Name of the Project
Makhado hard coking coal project.

Location
Limpopo, South Africa.

Project Owner/s
Coal miner MC Mining.

Project Description
In August 2022, an assessment was completed with the aim of optimising capital expenditure (capex) and reducing operational costs at Makhado, including possibly moving the Vele coal processing plant (CPP) and modifying this at Makhado (Scenario 1) or building a bespoke CPP at Makhado (Scenario 2).

These two scenarios will require additional capex, but will significantly reduce the transport costs when compared with the base case scenario proposed in the April 2022 BFS.

Both development scenarios will result in the mining of the East Pit, followed by the Central and West Pits, and the hauling of saleable coal only 72 km from Makhado to the Musina siding.

The option of reducing the Makhado peak funding requirements through a build, own, operate and transfer (BOOT) arrangement will significantly reduce the funding requirement of both scenarios.

Scenario 2, using a BOOT financing arrangement, was chosen as the preferred option because it provides similar results while keeping the Vele CPP intact for future exploitation of that coal resource.

MC Mining has started talks with potential BOOT funding providers.

Potential Job Creation
Not stated.

Net Present Value/Internal Rate of Return
Scenario 1 has a net present value (NPV), at a 6.1% discount rate, of R5.9-billion and Scenario 2 has an NPV of R5.8-billion.

Scenario 1 has an IRR of 45.2% and Scenario 2 an IRR of 41%, with paybacks of 3.2 and 3.5 years respectively.

Capital Expenditure
Construction capital proposed is R1.1-billion for Scenario 1 and R1.2-billion for Scenario 2.

Planned Start/End Date
Construction period remains at 12 months for all the proposals.

Latest Developments
MC Mining has made "pleasing" progress in various mining and corporate activities in the quarter ended December 31, 2022, MD & CEO Godfrey Gomwe has said.

The most notable achievements are the completion of the A$40-million rights issue in November, the restart of operations at the Vele Colliery and the extension of the marketing agreement with Overlooked.

The completion of the rights issue confirmed the continued robust support of MC Mining’s anchor shareholders and provided an opportunity for new equity investors to participate in the company’s maturing growth strategy. This was completed despite the current volatile market and uncertain economic environment.

"The additional capital has transformed the company’s balance sheet and is a further key milestone towards the complete financing of the flagship Makhado project and the positioning of MC Mining as the only large-scale producer of hard coking coal in South Africa," Gomwe has said.

During the quarter, MC Mining had entered into a contract mining agreement with Hlalethembeni Outsourcing Services to recommission, upgrade and operate its Vele Colliery. This resulted in the recommissioning of the Vele CPP.

The miner also completed a CPP optimisation study at its Makhado project.

The proposed optimisation will potentially increase the Makhado CPP's yearly run-of-mine feed capacity from three-million to four-million tonnes a year.

The study findings will be used in the detailed CPP and infrastructure design work, as well as revised mine plans. These are expected to be completed during the first quarter of the 2023 calendar year.

MC Mining's directors have approved expenditure of R71.3-million (about $4.1-million) for early works at Makhado and this is expected to start early this year. 

Key Contracts, Suppliers and Consultants
Minxcon (BFS).

Contact Details for Project Information
MC Mining, tel +27 10 003 8000 or email adminzamcmining.com.