MC Mining announces Phase 1 of Makhado project

Date: 21 March 2019 By: 

MC Mining have announced that they will start developing their flagship Makhado hard-coking and thermal-coal project just north of the Soutpansberg in phases.

According to a press release issued by the mining company, construction on Phase 1 will commence during the third quarter of this year if all conditions are satisfied. These conditions include finalizing a thermal off-take agreement by the second quarter of 2019, finalizing debt funding to the amount of US$20 million and raising enough equity to repay the Industrial Development Corporation of South-Africa (IDC) and to contribute to Phase 1 funding, totalling US$ 30 million.

MC Mining effectively owns 69% of Baobab Mining & Exploration (Pty) Ltd, the owner of the Makhado Project, the balance being and/or to be held by the IDC, seven communities located in the vicinity of Makhado and a black industrialist. MC Mining previously announced the Makhado “Lite” project plan, producing 4 million tonnes per annum (Mtpa) of run-off-mine (ROM) coal, yielding 1.6 to 1.8 Mtpa of saleable product. The development of Makhado Lite was, however, delayed for approximately a year mainly because of the lack of access to two key properties (the farms Lukin and Salaita) were the east pit, processing and other infrastructure would be located. These properties have since been bought by the company.

The delay, however, resulted in the company's having to repay their existing IDC debt ahead of significant cashflows out of Makhado. “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 Vele plant (Phase 1) and then progressing to the east pit (Phase 2),” said the company.

According to MC Mining, construction at Makhado and Vele will occur at the same time and will take nine months to complete, requiring funding of R460 million, including a 10% design contingency. “Phase 1 mining and processing will be outsourced to experienced third parties who have operated in South Africa and is expected to create approximately 650 permanent employment opportunities,” said the company. Once up and running, MC Mining said, Phase 1 will generate significant cash flows.

“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 to 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,” said MC Mining CEO David Brown. He added that they remained committed to the sustainable development of the Makhado Project, “recognising its potential to drive significant socio-economic transformation and seeking co-operation between mining, agriculture and heritage land uses”.

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