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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 21 September 2023
RESULTS FOR THE FULL YEAR ENDED 30 JUNE 2023
MC Mining Limited (MC Mining or the Company) is pleased to provide its audited financial statements
for the year ended 30 June 2023 (the Period). All figures are denominated in United States dollars
unless otherwise stated and the full report is available on the Company's website.
Financial review
• The loss after tax for the Period decreased by 79% to $4.4 million or 1.46 cents per share (FY2022:
loss after tax of $20.8 million or 11.41 cents per share);
• Contributing to the loss of $4.4 million were non-cash charges which decreased by 80% to $3.7
million (FY2022: $18.3 million) which includes the following:
o depreciation and amortisation decreased by 23% to $2.0 million (FY2022: $2.6 million)
o share based payment expense increased by 20% to $0.9 million (FY2022: $0.8 million)
o no impairment expense in FY2023 (FY2022: $14.9 million).
• Revenue for the Period increased by 91% to $44.8 million (FY2022: $23.5 million) and cost of sales
increased by 96% to $41.2 million (FY2022: $21.0 million), resulting in a 43% increase in gross
profit (FY2023: $3.6 million vs. FY2022: $2.5 million);
• No impairment recorded in FY2023 while the prior year included an impairment of $14.9 million
relating to the carrying value of an exploration asset neighbouring the Vele semi-soft coking and
thermal coal colliery (Vele Colliery or Vele) and rights that form part of the Greater Soutpansberg
Project (GSP);
• Administrative expenses increased by 30%, from $6.8 million in FY2022 to $8.9 million in the
reporting period due to:
o Employee expenses increasing by 58% to $4.3 million (FY2022: $2.7 million) following the
increase in staff required to advance the Makhado steelmaking hard coking coal project
(Makhado Project or Makhado) and recommencement of operations at the Vele Colliery;
o Professional fees decreased by 53% to $0.5 million (FY2022: $1.1 million) with the FY2022
balance including fees paid to the Interim Chief Executive Officer who resigned in April
2022;
o Overhead expenses increased 44% to $3.9 million (FY2022: $2.7 million) due to the
increased activities to advance Makhado;
• Finance costs from borrowings and finance leases remained flat at $1.7 million (FY2022: $1.7
million);
• Completion of a fully underwritten Rights Issue (the Rights Issue) in November 2022 raising net
proceeds of $21.4 million and facilitated loan repayments of $5.1 million (FY2022: $0.6 million)
including $3.4 million settled in equity as part of the Rights Issue;
• Unrestricted cash balances at year-end of $7.5 million (FY2022: $3.0 million);
• Net asset value increased by 13% to $87.4 million from $77.1 million in the prior corresponding
period;
• Headline loss per share decreased by 55% from ($0.03) in FY2022 to ($0.01) in FY2023;
• Basic and diluted loss per share decreased by 87% from ($0.11) in FY2022 to ($0.01);
• No dividend was declared for the year ended 30 June 2023 (FY2021: nil); and
• Attention is drawn to the disclosure in the annual financial statements and below on the going
concern assumptions.
Operational review
Safety
• Health and safety remains the highest priority. No fatalities (FY2022: nil) and six lost-time injuries
(LTIs) were recorded during the Period (FY2022: six LTIs).
