Makhado project economics improved as LoM increases ‘significantly’

MC Mining MD and CEO Godfrey Gomwe

MC Mining MD and CEO Godfrey Gomwe

31st July 2023

By: Darren Parker

Creamer Media Contributing Editor Online


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An updated life-of-mine (LoM) plan and coal reserve estimate for MC Mining’s fully-licensed and shovel-ready Makhado steelmaking hard coking coal project have significantly increased the LoM and improved the project's economics.

The increased coal reserves in the East Pit at Makhado have resulted in increased saleable tonnes, which was confirmed by the most recent drilling programme.

Since the August 2022 announcement of prefeasibility studies at the project, coal reserves have increased by 53%, with saleable steelmaking hard coking coal reserves having increased by 64% and saleable thermal coal reserves by 57%.

"MC Mining has made significant progress on the Makhado project during the quarter [ended June 30]. The completion of a five-year Makhado implementation plan was augmented by the substantial increase in coal reserves and mine life at much-improved annual production rates.

“This progress bodes well for moving operations down the cost curve, while aiming to take advantage of the favourable near-term steelmaking hard coking coal prices," MC Mining MD and CEO Godfrey Gomwe said on July 31.

The Makhado early works activities continued during the quarter, with funding activities expected to be concluded in the second half of the year. The managed tender processes to select the outsourced mining, plant and laboratory operators also started during the quarter.

The company also continued to progress critical Makhado early works during the quarter, including the start of detailed design, procurement and construction of the power supply overhead transmission line, with construction team mobilised onsite. MC Mining considered this to be a critical path activity.

Additionally, refurbishment of on-site accommodation to house project construction crews was undertaken, as was the placement of orders for key long-lead time items, including the payment of a deposit of R19-million.

MC Mining also achieved the mobilisation of contractors for the construction of the main access road, main bridge and civil works for bulk water reticulation. The company also reported progress with the erection of fencing to secure the project site.

“We are excited to have strong contenders to be our partners, and these processes are expected to be completed during the current quarter.”

The updated LoM for the Makhado plan resulted in a 25% higher yearly mine production rate with a 21.2% yield of saleable steelmaking hard coking coal, up from 19.8%, and 17.6% yield of 5 500 kcal thermal coal, up from 17.2%, thereby allowing for improved project financial returns.

Further, the managed tender processes to select the outsourced mining, plant, and laboratory operators have begun. These are expected to be completed during the current quarter.

Steady progress during the quarter has also been made on critical early works activities, MC Mining has reported.

In addition to progress at Makhado, MC Mining has reported the continued ramp-up of mining and processing at the outsourced Vele Aluwani colliery following the recommissioning of the mine in December last year.

The outsourced agent produced 48 092 t of thermal coal during the quarter, targeting monthly production of 60 000 t of saleable thermal coal from the site expected by the second half of the year.

“The ramp-up of operations at the outsourced Vele colliery continued during the quarter and the contractor is expected to be at full production during the second half of the year,” Gomwe said.

The mining and processing operations at the opencast Vele colliery were outsourced to Hlalethembeni Outsourcing Services (HOS) and recommissioned in late December last year. 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 the period, had created 333 permanent jobs.

HOS is responsible for all mining and processing costs, while 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.

The construction of the overhead electricity line was completed in April and connected to the national power grid in May. As a result, the generator at Vele will be used as a back-up source of power, with State-owned Eskom being the primary source of electricity at the colliery.

Meanwhile, Gomwe said the Uitkomst colliery continues to be impacted by the increased incidents of electricity blackouts implemented by Eskom.

“Production at the colliery requires extended travel time to the underground mining areas and a revised shift system to increase mining time was implemented during June. I am pleased to report that initial results of the new shift system recorded favourable improvements in daily run-of-mine (RoM) coal production,” Gomwe said.

He added that Uitkomst was assessing potential additional international and domestic customers to optimise prices for the colliery’s premium product.

The Uitkomst colliery produced 118 469 t of RoM coal, with production adversely affected by challenging geological conditions and lower seam heights.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online



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