Wrap Text
Half Year Results for the period ending 31 December 2017
MC Mining Limited
Previously Coal of Africa Limited
(Incorporated and registered in Australia)
Registration number ABN 008 905 388
ISIN AU000000MCM9
JSE share code: MCZ
ASX/AIM code: MCM
ANNOUNCEMENT 15 March 2018
HALF YEAR RESULTS FOR THE PERIOD ENDING 31 DECEMBER 2017
MC Mining Limited ("MC Mining", “MCM” or "the Company") is pleased to
provide its interim financial statements for the year ended 31 December
2017 (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
- No fatalities and no lost-time injuries ("LTIs") recorded during the
Period (2017: none);
- The Uitkomst metallurgical and thermal coal colliery (“Uitkomst
Colliery” or “Uitkomst”) processed 346,336 tonnes (“t”) of run of mine
(“ROM”) coal during the period, resulting in sales of 308,275t;
- MC Mining Board approval of the Makhado hard coking coal ‘Lite’
evaluation project (“Makhado Project” or “Makhado”), has significantly
reduced expected capital requirements and the construction period;
- Commencement of the Competent Persons Report (“CPR”) on the Makhado
Project by independent expert Minxcon (Proprietary) Limited
(“Minxcon”); and
- Vele coking and thermal coal colliery (“Vele”) remained on care and
maintenance.
Corporate and market features
- Delivery on MCM’s balance sheet restructuring strategy with the sale of
the Mooiplaats thermal coal colliery (“Mooiplaats Colliery” or
“Mooiplaats”) for R179.9 million ($14.5 million);
- Change of the Company’s name to MC Mining Limited and a 20 for one share
consolidation (the “Consolidation”) as approved by shareholders at the
November 2017 Annual General Meeting (“AGM”); and
- Positive coking and thermal coal price movements during the Period,
principally due to market supply constraints.
Financial review
- The loss for the Period of $97.34 million (H1 FY2017: loss of $12.97
million) included an $87.5 million impairment of the Vele asset; and
- Cash balance of $10.2 million (H1 FY2017: $7.2 million; FY2017: $9.6
million).
David Brown, CEO commented:
“The Company recorded significant progress during the Period with
production from the Uitkomst Colliery, further advancement of the Makhado
Project, as well as the sale of the non-core Mooiplaats asset. These
successful initiatives were key milestones to ensure MC Mining becomes a
self-sufficient mid-tier coal mining company.”
“The Mooiplaats disposal will yield annual operational cost savings of
approximately $1.4 million while the aggregate proceeds of $14.5 million
will be used to further develop our flagship Makhado Project and/ or the
potential acquisition of a second cash generating asset.”
“Makhado has the requisite regulatory approvals to commence mining and the
Company continues its efforts to secure access to two key properties for
the completion of confirmatory geotechnical drilling. The Company
anticipates that this will be resolved in H2 FY2018 with the marketing and
fundraising elements being progressed in H1 FY2019. The shortened
construction period ensures Makhado is positioned to take advantage of
higher hard coking and thermal coal prices, delivering positive returns
for shareholders in the near term.”
“The recent political developments in South Africa have resulted in a much
stronger currency, particularly against the United States dollar. The
change in economic climate together with the Company prioritising the
development of the Makhado Project, resulted a $87.5 million impairment in
its investment in Vele and the positioning of the colliery within MC
Mining’s portfolio will be finalised before the end of the current
financial year.”
Review of Operations
Uitkomst Colliery – Utrecht Coalfields (100% owned - 70% post BEE
transactions)
The Uitkomst Colliery employs approximately 573 employees (including
contractors) and reported no LTIs during the Period.
The Company acquired a 91% interest in the Uitkomst Colliery at the end of
June 2017, with the remaining 9% held by broad-based Black Economic
Empowerment (“BEE”) trusts, including employees and communities.