Uitkomst Colliery
• The operational results for the Uitkomst steelmaking and thermal colliery (Uitkomst or Uitkomst
Colliery) compared to the preceding period are detailed below:
FY2023 FY2022 %
Production tonnages
Uitkomst ROM (t) 444,984 470,597 (5%)
Inventory volumes
High quality duff and peas at site (t) 50,490 15,534 225%
High quality duff and peas at port (t) - 22,169 (100%)
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FY2023 FY2022 %
50,490 37,703 34%
Sales tonnages
Own ROM (t) 230,181 199,065 16%
Middlings sales 11,185 26,031 (57%)
241,366 225,096 7%
Financial metrics
Net revenue/t ($) 142 104 35%
Production costs/saleable tonnes ($)^ 123 85 44%
^all costs are incurred in South African Rand
• The Uitkomst Colliery produced 444,984 tonnes (t) (FY2022: 470,597 t) of run of mine (ROM) coal
during the twelve months to 30 June 2023, 5% lower than the previous year;
• A further 50,490t (FY2022: 15,534t) of high-quality coal remained on stockpile at Uitkomst at the
end of June 2023;
• The increase in international thermal coal prices in H1 CY2022 resulted in entering a Coal Sales &
Marketing Agreement (Marketing Agreement) with Overlooked Collieries (Pty) Ltd, a related
party;
• Uitkomst sold 241,366t of coal in FY2023 (FY2022: 225,096t) comprising 230,181t (FY2022:
199,065t) of premium duff and sized peas and 11,185t (FY2022: 26,031t) of high ash, coarse
discard coal. The Marketing Agreement provided access to the more lucrative international
market and Uitkomst generated sales revenue of $34.2 million (FY2022: $23.5 million) for the year
with $11.4 million (FY2022: $nil) derived from export coal sales;
• The sales of Uitkomst coal on the international market resulted in net revenue per tonne
increasing to $142/t (FY2022: $104/t); and
• The rise in Uitkomst’s costs per saleable tonne to $123/t (FY2022: $85/t) is mainly due to increase
in costs for explosives, employee, logistics and port costs amongst others, while the increased
incidence of load shedding resulted in significantly higher energy costs associated with the use of
generators at the mine.
Makhado Project
• MC Mining’s flagship Makhado steelmaking hard coking coal (HCC) project has the required
regulatory approvals and surface rights over the mining and processing areas and is ‘shovel ready’;
• The development of Makhado is expected to deliver positive returns for shareholders and position
MC Mining as South Africa’s pre-eminent steelmaking HCC producer resulting in obvious
advantages for domestic steel producers;
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• The development of Makhado is also expected to have a positive impact on employment and the
general Limpopo province economy resulting in the creation of approximately 650 direct jobs;
• An owner’s team was appointed in Q1 FY2023 to drive the planning and development of the
Makhado Project;
• The Makhado coal handling and processing plant (CHPP) optimisation study was completed by
independent experts, resulting in the annual capacity increasing from 3.2 million tonnes per
annum (Mtpa) to 4.0Mtpa; and
• The Company subsequently appointed Erudite (Pty) Ltd (Erudite) to complete the detailed designs
for the Makhado CHPP.
Implementation Plan
• The five-year Makhado Project implementation plan (Implementation Plan) was completed in
April 2023 with the goal of improving the accuracy of Makhado feasibility studies from ±30%
accuracy to an estimated accuracy of ±10%; and
• The Implementation Plan is for the first five years of production and includes a detailed execution
plan for the construction of the East Pit and related infrastructure and a detailed mine plan.
Updated LOM Plan and Coal Reserve
• Subsequent to the Implementation Plan, the Company prepared an updated life of mine (LOM)
plan and Coal Reserve estimate for Makhado;
• The LOM plan expands on the five-year Implementation Plan and incorporates the exploitation of
all portions of the East, Central and West Pit coal deposits that are mineable by surface mining
methods;
• The updated Coal Reserve estimate was derived from the updated LOM plan using updated costs,
macro-economic fundamentals and coal price assumptions;
• The updated LOM plan extended the Makhado LOM from 22 years to 28 years (27% increase),
despite the 25% higher annual ROM coal production rate and improved production metrics,
including:
o 25% increase in the targeted mining rate from 3.0 to 4.0Mtpa of ROM coal;
o 100% increase in CHPP capacity, from 2.0 to 4.0 Mtpa;
o 60% increase of total saleable coal products from 26 to 41 million tonnes over the mine
life;
o Time to first production increasing from 12 to 18 months owing to the construction of the
new, larger CHPP whilst keeping the payback period materially unchanged at 3.5 years
from the start of construction; and
o 11% increase in the estimated project peak funding requirements to US$100 million
(ZAR1.8 billion).
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The Makhado Project metrics over the LOM are detailed in the table below.
