Wrap Text
Report for the quarter ended 31 December 2020
International Thermal Coal Markets Trend Positively
MC Mining Limited
Previously Coal of Africa Limited
(Incorporated and registered in Australia)
Registration number ABN 008 905 388
ISIN AU000000MCM9
JSE share code: MCZ
ASX/AIM code: MCM
ANNOUNCEMENT 29 January 2021
REPORT FOR THE QUARTER ENDED 31 DECEMBER 2020
INTERNATIONAL THERMAL COAL MARKETS TREND POSITIVELY
MC Mining Limited (“MC Mining” or the “Company”) which operates in South Africa, together with its
subsidiaries, hereby provides its update for the three months ended 31 December 2020, the second quarter (the
“Quarter”) of the Company’s 2021 financial year. 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.
Salient operational and corporate features
• The focus on health and safety continued at the high-grade Uitkomst metallurgical and thermal coal mine
(“Uitkomst Colliery” or “Uitkomst”), with one lost-time injury (“LTI”) recorded during the Quarter (FY2021
Q1: three LTIs);
• Measures previously implemented by the Company to prevent the spread of COVID-19 remain in place;
• Uitkomst experienced a high level of absenteeism due to COVID-19, which resulted in a decline of run-of-
mine (“ROM”) coal production by 14% on the comparative December 2019 period (FY2021 Q2: 108,945
tonnes (“t”) vs. FY2020 Q2: 127,021t);
• Despite the lower coal production, Uitkomst generated coal sales of 81,486t, only 4% lower than FY2020
Q2’s 84,578t, with 15,092t of saleable coal on hand at the end of the Quarter (FY2020 Q2: 766t);
• Submission of Uitkomst Colliery and nearby leased Wykom siding Integrated Water Use License (“IWUL”)
renewal applications to the Department of Water & Sanitation (“DWS”) during the Quarter;
• Commencement of a staff restructuring process at the Uitkomst Colliery to make 42 positions redundant;
and
• Limited activities continued at the Company’s Makhado hard coking coal project (“Makhado Project” or
“Makhado”), Vele semi-soft coking and thermal coal colliery (“Vele Colliery” or “Vele”) and Greater
Soutpansberg Projects (“GSP”) to prevent the spread of COVID-19.
Coal market and financial features
• The initial spread of the COVID-19 pandemic in H1 CY2020 led to API4 thermal coal prices declining
significantly. Average prices improved during the Quarter but remained 4% below the comparative
December 2019 period ($73/t vs. $76/t);
• Resignation of Brenda Berlin, acting Chief Executive Officer (“CEO”) and Executive Director effective 15
February 2021. An executive search is advanced and the Company expects to announce an appointment
shortly;
• The Company submitted a formal application that was acknowledged by the Industrial Development
Corporation of South Africa Limited (“IDC”), extending the repayment period of the R160 million (c. $11
million) facility (“Restructured Initial IDC Facility”) as well as accrued interest beyond 30 November 2020,
and negotiations are ongoing;
• Composite debt/equity funding initiatives for the Makhado Project continued during the Quarter and are
expected to be concluded in Q1 CY2021; and
• Available cash at Quarter-end was $2.0 million ($1.6 million at the end of September 2020) and restricted
cash was $0.03 million.
Brenda Berlin, Acting CEO commented:
“MC Mining has implemented various measures to mitigate the risk of COVID-19 transmission at all of our sites,
with employees and contractors screened daily for COVID-19 symptoms. The effects of COVID-19 resulted in the
Uitkomst Colliery recording a higher incidence of absenteeism compared to Q2 FY2020 and ROM coal production
was 14% lower than the comparative December 2019 period. However, the higher than normal inventory levels
at the beginning of the Quarter ensured that Uitkomst was able to satisfy customer demand for its high-grade
Uitkomst metallurgical and thermal coal, therefore sales volumes were only 4% lower than Q2 FY2020. Uitkomst
sells a portion of its coal at API4 index-linked prices and the colliery benefitted from the improvements in API4
coal prices during the period.
