile to more than
800,000 tonnes per annum of steelmaking HCC and will generate significant
returns for shareholders. Funding and development activities at Makhado were
suspended due to the Takeover Offer process and are expected to be reinitiated
when this process is completed at the end of April 2024.
Vele Aluwani Semi-Soft Coking and Thermal Coal Colliery - Limpopo (Tuli)
Coalfield (100% owned)
Vele recorded no LTIs (FY2024 Q2: nil) during the quarter.
The mining and processing operations at the opencast Vele Colliery were
outsourced to Hlalethembeni Outsource Services Proprietary Limited (HOS) in
late December 2022. HOS experienced operational challenges in attaining the
targeted monthly saleable coal production while unit costs were adversely
impacted by the lack of access to rail capacity to transport Vele's coal to
port. The challenges experienced by HOS were exacerbated by the decline in the
API4 export thermal coal price during CY2023.
As a result, HOS exercised the hardship clause in the outsource agreement
during December 2023 and commenced downscaling operations at Vele. The
downscaling was completed during January 2024. HOS subsequently initiated
Operation Shandukani, a production optimisation strategy. The evaluation of
these measures is expected to take place in FY2024 Q4 and is expected to
result in improved profitability at the colliery.
Greater Soutpansberg Project (GSP) - Soutpansberg Coalfield (74% owned)
The Greater Soutpansberg Projects recorded no LTIs (FY2024 Q1: nil) during the
quarter. The Company executed the mining rights for the Mopane and Generaal
project areas during Q2 FY2024. The execution of the Chapudi mining right is
at an advanced stage and is expected to be completed during Q4 FY2024. The
studies required for the environmental and water use licences are expected to
commence during H2 CY2024.
Takeover Offer
Following receipt of a Notice of Intention to make a Takeover Offer and a
Revised Non-Binding and Indicative Proposal in September 2023, Goldway lodged
a Bidder's Statement on 2 February 2024. The Bidder's Statement detailed the
terms and conditions of the off-market Takeover Offer by Goldway, representing
a consortium of joint bidders.
The joint bidders include Senosi Group Investment Holdings Proprietary Limited
and Dendocept Proprietary Limited and certain other shareholders and
associates who represented, in aggregate, 64.3% of the issued capital in the
Company (together, the Consortium). The Takeover Offer was made by Goldway
which proposed to acquire all the MC Mining shares that the Consortium
currently did not own. The Takeover Offer was at a cash price of A$0.16 / ZAR
1.96068 / GBP0.08336 per share.
The Takeover Offer was declared unconditional on 8 April 2024 as the
Consortium had received acceptances for a relevant interest of 83.67% of the
Company's issued shares (including shares already held by Goldway). As a
result, the Takeover Offer was successful, and the Takeover Offer period was
extended to 21 April 2024. Following this, Goldway announced on 23 April 2024
that, together with acceptances received, their relevant interest represented
93.05% of the Company's issued shares. The Takeover Offer process is expected
to be completed on 30 April 2024.
Appendix 5B - Quarterly Cash Flow Report
The Company's available cash balance and facilities as at 31 March 2024 were
US$2.2 million. The aggregate amount of payments to related parties and their
associates, as disclosed as item 6.1 of the March 2024 quarter Appendix 5B,
was US$356k, comprising executive and non-executive director remuneration.
Godfrey Gomwe
Managing Director and Chief Executive Officer
This announcement has been approved by the Company's Disclosure Committee.
All figures are in South African rand or United States dollars unless
otherwise stated.
For more information contact:
Tony Bevan Company Secretary Endeavour Corporate Services +61 8 9316 9100
Company advisers:
Richard Johnson / Rob Patrick Nominated Adviser Strand Hanson Limited +44 20 7409 3494
Rory Scott Broker (AIM) Tennyson Securities +44 20 7186 9031
Marion Brower Financial PR (South Africa) R&A Strategic Communications +27 11 880 3924
BSM Sponsors Proprietary 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. MC Mining's key projects include the
Uitkomst Colliery (metallurgical and thermal coal), Makhado Project (hard
coking coal), Vele Colliery (semi-soft coking and thermal coal), and the
Greater Soutpansberg Projects (coking and thermal coal).
All figures are denominated in United States dollars unless otherwise stated.
Safety metrics are compared to the preceding quarter while financial and
operational metrics are measured against the comparable period in the previous
financial year. A copy of this report is available on the Company's website,
www.mcmining.co.za (http://www.mcmining.co.za) .
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 does 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.
