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RNS Number : 5126F
MC Mining Limited
29 October 2018
ANNOUNCEMENT
29 October 2018
FIRST MAKHADO PROJECT HARD COKING COAL OFF-TAKE AGREEMENT
SECURED
MC Mining Limited ("MC Mining") is pleased to announce the
conclusion of a Coal Purchase Agreement (the "Agreement") for hard
coking coal ("HCC") to be produced by the Makhado hard coking and
thermal coal project ("Makhado Project" or "Makhado") located in
South Africa's Limpopo province. The parties to the Agreement are
MC Mining's subsidiary, Baobab Mining & Exploration (Pty) Ltd
("Baobab" or the "Company"), the owner of the Makhado Project, and
Huadong Coal Trading Center Co, Ltd ("HDCTC"), a Chinese
state-owned enterprise and a subsidiary of the China Forestry Group
Corporation (the "Purchasing Group").
The Purchasing Group is the owner of the Zhonglin Rugao,
Zhonglin Xinminzhou and Zhonglin Suqian ports as well as Yangtze
River water and harbour space and canal shoreline, together with
780,000 tonnes of berth-space. HDCTC has logistics and bulk
commodity trading interests, utilising the Purchasing Group's
substantial logistics infrastructure, and traded in excess of five
million tonnes ("t") of iron ore and coal during the past two
years.
Key highlights:
-- three year off-take resulting in the supply of a minimum of
400,000t of HCC per annum to HDCTC (half of Makhado's annual HCC
production);
-- the Makhado Project is expected to produce up to 800,000t of
HCC annually as well as between 900,000t and 1,000,000t of export
quality thermal coal;
-- the Agreement confirms the quality of the Makhado HCC and
international demand for the product; and,
-- represents another significant step in the development of the
Makhado Project which will generate significant employment
opportunities in the Limpopo province.
Under the terms of Agreement, the first supply of HCC is due 18
months after construction of the Makhado Project commences and is
subject to the following conditions precedent:
-- Baobab confirming by 1 April 2019 that it has secured funding
for the capital, mining and operations for its Makhado Project,
extendable by 12 months;
-- HDCTC and the Company procuring the necessary internal and
regulatory approvals to proceed with the Agreement, also by 1 April
2019; and
-- Makhado site works commencing by 30 June 2020.
It is envisaged that the coal will be sold free-on-board (FOB)
at the Matola Terminal in Maputo, Mozambique. The HCC sales price
per the Agreement is linked to a published index price, confirming
the marketability of Makhado's coal. International prices of HCC
have been positive over the last 18 months and the Company is
confident that long-term prices will remain favourable.
South Africa produces significant quantities of thermal coal,
primarily used for heat, steam and electricity generation, sold to
domestic and export customers. However, the country has a very
limited domestic supply of high-quality metallurgical coal
resulting in coke producers having to import HCC for the
manufacture of metallurgical coke. This coke is used in furnaces
with iron ore and a flux (lime) to produce pig iron (steel). It is
anticipated that the balance of Makhado's HCC production (not sold
to HDCTC) will be sold domestically.
The development of MC Mining's flagship Makhado Project is
expected to facilitate economic growth in the Limpopo province and
the Agreement has the potential to generate significant foreign
currency inflows for South Africa. The timeframes envisaged in the
Agreement are in line with the Heads of Agreement ("HOAs") signed
with China Railway International Group Co., Ltd., announced in
September 2018. The HOAs will result in the negotiation of a
funding package for the Makhado engineering, procurement and
construction ("EPC") coal handling and processing plant, 85% of the
EPC costs and contract mining operations, conditional upon the
finalisation of mutually acceptable terms and conditions by June
2019.
The Agreement was brokered by Apex Commodity Markets Limited
("Apex"), a boutique physical commodity brokerage headquartered in
London and with representation in China, South Africa, Austria,
Canada and the United States. Apex focuses on niche products and
projects, mainly within the dry bulk commodity space, including
spot and off-take contracts as well as corporate finance
transactions. Apex will charge a market related commission for coal
sold in terms of the Agreement, facilitating the sales as well as
communications between the Company and HDCTC.
David Brown, CEO commented:
"The signing of the first HCC off-take agreement is a
significant step for Makhado, reaffirming its world class coal
qualities and international appetite for this type of coking coal.
South Africa is a traditional producer of thermal coal with
currently no significant HCC being produced which results in
producers having to import the commodity. Makhado's coking coal has
the necessary attributes to replace some of these imports whilst
the development of the project will generate employment
opportunities in the Limpopo province and make a positive
contribution to the national balance of payments.
We are currently progressing negotiations with other potential
domestic customers for the balance of the Makhado HCC, positioning
MC Mining as South Africa's pre-eminent producer of high-grade
metallurgical coal."
Authorised by
David Brown
Chief Executive Officer
For more information contact:
David Brown Chief Executive Officer MC Mining Limited +27 10 003 8000
Brenda Berlin Chief Financial Officer MC Mining Limited +27 10 003 8000
Tony Bevan Company Secretary Endeavour Corporate Services +61 08 9316 9100
Company advisors:
Financial PR
Jos Simson/ Gareth Tredway (United Kingdom) Tavistock +44 20 7920 3150
Ross Allister/David McKeown Nominated Adviser and Broker Peel Hunt LLP +44 20 7418 8900
Charmane Russell/Olwen Auret Financial PR (South Africa) R&A Strategic Communications +27 11 880 3924
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. MCM's key projects
include the Uitkomst Colliery (metallurgical coal), Makhado Project
(coking and thermal coal). Vele Colliery (coking and thermal coal),
and the Greater Soutpansberg Projects (MbeuYashu).
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
MCM's ability to control or estimate precisely, such as future
market conditions, changes in regulatory environment and the
behaviour of other market participants. MCM 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. MCM assumes no obligation and
do 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.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
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of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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