The Restructured Initial IDC Facility together with accrued interest was due to be repaid at the end of November
2020 and, as previously announced, the Company has formally applied to delay this repayment. Negotiations
are ongoing to align the repayment of the first drawdown of R120 million ($8.3 million) with the positive cash
flows generated by the Makhado Project, while the second drawdown of R40 million ($2.8 million) will be repaid
from capital planned to be raised for the construction of Phase 1. The IDC has reiterated its support for the
development of the Makhado Project and MC Mining is confident that a satisfactory position will be reached.
MC Mining previously secured a significant portion of the Makhado Phase 1 composite funding package,
including a new R245 million ($17 million) IDC facility and in-principle funding agreements for a further
R200 million ($14 million). The Company continued its interactions with potential domestic and international
funders for the remaining R130 million ($9 million) for Makhado Phase 1 and anticipates that the process to
secure the balance will be completed in Q1 CY2021, with construction commencing shortly thereafter.”
QUARTERLY COMMENTARY
COVID-19
The health and safety of MC Mining’s employees and contractors remains the prevailing priority and the
Company has implemented rigorous measures to prevent the spread of COVID-19, including staggering the
arrival and departure of employees on site and ensuring that sufficient social distancing is maintained. Staff and
contractors are regularly screened, while those with symptoms or those who were in contact with someone who
has tested positive are requested to self-isolate off site for a period of between 10 and 14 days. During the
Quarter, one Uitkomst employee tested positive for COVID-19 (FY2021 Q1: 26 positive tests) while the Limpopo
projects have not recorded any positive tests. Fortunately, no COVID-19 fatalities have been recorded in respect
of any employees at any of MC Mining sites (FY2021 Q1: nil).
Uitkomst Colliery – Utrecht Coalfields (70% owned)
The focus on health and safety continued at Uitkomst and the colliery recorded one LTI during the Quarter
(FY2021 Q1: three LTIs).
The numerous COVID-19 screening and isolation measures at the colliery have led to a reduction in the total
hours worked compared to Q2 FY2020, leading to a 14% decline in ROM coal production during the Quarter
(108,945t vs 127,021t). Despite the lower ROM coal production, sales of high quality coal were only 4% lower
than in the comparative period (72,656t vs. 75,761t) while 8,830t of high ash middlings coal were sold during
the Quarter (FY2020 Q2: 8,817t). Uitkomst’s sales included inventory produced in the preceding three months
and the colliery had 15,092t of saleable coal on hand at the end of the Quarter (FY2020 Q2: 766t; FY2021 Q1:
20,667t), which is expected to be sold during Q3 FY2021.
The COVID-19 pandemic adversely affected global manufacturing activities and energy production resulting in
the average API4 prices declining significantly in H1 CY2020. Average API4 coal prices improved during the
Quarter but were 4% lower than the comparative period in FY2020 ($73/t vs $76/t). The softer domestic sized
coal prices and lower API4 prices, albeit offset to some extent by a 6% weaker ZAR:US$ exchange rate, led to a
6% decline in revenue per tonne ($65.80 vs. $70.25) during the three months. The weaker exchange rate as well
as lower labour, mining and processing costs, resulted in production costs per saleable tonne decreasing 12% to
$47.54/t (FY2020 Q2: $54.18/t). Uitkomst commenced with a Section 189 (of the Labour Relations Act)
restructuring process during the Quarter, resulting in 42 positions at the colliery being made redundant in
January 2021.
Quarter to end-Dec Quarter to end-Dec
2020 2019 %?
Production tonnages
Uitkomst ROM (t) 108 945 127 021 (14%)
Sales tonnages
Metallurgical and thermal coal (t) 72 656 75 761 (4%)
Middlings sales 8 830 8 817 0%
81 486 84 578 (4%)
Quarter financial metrics
Revenue/t ($) 65.80 70.25 (6%)
Revenue/t (ZAR) 1 029 1 033 0%
Production cost/saleable tonnes ($)^ 47.54 54.18 (12%)
^ costs are all South African Rand based
The Uitkomst Colliery has an estimated 18-year life-of-mine (“LOM”) which includes the development of a north
adit. Uitkomst’s IWUL will expire in February 2021 and the colliery submitted a renewal application to the DWS
during the Quarter. An application to renew the IWUL for the nearby leased Wykom siding from where the high-
ash middlings coal is railed was also submitted during the Quarter. The Company will work to secure the license
renewals as soon as practicable with no disruption to operations being expected.