Unit of Measure LOM Plan
Key Production Metrics
Mining Production Rate - (Average) Mtpa 3.9
Total ROM Mined (over the mine life) Mt 106
Total Waste Mined (over the mine life) BCM (million) 260
Stripping Ratio (Waste: ROM) BCM:tonnes 2.5
Steelmaking HCC yield % 21.2
Thermal coal yield % 17.6
Total Coal Sales - all products Mt 41.2
Coal Sales 5,500 kcal TC - Export Mt 18.7
Coal Sales - Steelmaking HCC (Domestic and
Mt 22.5
Export)
Steelmaking HCC - Domestic Mt 11.2
Steelmaking HCC - Export Mt 11.3
Key Financial Evaluation Outcomes
Peak Funding Requirements ZAR 'Bn 1.8
Free cashflow (post tax) ZAR 'Bn 17.6
Post-tax IRR % 37
Post-tax NPV (6%) ZAR 'Bn 6.8
Post-tax NPV (10%) ZAR 'Bn 4
Average payback period Years 3.5
Engineering and operational tenders
• Erudite are in the process of completing the detailed designs for the Makhado mine infrastructure
and CHPP and commenced obtaining detailed execution quotes for the construction of the CHPP;
• This process is expected to be finished in H2 CY2023 and will also cater for the enlarged mining
and processing footprint;
• Makhado will be contractor-operated. During the Period the Company initiated the managed
tender processes to select a mining contractor, CHPP operating contractor and the analytical
laboratory operator. These processes are expected to be completed in H2 CY2023; and
• First coal production is expected 18 months from commencement of construction, which is
expected during H1 CY2024.
Early works
• MC Mining Board approved the commencement of early works of ZAR71.3 million ($3.9 million),
ZAR45.0 million ($2.4 million) for placement of orders for long lead items and a further ZAR55
million ($3.0 million) for electricity supply infrastructure;
• Various work streams commenced during the period include, amongst others:
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o detailed design, procurement and construction of the power supply overhead
transmission line, with construction team mobilised onsite – a critical path activity;
o refurbishment of onsite accommodation to house project construction crews;
o placement of orders for key long-lead time items, including the payment of a deposit of
ZAR19.0 million ($1.0 million);
o mobilisation of contractors for the construction of the main access road, main bridge and
civil works for bulk water reticulation; and
o progress with erection of fencing to secure the project site.
Vele Aluwani Colliery
• Due to the global economic downturn and lower coal prices, Vele was placed on care and
maintenance from August 2013;
• The Vele Coal Resource comprises both steelmaking semi-soft coking coal (SSCC) and export
quality thermal coal;
• Vele’s CHPP does not have the requisite fines circuits that would allow for the simultaneous
production of SSCC and thermal coal;
• Construction of a CHPP at Makhado and improved market conditions created optionality for the
potential recommencement of operations at Vele as previous Makhado development strategies
incorporated the processing of Makhado crushed and screened ROM coal at Vele;
• To take advantage of this opportunity, a Contract Mining Agreement was concluded with
Hlalethembeni Outsource Services Proprietary Limited (HOS) and the recommissioning of Vele in
December 2022;
• With limited financial and human capital requirements, the recommissioning of Vele adds a
further cash generating unit to MC Mining’s portfolio with limited financial or human capital
contributions and by the end of June 2023, had created 333 permanent jobs.
• HOS is responsible for all mining and processing costs and MC Mining remains responsible for the
colliery’s regulatory compliance, rehabilitation guarantees, relationships with authorities and
communities as well as the supply of electricity and water;
• Construction of the overhead electricity line was completed in April 2023 and the Vele CHPP was
connected to the national power grid in May 2023;
• HOS completed the de-watering of the Vele Colliery open-cast pit and produced 96,673t (FY2022:
nil t) of thermal coal during H2 FY2023; and
• Ramp-up to full production is expected to occur in H2 CY2023 with HOS targeting monthly
production of 60,000t of saleable thermal coal from Vele.
Greater Soutpansberg Projects
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• Exploration and development of the three Soutpansberg coalfield projects namely the Chapudi,
Mopane and Generaal project areas, is the catalyst for the long-term growth of the Company;
• The South African Department of Mineral Resources & Energy has granted mining rights for the
three project areas comprising the GSP, which collectively contain over 7.0 billion gross tonnes in
situ of inferred steelmaking HCC, SSCC and thermal coal resources;
• Exploration and development of the GSP positions the Company to be a potential long-term
domestic and export steelmaking coal supplier; and
• MC Mining anticipates commencing with the various studies required for the outstanding water
and environmental regulatory approvals following the construction of the Makhado Project.
