MC Mining hopes for funding boost
MC Mining, the developer of SA’s only hard coking coal mine, expects the Covid-19 pandemic could help rather than hinder its efforts to raise funds for the flagship Makhado project as the government looks to resuscitate the ailing economy. It hopes the government will support investments such as Makhado, which will help stimulate the economy.
MC Mining, developer of SA’s only hard-coking coal mine, expects the Covid-19 pandemic could help rather than hinder its efforts to raise funds for the flagship project as the government looks to resuscitate the ailing economy.
Formerly known as Coal of Africa, MC Mining now produces coal only from its Uitkomst colliery to supply industry in the nearby area of Newcastle in KwaZulu-Natal.
Its flagship Makhado project, which will be SA’s only producer of hard-coking coal, is just $9m (R150m) away from breaking ground on the first phase of the project.
Distinct from thermal coal used in power stations, coking coal, and hard-coking coal in particular, is a premium product used in steelmaking. There is no substitute for it.
The company hopes that the government will support investments such as its Makhado project, which will help stimulate the economy.
Even before the Covid-19 pandemic it was difficult for new coal projects to attract traditional funders. “Overseas investors are spoilt for choice in terms of global investment, and rightly or wrongly SA is viewed as a relatively high-risk mining investment destination,” said MC Mining acting CEO Brenda Berlin. Also the anticoal sentiment [despite coking coal being cleaner than thermal] didn’t help attract overseas investment.”
For this reason, MC Mining has already narrowed its search to local, nontraditional sources of funding.
Capital expenditure for the first phase is $32m, and in 2020 MC Mining secured $17m in new debt from the government’s Industrial Development Corporation — after restructuring an existing loan with the financier — and also raised $14m through two in-principle agreements. Another $9m in funding must be secured if construction is to begin at the start of 2021.
While Covid-19 had slowed the funding process, there was a silver lining, Berlin said.
Renewed enthusiasm of governmental institutions for investing in projects like Makhado that facilitated creation of new jobs and procurement opportunities in impoverished areas, spoke to the industrialisation agenda.
“So there’s a lot of energy in government circles to meet those ideals, all of which we do,” she said. A phased approach to the project would reduce the execution risk, said Berlin. Offtake agreements had been secured for the coking and the by-product thermal coal produced by phase one of Makhado, which had a life of nine years and would produce 0.54-million tonnes of coking coal a year.
Construction on phase two could begin as soon as 2023 and was expected to produce 0.8million tonnes of coking coal with a life expectancy of 37 years. Capital costs for this phase were estimated to be $84m.
The group reported on Wednesday that its losses had narrowed from $33.5m in 2019 to $12.85m for the year ended in June 2020. Uikomst, MC Mining ’ s only operational mine, was put on care and maintenance during the Covid-19 pandemic from March 27 until it restarted with half the workforce on May 4 with production only normalising at the end of June.
Sales fell 17% in line with lower production while revenue dropped 35% to $17.2m, due to a 22% drop-off in export coal prices.