Uitkomst comprises the existing underground coal mine and a planned life
of mine (“LOM”) extension directly to the north of current operations,
totalling 16 years remaining LOM. The LOM extension requires the
development of a north adit (horizontal shaft) and the colliery has applied
for an amendment of its Integrated Water Use Licence (“IWUL”) prior to
commencing this expansion. Uitkomst sells sized coal (peas) products to
local energy generation facilities with the 0 to 40mm product sold into
the domestic metallurgical market for use as pulverised coal.
The Uitkomst Colliery processed 346,336t of ROM coal during the Period,
comprising 265,609t of Uitkomst ROM coal and 80,727t of purchased ROM.
This resulted in sales of 308,275t, consisting of 174,948t of Uitkomst
ROM, 53,690t of slurry used for blending and 79,637t of purchased ROM coal.
Revenue in US dollars totalled $17.0 million and was positively impacted
in the second quarter by improved international coal prices and a weaker
exchange rate.
December
September 2017
2017 quarter quarter H1 FY2018
(t) (t) (t)
Production tonnages
Uitkomst ROM 125 108 140 501 265 609
Purchased ROM to 45 313 35 414 80 727
blend
170 421 175 915 346 336
Sales tonnages
Own ROM 80 677 94 271 174 948
Slurry used for 36 489 17 201 53 690
blending
Purchased ROM to 48 266 31 371 79 637
blend
165 432 142 843 308 275
Financial metrics
Revenue/t ($) 50.03 61.09 55.14
Production cost/
43.20 43.47 43.32
saleable tonnes ($)
In order to meet the requirements of the South African Mining Charter, the
Company is in the process of selling an additional 21% interest in Uitkomst
to BEE shareholders on a vendor finance basis. The transaction is expected
to be concluded prior to 30 June 2018.
Makhado Coking Coal Project – Soutpansberg Coalfield (95% owned - 69% post
BEE transactions)
The Makhado Project recorded no LTIs during the Period.
The Directors of MC Mining approved the revised evaluation plan for the
Makhado ‘Lite’ project in September 2017, to unlock near-term shareholder
value from its flagship project. The plan reduces capital expenditure and
shortens the construction period to 12 months, with a 46 year LOM and
potential for future expansion of mining and processing if appropriate.
The Makhado Project has all the regulatory permits required to commence
mining but requires access to the key Lukin and Salaita farms to confirm
geotechnical information prior to the construction of the colliery. These
properties are subject to the South African government’s land claims
processes and the Company anticipates that this will be resolved in H2
FY2018.
During the Period, MC Mining engaged independent mining experts Minxcon to
complete a CPR on the Makhado Project. The results were received in January
2018 and confirmed the figures relating to costs, capital expenditure and
returns previously released to the market. The Company has commenced hard
coking and export thermal coal off-take discussions with various parties
and expects that a substantial portion of Makhado’s hard coking coal will
be sold locally with the balance sold on international markets.
The South African Government is actively facilitating industrial
development and gazetted the South Africa Energy Metallurgy Special
Economic Zone (“SEZ”) 40km south of Musina, during September 2017. The SEZ
will include a coal-fired power plant, coking coal batteries as well as
steel and stainless steel plants. The Company anticipates that the SEZ
could take three to five years to develop.
Vele Coking and Thermal Coal Colliery – Limpopo (Tuli) Coalfield (100%
owned)
The Vele Colliery remained on care and maintenance throughout the Period
and no LTIs were recorded during this time.
The original Vele Colliery IWUL was renewed in January 2016 for a further
20 years, and also amended in line with the requirements for the colliery’s
Plant Modification Project. Post the Period-end, in February 2018, the
South African Department of Water and Sanitation granted the IWUL
amendment, completing the suite of regulatory authorisations required for
the Vele Colliery.
