MC Mining has announced the development of its flagship Makhado hard coking and thermal coal through a phased approach. Present plans are for Construction of Phase 1 to commence in Q3 CY2019. A nine-month construction period is envisaged.

Phase 1 of Makhado coal project approved

Exploration work at Makhado.

MC Mining effectively owns 69 % of Baobab Mining & Exploration, the owner of the Makhado project, the balance either held (or to be held) by the Industrial Development Corporation of South Africa Limited (IDC), seven communities located in the vicinity of Makhado and a black industrialist. The development of Makhado, located 65 km south-west of Musina, will provide significant direct and indirect benefits to these communities located in one of the poorest areas of South Africa.

MC Mining previously announced the Makhado ‘Lite’ project plan, producing 4,0 Mt/a of ROM coal yielding 1,6 to 1,8 Mt/a of saleable product. The development of Makhado Lite was delayed for approximately one year mainly due to lack of access to two key properties where the east pit, processing and other infrastructure would be located. The impact of this delay results in, amongst other things, the repayment date for the existing IDC loan occurring ahead of significant cashflows from Makhado Lite.

Consequently, in parallel with pursuing various strategies to obtain access to the two properties, management assessed alternative project development plans, which included developing Makhado in phases by commencing mining on the west pit and processing through the existing plant at MC Mining’s Vele mine (Phase 1) and then progressing to the east pit (Phase 2).

Makhado is located 80 km south-east of Vele, which is currently on care and maintenance.

The development of Phase 1 fast-tracks the development of a second cash generating asset in the Group, reduces debt/equity funding requirements and significantly reduces execution risk.

Phase 1 commences with the development of the Makhado west pit as well as modifications to the existing Vele colliery processing plant. The drilling programme completed in Q4 CY2018 confirms the west pit’s limit of oxidation at 17 m below surface, indicating that the coal deeper than 17 m has not oxidised. This is shallower than the previously modelled depth of 30 m and translates into a lower strip ratio of 2,08 m3/t over the nine-year life of the pit.

The approximate 3,0 Mt/a of ROM coal from the west pit will be mined by an independent mining contractor using a truck and shovel, modified terrace mining method. The ROM coal will be hauled to a crushing and screening plant consisting of a feeder breaker to crush the coal that is then scalped, removing the coarse parting and waste. The circa 2,0 Mt/a of scalped ROM coal will be transported by road to the Vele colliery for final processing.

The Vele plant modifications will facilitate the simultaneous production of HCC and a 5 500 kcal export quality thermal coal. The plant modifications consist of, amongst others, a new fines circuit comprising a Reflux Classifier in series with the existing spiral plant, a low density secondary wash plant and a froth flotation plant to capture the ultra-fine coal. The plant will be managed by independent processing experts to produce approximately 1,1 Mt/a of saleable coal comprising 0,54 Mt/a of HCC and 0,57 Mt/a of thermal coal.

Construction at Makhado and Vele will occur at the same time and will take nine months to complete requiring peak funding of R460 million, including a 10 % design contingency.

David Brown, Chief Executive Officer of MCM, commented: “The approval for the phased development reflects further advancement of Makhado and its ability to generate significant near-term value by positioning MC Mining to be able take advantage of positive future global coking coal prices due to limited supply.

“The use of the existing Vele processing plant reduces the project’s capital expenditure requirements and together with the completed FEED process, shortens the construction time while moderating execution risk. The company is in advanced thermal coal offtake discussions with various parties and expects that the marketing and fundraising elements will be completed in early Q3 CY2019. The planned commencement of construction later in Q3 CY2019 also reduces the period for delivery of saleable coal to market and generates positive returns for shareholders in the near-term.”

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