Makhado Hard Coking Coal Project – Soutpansberg Coalfield (67% owned)
The fully permitted Makhado Project recorded no LTIs (FY2021 Q1: nil) during the Quarter.
MC Mining’s flagship Makhado Project has very favourable economics and its phased development is expected
to 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 ($17 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. MC Mining has also secured in-principle agreements for a further R200 million (c. $14 million)
for Phase 1 that is subject to agreement of final documentation and, is in advanced discussions with potential
equity funders for the remaining R130 million (c. $9 million). The Company anticipates that this will be finalised
during Q1 CY2021.
The Company has also previously secured the R160 million (c. $11 million) Restructured Initial IDC Facility and
utilised R120 million (c. $8 million) (“First Drawdown”) of this facility to develop Makhado, including progressing
the project to fully permitted status and completing the acquisition of the surface rights required for the mining
area. During August 2020, the Company drew down R40 million (c. $3 million) (“Second Drawdown”) of the
Restructured Initial IDC Facility. The First Drawdown and Second Drawdown plus accrued interest was due for
repayment by 30 November 2020. During the Quarter the Company submitted a formal application to extend
the repayment period and the IDC has acknowledged this application.
The IDC supports the development of Makhado and negotiations between the parties are ongoing to align the
repayment of the First Drawdown and accrued interest with the positive cash flows generated by Makhado,
whilst the Second Drawdown will be repaid from the proceeds raised to construct Phase 1. MC Mining is
confident that a satisfactory position can be reached with the IDC. In the unlikely event that the parties cannot
reach agreement on further deferment terms, the financing documentation allows for the debt to be converted
into equity.
Vele Semi-Soft Coking and Thermal Coal Colliery – Limpopo (Tuli) Coalfield (100% owned)
The Vele Colliery remained on care and maintenance during the Quarter and no LTIs were recorded during the
period (FY2021 Q1: nil).
There were no further developments to report and the Vele processing plant is expected to be refurbished and
recommissioned as part of Phase 1 of the Makhado Project.
Greater Soutpansberg Project – Soutpansberg Coalfield (74% owned)
The GSP recorded no LTIs (FY2021 Q1: nil) during the Quarter.
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.
Markets
The spread of COVID-19 in H1 CY2020 resulted in a reduced global economic activity and lower demand for
commodities, with metallurgical and thermal coal prices declining. The global economy is showing signs of
improvement and demand for South African thermal coal improved during the Quarter with average API4 price
for the three months of $73/t, 4% lower than the $76/t recorded in Q2 FY2020 (FY2021 Q1: $55/t). HCC
remained under pressure due to geopolitical events and average prices were 20% lower than the comparative
period ($111/t vs. $139/t).
Brenda Berlin
Acting Chief Executive Officer
This announcement has been approved by the Company’s Disclosure Committee.
This announcement is inside information for the purposes of Article 7 of Regulation 596/2014.
For more information contact:
Brenda Berlin Acting Chief Executive MC Mining Limited +27 10 003 8000
Officer
Tony Bevan Company Secretary Endeavour Corporate +61 08 9316 9100
Services
Company advisors:
James Harris / James Dance Nominated Adviser Strand Hanson Limited +44 20 7409 3494
Rory Scott Broker (AIM) Tennyson Securities +44 20 7186 9031
James Duncan Financial PR (South R&A Strategic +27 11 880 3924
Africa) Communications
Investec Bank 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).
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.
MC Mining has ensured that the mineral resources quoted are subject to good governance arrangements and
internal control. The Company has engaged external independent consultants to update the mineral resource
in accordance with the JORC Code 2012 and SAMREC 2016. The units of measure in this report are metric, with
Tonnes (t) = 1,000kg. Technical information that requires subsequent calculations to derive subtotals, totals and
weighted averages may involve a degree of rounding and consequently introduce an error. Where such errors
occur MC Mining does not consider them to be material.
