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RNS Number : 6726C
MC Mining Limited
19 June 2019
ANNOUNCEMENT 19 June 2019
MAKHADO PHASE 1 HARD COKING COAL OFF-TAKE CONCLUDED
MC Mining Limited ("MC Mining") is pleased to announce the
completion of a major milestone for the company through the signing
of an off-take agreement (the "Agreement") with ArcelorMittal South
Africa Limited ("AMSA"). The Agreement results in AMSA purchasing
hard coking coal ("HCC") that will be produced from Phase 1 of the
Makhado coking coal project ("Makhado Project" or "Makhado").
The Agreement reaffirms the quality of Makhado's HCC and follows
the April 2019 announcement of an off-take with one of the world's
largest producers and marketers of seaborne traded coal for all the
by-product thermal coal to be produced by Phase 1. Completion of
these off-takes satisfies a key requirement for the Makhado
Project's economics and allows funding discussions to gain further
traction with construction anticipated to commence in Q3
CY2019.
South Africa has a very limited production of high-quality
metallurgical (coking) coal, resulting in AMSA and other coke
producers having to import HCC for the manufacture of metallurgical
coke, a key ingredient in the production of steel. The key
highlights of the Agreement are:
-- AMSA will purchase a minimum of 350,000 tonnes ("t") of Phase
1 HCC annually and has the right to acquire a further 100,000t per
year;
-- the Agreement will endure for the shorter of ten years or the Phase 1 life-of-mine;
-- HCC will be delivered to the Musina siding and railed to
AMSA's Vanderbijlpark and Newcastle operations;
-- The HCC will be sold on a FOR (free on rail) basis; and
-- sales prices will be calculated on a monthly basis and are
linked to a published, international US dollar denominated HCC
index.
The Agreement is subject to various conditions precedent,
including:
-- confirmation by 15 December 2019 that the requisite funding
for the development of Phase 1 has been secured; and
-- confirmation by 30 June 2020 that delivery of HCC will commence within six months.
Phase 1 of the Makhado Project will result in the development of
the west pit on the Daru and Tanga farms with a nine-month
construction period expected to commence in Q3 CY2019 and will be
followed by a one-month ramp-up. This phase will generate
approximately three million tonnes per annum ("Mtpa") of
run-of-mine ("ROM") coal that will undergo preliminary processing
at the mine, yielding an estimated 2Mtpa of residual coal. The
residual coal will be transported to the existing, modified Vele
Colliery for final processing, producing approximately 0.54Mtpa of
HCC and 0.57Mtpa of export quality thermal coal that will be
trucked to the Musina siding for dispatching to customers.
As stated, the conclusion of this Agreement ensures off-takes
for Phase 1 are completed, a key component for the launch of the
project. This also ensures that MC Mining can contemplate the
development of Phase 2 of the Makhado Project (Makhado 'Lite') that
also has significant positive economics. The construction of Phase
2 in circa CY2022 will include the development of the east and
central pits on the recently acquired Lukin and Salaita properties
and is expected to produce some 4Mtpa of ROM coal. This will yield
approximately 0.8Mtpa of HCC and between 0.9Mtpa and 1.0Mtpa of
export quality thermal coal. MC Mining has secured an initial
three-year off-take for a minimum of 0.4Mtpa of Phase 2 HCC with
Huadong Coal Trading Center Co, Ltd ("HDCTC"), a Chinese
state-owned enterprise. HDCTC has logistics and bulk commodity
interests and traded in excess of 5,000,000t of iron ore and coal
during the past two years which necessities that circa 50% of the
Phase 2 HCC is also subject to off-take agreements.
David Brown, CEO commented:
"The signing of the Phase 1 HCC off-take agreement with AMSA is
a massively positive step for Makhado. MC Mining is now positioned
to become South Africa's pre-eminent producer of high-grade
metallurgical coal and the Makhado coking coal will partially
replace coking coal currently imported.
The phased development of Makhado reduces execution risk by
utilising the existing Vele Colliery processing facility as well as
previously tested logistics infrastructure and generates a
significant number of employment opportunities in the Limpopo
province. The Agreement, together with the announcement in April
2019 of the Phase 1 thermal coal off-take agreement, reaffirms the
world-class quality of the Makhado coal and satisfies a key
requirement for funders. The long-term viability of Makhado's HCC
is supported by global steel demand that is expected to grow over
the next ten years, with economic development and urbanisation
driving increases in per capita steel usage.
Negotiations for a composite debt and equity funding arrangement
continue. We anticipate that these processes will be completed in
Q3 CY2019, with construction of Phase 1 of our flagship Makhado
Project commencing later in the same period."
Authorised by
David Brown
Chief Executive Officer
This announcement is inside information for the purposes of
Article 7 of Regulation 596/2014.
For more information contact:
Chief Executive
David Brown Officer MC Mining Limited +27 10 003 8000
Chief Financial
Brenda Berlin Officer MC Mining Limited +27 10 003 8000
Endeavour Corporate +61 08 9316
Tony Bevan Company Secretary Services 9100
Company advisors:
Financial PR (United +44 20 7920
Jos Simson/Emily Fenton Kingdom) Tavistock 3150
Nominated Adviser +44 20 7418
Ross Allister and Broker Peel Hunt LLP 8900
Charmane Russell/Olwen Financial PR (South Russell & Associates +27 11 880
Auret Africa) 3924 or
+27 82 372
5816
Investec Bank Limited is the nominated JSE Sponsor
About MC Mining Limited:
MC Mining Limited (MC Mining) is an AIM/ASX/JSE listed coal
exploration, development and mining company operating in South
Africa. MC Mining's key projects include the Uitkomst Colliery
(metallurgical coal), Makhado coking and thermal coal project, Vele
Colliery (coking and thermal coal) and the Greater Soutpansberg
Projects (coking and thermal coal).
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 MC
Mining's ability to control or estimate precisely, such as future
market conditions, changes in regulatory environment and the
behaviour of other market participants. MC Mining 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. MC Mining 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
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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