Corporate Activities
• Completion of a fully underwritten 1.012 for 1 renounceable Rights Issue raising gross proceeds
of A$40 million (equivalent to approximately $26.6 million) from the issue of 200,026,719 new
MC Mining ordinary shares. The proceeds of the Rights Issue are being used to fund the continued
development of Makhado and for general working capital;
• Rights Issue facilitated the repayment of the ZAR60 million Standby Facility ($3.2 million) owing
to Dendocept (Pty) Ltd (Dendocept) and ZAR20 million ($1 million) loan owing to the Senosi Group
Investment Holdings (Proprietary) Limited (SGIH);
• Appointment of Dendocept Consortium shareholder representative Non-Executive Director, Ms
Yi (Christine) He. The Dendocept Consortium collectively owns 23.9% of the Company’s ordinary
shares;
• Appointment of Mr Julian Hoskin as an Independent Non-Executive Director of MC Mining; and
• Resignation of shareholder representative Non-Executive Director, Mr Junchao Liu.
Going concern
Attention is drawn to the disclosure in the annual financial statements on the going concern
assumption (refer note 1 of the Annual Financial Statements), noting that there is a material
uncertainty that may cast significant doubt on the Group’s ability to continue as a going concern and,
therefore, that the entity may be unable to realise its assets and discharge its liabilities in the normal
course of business. The directors are satisfied however, at the date of signing the annual financial
report, that there are reasonable grounds to believe that the Group will be able to continue to meet
its debts as and when they fall due and that it is appropriate for the financial statements to be
prepared on a going concern basis. The directors have based this on a number of assumptions which
are set out in detail in note 1 to the annual financial report. In order to meet its working capital
requirements, the Group is exploring and progressing several alternative strategies to raise additional
funding including, but not limited to:
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• The issue of new equity for cash in the Company or its subsidiary that owns the Makhado project;
• Convertible MC Mining equity funding;
• Further debt funding including composite debt/equity instruments;
• Production based funding and inventory prepayment funding facilities;
• Cash generated from the Company’s collieries; and
• Further contractor BOOT funding or construction-based (EPC) funding arrangements.
The Group also has the capacity if necessary to reduce its operating cost structure in order to minimise
its working capital requirements and defer the timing of any future capital raising. The conclusion of
the debt and equity raise is by its nature an involved process and is subject to successful negotiations
with the external funders and shareholders. Any equity raise is likely to be subject to a due diligence
process. The Group has a history of successful capital raisings to meet the Group’s funding
requirements and completed an A$40 million fully underwritten rights offer during the reporting
period. The Company has historically successfully negotiated extensions to the repayment of
outstanding debt facilities. The directors believe that at the date of signing the annual financial
statements there are reasonable grounds to believe that they will be successful in achieving the
matters set out above and that the Group will therefore have sufficient funds to meet its obligations
as and when they fall due.
Subsequent events
• The Industrial Development Corporation of South Africa Limited (IDC) agreed to extend the
repayment date for the R160 million ($8.5 million) loan plus accrued interest to 30 September
2023. A further application for an extension to the repayment period is under consideration by
the IDC. If the outstanding loan is not repaid, the IDC can convert the outstanding balance to
equity in Baobab Mining & Exploration (Pty) Ltd (Baobab), the owner of the Makhado Project or,
MC Mining. The conversion into MC Mining equity will be based on a 10% discount to the 30-day
weighted average price and a conversion would result in the IDC being a significant shareholder
in either MC Mining or Baobab;
• The additional, conditional July 2019 R245 million ($13 million) facility for the development
Makhado, remained subject to the IDC confirming its due diligence and credit approval and in July
2023 the Company was informed that this facility had not been extended; and
• The MC Mining Directors approved the grant of 3,119,632 performance rights to staff in terms of
the Company’s shareholder approved Performance Rights plan. These performance rights are in
lieu of a deferred cash bonus and will vest in July 2026 if the recipient remains an employee of MC
Mining.