Glossary
Term Definition
Consortium Goldway and its associates representing 64.3% of the issued share capital of
MC Mining
GSP Greater Soutpansberg Projects
Goldway Goldway Capital Investment Limited
HCC Hard coking coal
HOS Hlalethembeni Outsource Services Proprietary Limited
IDC Industrial Development Corporation of South Africa Limited
LTI Lost time injury
Makhado Project/ Makhado Makhado steelmaking hard coking coal project
MC Mining/ the Company MC Mining Limited
Paladar Paladar Resources Proprietary Limited
ROM Run of mine
t tonnes
Takeover Offer Off-market takeover offer of all of the shares not owned by Goldway or its
associates
Uitkomst Colliery/ Uitkomst Uitkomst metallurgical and thermal coal mine
Vele Colliery/Vele Vele Aluwani Colliery
Tenements held by MC Mining and its Controlled Entities
Project Name Tenement Number Location Interest Change during quarter
Chapudi Project* Albert 686 MS Limpopo~ 74%
Bergwater 712 MS 74%
Remaining Extent and Portion 2 of Bergwater 697 MS 74%
Blackstone Edge 705 MS 74%
Remaining Extent & Portion 1 of Bluebell 480 MS 74%
Remaining Extent & Portion 1 of Bushy Rise 702 MS 74%
Castle Koppies 652 MS 74%
Chapudi 752 MS 74%
Remaining Extent, Portions 1, 3 & 4 of Coniston 699 MS 74%
Driehoek 631 MS 74%
Remaining Extent of Dorps-rivier 696 MS 74%
Enfield 512 MS (consolidation of Remaining Extent of Enfield 474 MS, Brosdoorn 74%
682 MS & Remaining Extent of Grootvlei 684 MS)
Remaining Extent and Portion 1 of 74%
Grootboomen 476 MS 74%
Grootvlei 684 MS 74%
Kalkbult 709 MS 74%
Remaining Extent, Remaining Extent of Portion 2, Remaining Extent of Portion 74%
3, Portions 1, 4, 5, 6, 7 & 8 of Kliprivier 692 MS
Remaining Extent of Koodoobult 664 MS 74%
Koschade 657 MS (Was Mapani Kop 656 MS) 74%
Malapchani 659 MS 74%
Mapani Ridge 660 MS 74%
Melrose 469 MS 74%
Middelfontein 683 MS 74%
Mountain View 706 MS 74%
M'tamba Vlei 654 MS 74%
Remaining Extent & Portion 1 of Pienaar 635 MS 74%
Remaining Extent & Portion 1 of Prince's Hill 704 MS 74%
Qualipan 655 MS 74%
Queensdale 707 MS 74%
Remaining Extent & Portion 1 of Ridge End 662 MS 74%
Remaining Extent & Portion 1 of Rochdale 700 MS 74%
Sandilands 708 MS 74%
Portions 1 & 2 of Sandpan 687 MS 74%
Sandstone Edge 658 MS 74%
Remaining Extent of Portions 2 & 3 of Sterkstroom 689 MS 74%
Sutherland 693 MS 74%
Remaining Extent & Portion 1 of Varkfontein 671 MS 74%
Remaining Extent, Portion 2, Remaining Extent of Portion 1 of Vastval 477 MS 74%
Vleifontein 691 MS 74%
Ptn 3, 4, 5 & 6 of Waterpoort 695 MS 74%
Wildebeesthoek 661 MS 74%
Woodlands 701 MS 74%
Kanowna West & Kalbara M27/41 Coolgardie^ Royalty<>
M27/47 Royalty<>
M27/59 Royalty<>
M27/72,27/73 Royalty<>
M27/114 Royalty<>
M27/196 Royalty<>
M27/181 5.99%
M27/414,27/415 Royalty<>
P27/1826-1829 Royalty<>
P27/1830-1842 Royalty<>
P27/1887 Royalty<>
Abbotshall Royalty ML63/409,410 Norseman^ Royalty
Kookynie Royalty ML40/061 Leonora^ Royalty
ML40/135,136 Royalty
Makhado Project Fripp 645 MS Limpopo~ 67%(#)
Lukin 643 MS 67%(#)
Mutamba 668 MS 67%(#)
Salaita 188 MT 67%(#)
Tanga 849 MS 67%(#)
Daru 889 MS 67%(#)
Windhoek 900 MS 67%(#)
Generaal Project* Beck 568 MS Limpopo~ 74%
Bekaf 650 MS 74%
Remaining Extent & Portion 1 of Boas 642 MS- 74%
Chase 576 MS 74%
Coen Britz 646 MS 74%
Fanie 578 MS 74%
Portions 1, 2 and Remaining Extent of Generaal 587 MS 74%
Joffre 584 MS 74%
Juliana 647 MS 74%
Kleinenberg 636 MS 74%
Remaining Extent of Maseri Pan 520 MS 74%
Remaining Extent and Portion 2 of Mount Stuart 153 MT 100%
Nakab 184 MT 100%
Phantom 640 MS 74%
Riet 182 MT 100%
Rissik 637 MS 100%
Schuitdrift 179 MT 100%
Septimus 156 MT 100%
Solitude 111 MT 74%
Stayt 183 MT 100%
Remaining Extent & Portion 1 of Terblanche 155 MT 100%
Van Deventer 641 MS 74%
Wildgoose 577 MS 74%
