MC Mining is a coal exploration mining companyMC Mining’s key projects include the Uitkomst Collier (metallurgical and thermal coal), Makhado Project (hard coking coal), Vele Colliery (semi-soft coking and thermal coal), and the Soutpansberg Projects (coking and thermal coal).
MC Mining’s flagship Makhado Project is situated in the Soutpansberg Coalfield in Limpopo province. Makhado has all required licences and authorisations and construction of Phase 1 of the project is expected to commence in Q1 of 2022 dependent on funding. The Makhado Project mining area covers four farms and will be developed in two phases.
MC Mining owns all of the surface rights where the opencast mining pits and related infrastructure will be situated. The Phase 1 includes the scalped and screened Makhado run-of-mine coal being processed at the existing, modified Vele Colliery plant, producing 0.54 million tonnes per annum (Mtpa) of hard coking coal and 0.57Mtpa of a thermal coal by-product.
The Makhado hard coking coal project currently has 29 employees and contractors with 650 to be employed when Makhado Phase 1 hard coking coal project is operational.
MC Mining has secured offtake agreements for 85% of the Makhado Phase 1 hard coking coal and all of the thermal coal by-product. The offtake agreement with ArcelorMittal will result in ArcelorMittal purchasing between 350 000t & 450 000t of Phase 1 hard coking coal annually.
MC Mining has a 68% interest in the Makhado Project through its subsidiary, Baobab Mining & Exploration (Pty) Ltd, with the Industrial Development Corporation of South Africa Limited (IDC) owning 6.7%, seven local communities owning 20% and the remaining 6% held by a Black Economic Empowerment industrialist.
How much capital has MC Mining raised in the last 6 months and from who?
- R60 million standby loan facility from a 1.5% shareholder
- raised R84m staged in 2 tranches and
- the IDC extended the date for repayment of a R160m loan payable by MC Mining.
- MC Mining Limited has entered into a R60 million Standby Loan Facility with Dendocept, a 1.5% shareholder in the Company. Proceeds from the Facility will be utilised to progress early works at the Makhado hard coking coal project
The R60m is available for a period of 12 months from first drawdown and must be repaid on or before the end of this period. Interest will be paid monthly calculated using the prevailing South African Prime interest rate (currently 8.25%) plus a margin of 3%, similar to that levied on the current bank financing in the group. The R60m facility is unsecured and is guaranteed by MC Mining. The outstanding balance on the final maturity date is payable in cash or convertible to MC Mining.
- Early 2022, MC Mining entered into a staged R86,036,691 Convertible Advance and Subscription Agreement with South African based mining group, Senosi Group Investment Holdings Proprietary Limited (Senosi). This agreement has two tranches.
Tranche 1: the initial share subscription by Senosi is limited to 38,363,909 new ordinary shares in MC Company’s to be issued at R1.20 per share, to raise R46,036,691 in equity. This will result in SGIH owing 19.9% of the MC Company’s issued shares.
Senosi has also conditionally agreed to subscribe for a 2nd tranche of new ordinary shares (together with the First Tranche Shares, at the issue price, raising R40m (the Second Tranche Funding), which, will result in Senosi holding an aggregate 31.71% stake MC Mining.
Total R46m Senosi loan will convert to the First Tranche Shares once the funds have been advanced, provided that South African Reserve Bank approval has been obtained.
1st Tranche Funding is secured against shares in MCM’s subsidiaries,Limpopo Coal Company and Harissa Investment. 1st tranche funding (R46m) will be used to settle the balance owing to the vendors of the Lukin and Salaita properties.
MCM is set to make payment of R35m under a deferred payment arrangement for land acquired under a sale and purchase agreement. R11m will be used for working capital.
The second tranche funding will be used to advance development of the Makhado hard coking coal project, thermal coal project and for working capital.
3.the Industrial Development Corporation of South Africa Limited (IDC) extended the date for repayment of a R160m loan payable by MC Mining.
In March 2017, the Company and Baobab Mining and Exploration Proprietary Limited (Baobab), a subsidiary of MC Mining and owner of the NOMR for the Makhado Project entered into a loan agreement with the IDC which provided for a loan facility of $16,772 (R240,000) (March loan facility).
The facility was provided to advance the development of the Makhado Project. A first tranche drawn down of $8,386 (R120,000 ) was completed in May 2017. The IDC loan facility of $16,772 (R240,000) in March 2017 was restructured during the period. In addition to the initial $8,386 (R120,000) draw down in May 2017, the IDC agreed that the MC Mining’s subsidiary, Baobab, draw down $2,795 (R40,000) representing the second tranche drawn on that loan facility. The remaining $5,591 (R80,000) undrawn balance was then cancelled. The $2,795 (R40,000) loan facility restructure was conditional upon the MC Mining raising $1,048 (R15,000) in the form of new equity. That condition was satisfied in August 2020 at which time 13,331,433 new shares were issued raising $1,048 (R15,000).
The $11,181 (R160,000) IDC loan facility plus accrued interest was repayable on 31 January 2022. MC Mining was required to issue warrants, in respect of MC Mining shares, to the IDC on each draw down date. The warrants for the first draw down equated to 2.5% of the entire issued share capital of MC Mining as at 5 December 2016. The IDC is entitled to exercise the warrants for a period of five years from the date of issue.
The warrants for the second draw down equated to 0.833% of the entire share capital of MC Mining as at 1 October 2020. Furthermore, upon each advance date, Baobab shall be required to issue new ordinary shares in Baobab to the IDC equivalent to 5% of the entire issued share capital of Baobab at such time. As a result of the first draw down, 5% of Baobab’s equity was issued to the IDC. Baobab is required to issue new ordinary shares to the IDC equivalent to 1.7% of the entire share capital of Baobab for the $2,795 (R40,000) draw down.
The repayment date for the existing $11.2 million (ZAR160 million) IDC loan was extended to 31 January 2022.
In April 2022, MC Mining concluded its bankable feasibility study. The Makhado Project’s development plan in the bankable feasibility study was designed to minimise the upfront capital expenditure by utilising existing infrastructure that is currently on care and maintenance. Here are the results;
• 22 years life-of-mine (LOM)
• Hard Rock Cooking 13.7 Mt
• Thermal coal production 11.9 Mt
• Construction capital: R625m
• Peak funding: R727m
• Construction period: 12 months
• Long term ZAR:USD exchange rate used: R15.47
• Real long term premium HCC price/t: $212.10
• Real long term thermal coal price/t: $105.50
• Post-tax IRR: 38:2%
• Post-tax Net Present Value (NPV): R4 billion.
The project has a positive post-tax internal rate of return (IRR) and an estimated payback period of 3.8 years. The project seeks to take advantage of the current higher global coal prices.
Shareholders have been waiting for this project to be completed.
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