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Godfrey Gomwe, Chief Executive Officer and Managing Director of MC Mining, commented:
“MC Mining made pleasing progress during FY2023 including the completion of the A$40 million Rights
Issue, the recommencement of operations at the Vele Colliery and the detailed planning for the
construction of the Makhado Project. The conclusion of the Marketing Agreement ensured the
Uitkomst Colliery could take advantage of favourable international thermal coal prices during H1
FY2023.
The completion of the underwritten Rights Issue confirmed the continued robust support of our
anchor shareholders and provided an opportunity for new equity investors to participate in the
Company’s growth strategy. The additional capital transformed the Company’s balance sheet and
facilitated the settlement of over $3.9 million of debt. The Rights Issue is a further key milestone
towards raising the financing required for our flagship Makhado Project as it unlocks other sources of
funding, enabling the positioning of MC Mining as the only large-scale producer of steelmaking HCC
in South Africa.
The Makhado CHPP optimisation study was completed during the Period, confirming the benefits of
increasing the CHPP annual ROM feed capacity from 3.2Mtpa to 4.0Mtpa. The increase in volumes
were used in the detailed CHPP and infrastructure design work while revised mine plans were
completed during FY2023.
The Company’s directors approved expenditure of ZAR71.3 million ($3.9 million) on early works at
Makhado and this commenced during the Period while the funding initiatives for the balance of the
capital required continued and are expected to be finalised in H2 CY2023.
The Vele Aluwani Colliery had been on care and maintenance for almost ten years and during this time
the Company assessed various strategies to utilise the asset. Operations at the colliery were
outsourced during the Period and coal sales commenced in January 2023 with ramp-up to full
production expected in early Q4 CY2023. The recommissioning of Vele created 333 permanent job
positions and the resumption of production will also alleviate any ‘use it or lose it’ risk associated with
unutilised mining assets in South Africa.”
Authorised by
Godfrey Gomwe
Managing Director & Chief Executive Officer
This announcement has been approved by the Company’s Disclosure Committee.
All figures are in South African rand, United States dollars or Australian dollars unless otherwise stated.
For more information contact:
Tony Bevan Company Secretary Endeavour Corporate +61 08 9316 9100
Services
Company advisors:
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James Harris / James Dance Nominated Adviser Strand Hanson Limited +44 20 7409 3494
Rory Scott Broker (AIM) Tennyson Securities +44 20 7186 9031
Marion Brower Financial PR (South R&A Strategic +27 11 880 3924
Africa) Communications
BSM is the nominated JSE Sponsor
Regulatory requirements
This short form announcement, which is the responsibility of MC Mining's directors, is only a summary of information in the
full announcement and does not contain full or complete details. Any investment decisions by shareholders and/or investors
should be based on consideration of the full announcement.
The full announcement can be found at this JSE CloudLink:
https://senspdf.jse.co.za/documents/2023/jse/isse/mcze/fy2023.pdf
The full announcement is also available for viewing on the company's website at https://protect-
za.mimecast.com/s/HbKmC0gMyXcvLwyFws6cE?domain=mcmining.co.za or a copy may be requested in person, at the
company's registered office or the office of the sponsor, at no charge, during office hours. Copies of the full announcement
may also be requested from the Company’s group investor relations at investor@mcmining.co.za.
The information in this announcement has been extracted from the audited Group financial results for the year ended 30
June 2023, but the short-form announcement itself has not been reviewed by the Company's auditors.
Mazars Australia, the group's independent auditor, has audited the consolidated annual financial statements of the group
from which the abridged consolidated results contained in this report have been derived, and has expressed an unmodified
audit opinion on the consolidated annual financial statements but have drawn attention to a material uncertainty around
the Going Concern.
A copy of the auditor's report is available for inspection at MC Mining Limited’s registered office and is included in the audited
financial statements for the year ended 30 June 2023. Shareholders are therefore advised to obtain a copy of the auditor's
report and key audit matters together with the accompanying financial information from MC Mining Limited’s registered
office.
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). Vele Colliery (semi-soft coking 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
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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 does 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.
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