Tenements held by MC Mining and its Controlled Entities
Change
Project during
Name Tenement Number Location Interest Quarter
Chapudi Albert 686 MS Limpopo~ 74%
Project* Bergwater 712 MS 74%
Remaining Extent and Portion 2 of Bergwater 74%
697 MS
Blackstone Edge 705 MS 74%
Remaining Extent & Portion 1 of Bluebell 480 74%
MS
Remaining Extent & Portion 1 of Bushy Rise 74%
702 MS
Castle Koppies 652 MS 74%
Chapudi 752 MS 74%
Remaining Extent, Portions 1, 3 & 4 of 74%
Coniston 699 MS
Driehoek 631 MS 74%
Remaining Extent of Dorps-rivier 696 MS 74%
Enfield 512 MS (consolidation of Remaining 74%
Extent of Enfield 474 MS, Brosdoorn 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 74%
Portion 2, Remaining Extent of Portion 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 74%
MS
Remaining Extent & Portion 1 of Prince's Hill 74%
704 MS
Qualipan 655 MS 74%
Queensdale 707 MS 74%
Remaining Extent & Portion 1 of Ridge End 74%
662 MS
Remaining Extent & Portion 1 of Rochdale 74%
700 MS
Sandilands 708 MS 74%
Portions 1 & 2 of Sandpan 687 MS 74%
Sandstone Edge 658 MS 74%
Change
Project during
Name Tenement Number Location Interest Quarter
Remaining Extent of Portions 2 & 3 of 74%
Sterkstroom 689 MS
Sutherland 693 MS 74%
Remaining Extent & Portion 1 of Varkfontein 74%
671 MS
Remaining Extent, Portion 2, Remaining 74%
Extent of Portion 1 of Vastval 477 MS
Vleifontein 691 MS 74%
Ptn 3, 4, 5 & 6 of Waterpoort 695 MS 74%
Wildebeesthoek 661 MS 74%
Woodlands 701 MS 74%
Kanowna M27/41 Coolgardie^ 2.99%
West and M27/47 2.99%
Kalbara M27/59 2.99%
M27/72,27/73 2.99%
M27/114 2.99%
M27/181 7.24%
M27/196 2.99%
M27/414,27/415 2.99%
P27/1826-1829 2.99%
P27/1830-1842 2.99%
P27/1887 2.99%
Abbotshall ML63/409,410 Norseman^ Royalty
Royalty
Kookynie ML40/061 Leonora^ Royalty
Royalty ML40/135,136 Royalty
Makhado Fripp 645 MS Limpopo~ 69%#
Project Lukin 643 MS 69%#
Mutamba 668 MS 69%#
Salaita 188 MT 69%#
Tanga 849 MS 69%#
Daru 848 MS 69%#
Windhoek 847 MS 69%#
Generaal Beck 568 MS-- Limpopo~ 74%
Project* Bekaf 650 MS- 74%
Remaining Extent & Portion 1 of Boas 642 74%
MS-
Chase 576 MS- 74%
Coen Britz 646 MS- 74%
Fanie 578 MS- 74%
Portions 1, 2 and Remaining Extent of 74%
Generaal 587 MS-
Joffre 584 MS- 74%
Juliana 647 MS 74%
Kleinenberg 636 MS- 74%
Remaining Extent of Maseri Pan 520 MS- 74%
Change
Project during
Name Tenement Number Location Interest Quarter
Remaining Extent and Portion 2 of Mount 100%
Stuart 153 MT--
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 100%
155 MT--
Van Deventer 641 MS- 74%
Wildgoose 577 MS- 74%
Mopane Ancaster 501 MS-- Limpopo~ 100%
Project* Banff 502 MS- 74%
Bierman 599 MS- 74%
Cavan 508 MS 100%
Cohen 591 MS-- 100%
Remaining Extent, Portions 1 & 2 of Delft 499 74%
MS-
Dreyer 526 MS-- 74%
Remaining Extent of Du Toit 563 MS- 74%
Faure 562 MS 74%
Remaining Extent and Portion 1 of Goosen 74%
530 MS --
Hermanus 533 MS- 74%
Jutland 536 MS-- 100%
Krige 495 MS- 74%
Mons 557 MS- 100%
Remaining Extent of Otto 560 MS (Now 74%
Honeymoon)-
Remaining Extent & Portion 1 of Pretorius 74%
531 MS-
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 74%
