TIDMMCM
RNS Number : 0638G
MC Mining Limited
13 March 2020
ANNOUNCEMENT 13 March 2020
HALF-YEAR RESULTS FOR THE PERIODED 31 DECEMBER 2019
MC Mining Limited ("MC Mining" or the "Company") is pleased to
provide its reviewed interim financial report for the six months
ended 31 December 2019 (the "Period"). All figures are denominated
in United States dollars unless otherwise stated and the full
report is available on the Company's website, www.mcmining.co.za
.
Highlights
Operational salient features
-- The high-grade Uitkomst metallurgical and thermal coal mine
("Uitkomst Colliery" or "Uitkomst") regrettably recorded seven
lost-time injuries ("LTIs") during the Period (FY2019 H1: one LTI).
As a result, the Company introduced a mandatory safety re-training
programme which all staff have participated in;
-- Uitkomst's run-of-mine ("ROM") coal production pleasingly
increasing 11% compared to H1 FY2019 period (262,696 tonnes ("t")
vs. 237,715t) as a result of optimisation initiatives and changes
in mine management;
-- Sales of high-grade metallurgical and thermal coal derived
from Uitkomst ROM coal of 147,234t (H1 FY2019: 157,452t);
-- 14,587t of high-ash middlings coal sold during the Period (FY2019 H1: 0t);
-- Term loan facility concluded with the Industrial Development
Corporation of South Africa Limited ("IDC") for R245 million ($17.4
million), the initial step in the composite debt and equity funding
package for the construction of Phase 1 of the Makhado hard coking
coal project ("Makhado Project" or "Makhado") ;
-- Steady progress in the composite debt/equity funding
initiatives for Makhado which the Company anticipates will be
completed in H1 CY2020;
-- Vele semi-soft coking and thermal coal colliery ("Vele
Colliery") remained on care and maintenance with its processing
plant to be refurbished and recommissioned as part of Phase 1 of
the Makhado Project; and
-- The South African Department of Mineral Resources and Energy
("DMRE") granted a mining right for the 74%-owned Generaal coking
and thermal coal project ("Generaal Project"), one of the three
projects comprising the Company's Greater Soutpansberg Project
("GSP").
Corporate and market features
-- E xtension for a fur ther six months of the R120 million
($8.5 million) facility from the IDC to MC Mining's subsidiary,
Baobab Mining and Exploration Proprietary Limited, for the
development of Makhado;
-- Pressure on API4 thermal coal prices resulted in an average
price of $69/t compared to $99/t in H1 FY2019; and
-- The slowdown in the global e conomy led to demand weakness
and average premium hard coking coal ("HCC") prices for the Period
declined to $148/t, 28% lower than the comparative period's $206/t
.
Subsequent events
-- Resignation of David Brown as Chief Executive Officer and
Executive director on 31 January 2020, and the appointment of
Brenda Berlin as Acting CEO.
Financial review
-- The loss for the Period was $7.1 million or 4.95 cents per
share compared to a loss of $3.6 million or 2.49 cents per share
for H1 FY2019;
-- The 30% decline in API4 coal prices resulted in revenue
decreasing to $11.4 million (FY2019 H1: $15.2 million) and despite
a reduction in the cost of sales ($11.1 million vs. $12.3 million),
gross profit declined to $0.3 million (FY2019 H1: $2.9 million);
and
-- Available cash at the end of the Period of $3.8 million ($8.8
million at the end of June 2019) with restricted cash of $0.03
million.
Brenda Berlin , Acting CEO commented :
"The optimisation initiatives implemented at the Uitkomst
Colliery during the Period yielded very positive results with ROM
coal production increasing by 11%. The initiatives also led to a
more predictable production profile and notwithstanding revenue
being adversely affected by the 30% decline in API4 coal prices,
Uitkomst was cash generative for the Period. The colliery also
undertook a review of its cost base to ensure that costs are
aligned to its production profile and the cost per ROM tonne was
22% lower than H1 FY2019.
