Business Day

MC Mining hopes for funding boost

- Lisa Steyn Mining & Energy Writer steynl@businessli­ve.co.za

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.

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