Mopane Project* Ancaster 501 MS Limpopo~ 100%
Banff 502 MS 74%
Bierman 599 MS 74%
Cavan 508 MS 100%
Cohen 591 MS 100%
Remaining Extent, Portions 1 & 2 of Delft 499 MS 74%
Dreyer 526 MS 74%
Remaining Extent of Du Toit 563 MS 74%
Faure 562 MS 74%
Remaining Extent and Portion 1 of Goosen 530 MS 74%
Hermanus 533 MS 74%
Jutland 536 MS 100%
Krige 495 MS 74%
Mons 557 MS 100%
Remaining Extent of Otto 560 MS (Now Honeymoon) 74%
Remaining Extent & Portion 1 of Pretorius 531 MS 74%
Schalk 542 MS 74%
Stubbs 558 MS 100%
Ursa Minor 551 MS 74%
Van Heerden 519 MS 74%
Portions 1, 3, 4, 5, 6, 7, 8, 9, Remaining Extent of Portion 10, Portions 13, 74%
14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 26, 27, 29, 30, 35, 36, 37, 38,
39, 40, 41, 44, 45, 46, 48, 49, 50, 51, 52 & 54 of Vera 815 MS
Remaining Extent of Verdun 535 MS 74%
Voorburg 503 MS 100%
Scheveningen 500 MS 74%
Uitkomst Colliery and prospects Portion 3 (of 2) of Kweekspruit No. 22 KwaZulu-Natal~ 84%
Portion 8 (of 1) of Kweekspruit No. 22 84%
Remainder of Portion 1 of Uitkomst No. 95 84%
Portion 5 (of 2) of Uitkomst No. 95 84%
Remainder Portion1 of Vaalbank No. 103 84%
Portion 4 (of 1) of Vaalbank No. 103 84%
Portion 5 (of 1) of Vaalbank No. 103 84%
Remainder of Portion 1 of Rustverwacht No. 151 84%
Remainder of Portion 2 of Rustverwacht No. 151 84%
Remainder of Portion 3 (of 1) of Rustverwacht No. 151 84%
Portion 4 (of 1) Rustverwacht No.151 84%
Portion 5 (of 1) Rustverwacht No. 151 84%
Remainder of Portion 6 (of 1) of Rustverwacht No. 151 84%
Portion 7 (of 1) of Rustverwacht No. 151 84%
Portion 8 (of 2) of Rustverwacht No. 151 84%
Remainder of Portion 9 (of 2) of Rustverwacht No. 151 84%
Portion 11 (of 6) of Rustverwacht No. 151 84%
Portion 12 (of 9) of Rustverwacht No. 151 84%
Portion 13 (of 2) of Rustverwacht No. 151 84%
Portion 14 (of 2) of Rustverwacht No. 151 84%
Portion 15 (of 3) of Rustverwacht No. 151 84%
Portion 16 (of 3) of Rustverwacht No. 151 84%
Portion 17 (of 2) of Rustverwacht No. 151 84%
Portion 18 (of 3) of Waterval No. 157 84%
Remainder of Portion 1 of Klipspruit No. 178 84%
Remainder of Portion 4 of Klipspruit No. 178 84%
Remainder of Portion 5 of Klipspruit No. 178 84%
Portion 6 of Klipspruit No. 178 84%
Portion 7 (of 1) of Klipspruit No. 178 84%
Portion 8 (of 1 )of Klipspruit No. 178 84%
Portion 9 of Klipspruit No. 178 84%
Remainder of Portion 10 (of 5) of Klipspruit No. 178 84%
Portion 11 (of 5) of Klipspruit No. 178 84%
Portion 13 (of 4) of Klipspruit No. 178 84%
Remainder of Portion 14 of Klipspruit No. 178 84%
Portion 16 (of 14) of Klipspruit No. 178 84%
Portion 18 of Klipspruit No. 178 84%
Portion 23 of Klipspruit No. 178 84%
Remainder of Portion 1 of Jackalsdraai No. 299 84%
Remainder of Jericho B No. 400 84%
Portion 1 of Jericho B No. 400 84%
Portion 2 of Jericho B No. 400 84%
Portion 3 of Jericho B No. 400 84%
Remainder of Jericho C No. 413 84%
Portion 1 of Jericho C No. 413 84%
Remainder of Portion 1 of Jericho A No. 414 84%
Remainder of Portion 2 (of 1) of Jericho A No. 414 84%
Portion 3 (of 1) of Jericho A No. 414 84%
Portion 4 (of 1) of Jericho A No. 414 84%
Portion 5 (of 2) of Jericho A No. 414 84%
Portion 6 (of 1) of Jericho A No. 414 84%
Margin No. 420 84%
Vele Colliery and prospects Portions of Overvlakte 125 MS (Remaining Extent, 3, 4, 5, 6, 13, 14) Limpopo~ 100%
Bergen Op Zoom 124 MS 100%
Semple 155 MS 100%
Voorspoed 836 MS 100%
Alyth 837 MS 100%
* Form part of the Greater Soutpansberg Projects
~ Tenement located in the Republic of South Africa
^ Tenement located in Australia
(# ) MC Mining's interest will reduce to 67% on completion of the
26% Broad Based Black Economic Empowerment (BBBEE) transaction
<> net smelter royalty of 0.5%
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