The Company has completed significant milestones required for
the development of our flagship, fully-permitted Makhado Project,
facilitating the continuation of Phase 1 funding initiatives. The
first step was a $17.4 million term loan from the IDC and reflects
their support for the project. This loan is a significant
contribution towards the securing the $37 million required to
develop Phase 1. Following this, discussions with potential funders
for the balance are progressing and we anticipate that this process
should be completed in H1 CY2020, with construction commencing in
Q3 CY2020. The completion of Phase 1 will result in MC Mining being
the pre-eminent South African producer of hard coking coal. "
Project and Operation Review
Uitkomst Colliery (70% owned)
Uitkomst employs approximately 554 employees and despite s afety
continuing to be a key focus, the colliery recorded seven LTIs in
six separate incidents during the Period (FY2019 H1: one LTI). A
safety re-training programme was completed and this has
subsequently resulted in a positive safety trend, with only one LTI
recorded subsequent to the end of the Period.
The optimisation initiatives at Uitkomst yielded improved ROM
coal production, 11% higher than the comparable period (262,696t vs
237,715t). The ROM coal mined was from an area of lower quality
than the prior year, generating high-grade metallurgical and
thermal coal sales of 147,234t (FT2019 H1: 157,452t). The prior
year sales included 6,035t of coal derived from purchased ROM coal
(FY2020 H1: 0t) while Uitkomst sold 14,587t (FY2019 H1: 0t) of
high-ash middlings coal during the Period.
Uitkomst's revenue was adversely affected by pressure on
international thermal coal prices - the average API4 coal price for
the Period was 30% lower than the prior year ($69/t vs $99/t) while
the ZAR:US$ exchange rate weakened 4%. The decline in coal prices
was somewhat offset by the premium above the API4 prices that
Uitkomst receives for its sized-coal product. As a result, revenue
per tonne was 23% lower than H1 FY2019. The increased volumes mined
and optimisation initiatives resulted in production costs per ROM
tonne declining from $47.70/t to $37.21/t, while t he lower API4
prices resulted in the colliery's EBITDA declining from $3.1
million for the first half of FY2019 to $1.2 million in H1
FY2020.
Key production and financial metrics for the Period are detailed
below.
H1 FY2020 H1 FY2019 % r
Production tonnages
Uitkomst ROM coal (t) 262,696 237,715 11%
Purchased ROM coal to blend (t)* - 12,466 (100%)
262,696 250,181 5%
Sales tonnages
Own ROM coal (t) 147,234 157,452 (7%)
Middlings sales (t) 14,587 - 100%
Purchased ROM coal to wash or blend (t)* - 6,035 (100%)
161,821 163,487 (1%)
Financial metrics
Revenue/t($) 68.11 88.91 (23%)
Production costs/saleable tonnes ($) 37.21 47.70 (22%)
------------------------------------------ ---------- ---------- -------
*supply contract completed during FY2018
The Uitkomst Colliery has an estimated 15-years life-of-mine
("LOM") which includes the development of a north adit (horizontal
shaft). The colliery is in the process reassessing the design of
this development and will commence geological drilling for the
siting of the adit during Q3 FY2020.
Makhado Coking Coal Project (95% owned - 69% post Broad Based
BEE transaction)
Makhado has all of the regulatory permits required to commence
mining operations and n o LTIs were recorded during the Period
(FY2019 H1: nil).
The Makhado Project has a LOM in excess of 46 years comprising a
nine-year Phase 1 LOM and Phase 2 which will be mined for more than
37 years. Phase 1 entails construction of the west pit and trucking
of scalped and screened ROM coal to the existing, but to be
modified Vele Colliery for final processing. The Company made
significant progress in the development of Makhado during CY2019,
including off-take agreements for circa 85% of the Phase 1 HCC, all
of the thermal coal by-product as well as approximately 45% of the
Phase 2 HCC. The conclusion of the off-take agreements allowed the
Company to progress the Phase 1 composite debt/equity funding
initiatives.
The initial step in the funding process was the conclusion of a
R245 million ($17.4 million) term loan facility from the IDC. The
Company is in the process of various initiatives to raise the
balance required of $20 million and anticipates completing this in
H1 CY2020, with construction commencing in Q3 CY2021. Some of the
alternatives being progressed are:
-- the issue of new equity in the Company to certain current as
well as potential new shareholders;
-- the issue of new equity for cash in the corporate entities that own the Makhado Project;
-- debt funding; and
-- contractor funding such as build, own, operate, transfer (BOOT) arrangements.