The significant political changes that occurred towards the end of the
Period, resulting in strengthening of the rand against the dollar, led to
an impairment indicator on the Vele carrying value. This rand strength,
coupled with a delay in production due to the Makhado Project focus,
resulted in the carrying value of Vele being impaired by $87.5 million
during the Period.
Greater Soutpansberg Project (MbeuYashu) – Soutpansberg Coalfield (74%
owned)
The MbeuYashu Project recorded no LTIs during the six months.
Corporate
Mooiplaats Disposal
MC Mining has made significant progress in the restructuring of its balance
sheet, including the sale of the underground Mooiplaats Colliery that had
been on care and maintenance since 2013. The colliery was sold to
Mooiplaats Coal Holdings Proprietary Limited for $12.9 million (ZAR179.9
million). The purchase price will be settled as follows:
• $4.8 million (ZAR67.0 million) was received in November 2017; and
• The balance, being $9.1 million (ZAR112.9 million), to be settled in
ten equal quarterly instalments, subject to the incorporation of
Portions 2, 3 and the remaining extent of the farm Klipbank 295 IT into
the Mooiplaats Colliery New Order Mining Right.
Corporate Actions
At the November 2017 AGM, shareholders approved the renaming of the Company
to reflect its potential growth, particularly of its hard coking
(metallurgical) coal prospects. This resulted in the Company changing its
name to ‘MC Mining Limited’. This was accompanied by a change in the
Company’s ticker on the Australian Securities Exchange and AIM Market of
the London Stock Exchange to ‘MCM’, while MC Mining’s shares trade under
the MCZ ticker on the Johannesburg Stock Exchange. Shareholders also
approved a 20-for-1 consolidation of the Company’s issued capital and the
Consolidation was completed in December 2017.
Financial review
The loss for the six-month Period was $97.34 million (H1 2017: loss of
$12.97 million) or 78.39 US cents per share compared to a loss of $12.97
million, or 13.68 US cents per share for the prior corresponding period.
The loss for the Period includes:
- Revenue from Uitkomst of $17.0 million (H1 FY2017: nil) and cost of
sales of $14.36 million (H1 FY2017: NIL), resulting in a gross profit
of $2.7 million (2017: nil);
- An impairment of the Vele assets of $87.5 million and the reversal of a
$3.1 million prior year impairment arising from the sale of Mooiplaats;
- In the comparative period, intangible assets were impaired by $10.6
million due to the Company deciding not to renew its port capacity
through the Matola terminal;
- De-recognition of the Vele deferred tax asset of $5.6 million and an
income tax expense of $1.3 million;
- Net foreign exchange losses of $1.3 million (2016: gain of $2.9 million)
arising from the translation of inter-group loan balances, borrowings
and cash due to changes in the ZAR:US$ and A$:US$ exchange rates during
the period;
- Employee benefit expense of $3.9 million (H1 FY2017: expense: $2.5
million)
- Other expenses of $2.7 million (H1 FY2017: $2.3 million); and
- Depreciation of $0.2 million (H1 FY2017: $0.2 million) and amortisation
of nil (H1 FY2017: $0.4 million).
Authorised by
David Brown
Chief Executive Officer
For more information contact:
David Brown Chief Executive MC Mining Limited +27 10 003
Officer 8000
Brenda Berlin Chief Financial MC Mining Limited +27 10 003
Officer 8000
Tony Bevan Company Secretary Endeavour Corporate +61 08 9316
Services 9100
Company advisors:
Jos Simson/ Gareth Financial PR Tavistock +44 20 7920
Tredway (United Kingdom) 3150
Ross Allister/Richard Nominated Adviser Peel Hunt LLP +44 20 7418
Crichton/James and Broker 8900
Bavister
Charmane Financial PR R&A Strategic +27 11 880
Russell/Olwen Auret (South Africa) Communications 3924
Investec Bank Limited is the nominated JSE Sponsor
About MC Mining Limited:
MC Mining Limited (MCM) 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
Limited (MCM) 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.
Date: 15/03/2018 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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