of Portion 10, Portions 13, 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%
Portion 3 (of 2) of Kweekspruit No. 22 70%
Change
Project during
Name Tenement Number Location Interest Quarter
Uitkomst Portion 8 (of 1) of Kweekspruit No. 22 KwaZulu- 70%
Colliery and Natal~
prospects Remainder of Portion 1 of Uitkomst No. 95 70%
Portion 5 (of 2) of Uitkomst No. 95 70%
Remainder Portion1 of Vaalbank No. 103 70%
Portion 4 (of 1) of Vaalbank No. 103 70%
Portion 5 (of 1) of Vaalbank No. 103 70%
Remainder of Portion 1 of Rustverwacht No. 70%
151
Remainder of Portion 2 of Rustverwacht No. 70%
151
Remainder of Portion 3 (of 1) of 70%
Rustverwacht No. 151
Portion 4 (of 1) Rustverwacht No.151 70%
Portion 5 (of 1) Rustverwacht No. 151 70%
Remainder of Portion 6 (of 1) of 70%
Rustverwacht No. 151
Portion 7 (of 1) of Rustverwacht No. 151 70%
Portion 8 (of 2) of Rustverwacht No. 151 70%
Remainder of Portion 9 (of 2) of 70%
Rustverwacht No. 151
Portion 11 (of 6) of Rustverwacht No. 151 70%
Portion 12 (of 9) of Rustverwacht No. 151 70%
Portion 13 (of 2) of Rustverwacht No. 151 70%
Portion 14 (of 2) of Rustverwacht No. 151 70%
Portion 15 (of 3) of Rustverwacht No. 151 70%
Portion 16 (of 3) of Rustverwacht No. 151 70%
Portion 17 (of 2) of Rustverwacht No. 151 70%
Portion 18 (of 3) of Waterval No. 157 70%
Remainder of Portion 1 of Klipspruit No. 178 70%
Remainder of Portion 4 of Klipspruit No. 178 70%
Remainder of Portion 5 of Klipspruit No. 178 70%
Portion 6 of Klipspruit No. 178 70%
Portion 7 (of 1) of Klipspruit No. 178 70%
Portion 8 (of 1 )of Klipspruit No. 178 70%
Portion 9 of Klipspruit No. 178 70%
Remainder of Portion 10 (of 5) of Klipspruit 70%
No. 178
Portion 11 (of 5) of Klipspruit No. 178 70%
Portion 13 (of 4) of Klipspruit No. 178 70%
Remainder of Portion 14 of Klipspruit No. 178 70%
Portion 16 (of 14) of Klipspruit No. 178 70%
Portion 18 of Klipspruit No. 178 70%
Portion 23 of Klipspruit No. 178 70%
Remainder of Portion 1 of Jackalsdraai No. 70%
299
Remainder of Jericho B No. 400 70%
Change
Project during
Name Tenement Number Location Interest Quarter
Portion 1 of Jericho B No. 400 70%
Portion 2 of Jericho B No. 400 70%
Portion 3 of Jericho B No. 400 70%
Remainder of Jericho C No. 413 70%
Portion 1 of Jericho C No. 413 70%
Remainder of Portion 1 of Jericho A No. 414 70%
Remainder of Portion 2 (of 1) of Jericho A No. 70%
414
Portion 3 (of 1) of Jericho A No. 414 70%
Portion 4 (of 1) of Jericho A No. 414 70%
Portion 5 (of 2) of Jericho A No. 414 70%
Portion 6 (of 1) of Jericho A No. 414 70%
Margin No. 420 70%
Vele Colliery Portions of Overvlakte 125 MS (Remaining Limpopo~ 100%
and Extent, 3, 4, 5, 6, 13, 14)
prospects Bergen Op Zoom 124 MS 100%
Semple 155 MS 100%
Voorspoed 836 MS 100%
Alyth 837 MS 100%
Tshikunda Certain portions of Unsurveyed State Land Limpopo~ 60%
known as Mutale
* Form part of the Greater Soutpansberg Projects
- Lapsed – Mining Right Application Lodged
-- Valid – Mining Right Application Lodged
~ 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
Date: 29-01-2021 09:12:00
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