The development of Phase 1 will take nine months, with first
coal sales in month ten. The project provides a quick payback of
funds, facilitating the development of Phase 2. The second phase
comprises the construction of the east and central pits, the
Makhado processing plant and related infrastructure. Phase 1 is a
critical step in the development of Phase 2 of the Makhado Project,
which also has significant positive economics.
Vele Coking and Thermal Coal Colliery (100% owned)
The Vele Colliery remained on care and maintenance during the
Period. No LTIs were recorded (FY2019 H1: nil).
The Vele processing plant will be modified as part of Phase 1 of
the Makhado Project, facilitating the simultaneous production of
HCC and thermal coal. These modifications includes amongst others,
a new de-stoning plant, new fines circuit and froth flotation
plant.
Greater Soutpansberg Project (74% owned)
The longer-term GSP recorded no LTIs (FY2019 H1: nil) during the
Period. The GSP is located within close proximity to the
Musina-Makhado Special Economic Zone, an area designated by
government to focus on, amongst others, energy and metallurgical
industries.
The GSP comprises the Chapudi, Mopane and Generaal project
areas. Mining right applications for the three projects were
submitted to the DMRE during 2013, with the Chapudi Project mining
right granted in December 2018, a key step to unlocking value from
these assets. The Generaal Project contains over 407 million gross
tonnes in situ of inferred coal resources and was granted a mining
right by the DMRE during the Period. The Mopane Project mining
right application is at an advanced stage and the Company is
hopeful that the granting thereof will occur in the near
future.
Coal markets
The slowdown in the global economy adversely affected
metallurgical coal markets and average premium HCC prices during
the Period were $148/t (FY2019 H1: $206/t). API4 thermal coal
prices remained under pressure with prices averaging $61/t for the
first three months of the Period. These improved in the Q2 FY2020
as a result of increased demand from India and average API4 prices
for the Period were $69/t, 30% lower than the $99/t recorded in H1
FY2019.
Financial review
The loss for the Period was $7.1 million (4.95 cents per share)
compared to a loss of $3.6 million (2.49 cents per share) in H1
FY2019. This loss includes:
-- Revenue of $11.4 million (FY2019 H1: $15.2 million) and cost
of sales of $11.1 million (FY2019 H1: $12.3 million) resulting in a
gross profit of $0.3 million (FY2019 H1: $2.9 million);
-- Net impairment of $1.2 million (FY2019 H1: $0.1 million);
-- Income tax credit of $0.3 million (FY2019 H1: expense of $0.6 million);
-- Net foreign exchange loss of $0.2 million (FY2019 H1: gain of
$0.1 million) arising from changes in exchange rates during the
Period;
-- Employee benefit expense of $3.0 million (FY2019 H1: $2.6
million) included in administrative expenses;
-- Depreciation of $0.2 million (FY2019 H1: $0.1 million), also in administrative expenses; and
-- Other expenses of $2.2 million (FY2019 H1: $2.1 million).
MC Mining had cash equivalents of $3.8 million on hand at the
end of the Period, compared to cash and cash equivalents of $8.8
million at the end 30 June 2019.
Authorised by
Brenda Berlin
Chief Executive Officer
For more information contact:
Brenda Berlin CEO MC Mining Limited +27 10 003 8000
Tony Bevan Company Secretary Endeavour Corporate Services +61 08 9316 9100
Company advisors:
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. MC Mining's key
projects include the Uitkomst Colliery (metallurgical coal),
Makhado Project (hard coking coal and thermal coal by-product).
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.
MC Mining has ensured that the mineral resources quoted are
subject to good governance arrangements and internal control. The
Company has engaged external independent consultants to update the
mineral resource in accordance with the JORC Code 2012 and SAMREC
2016. The units of measure in this report are metric, with Tonnes
(t) = 1,000kg. Technical information that requires subsequent
calculations to derive subtotals, totals and weighted averages may
involve a degree of rounding and consequently introduce an error.
Where such errors occur MC Mining does not consider them to be
material.
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contact rns@lseg.com or visit www.rns.com.
END
IR FIFSDVEIVLII
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