Name of the Project
Makhado hard coking and thermal coal project.

Location
Limpopo, South Africa.

Project Owner/s
Emerging developer and producer of high-quality thermal and coking coal MC Mining (93.3%). The Industrial Development Corporation is also a 6.7% shareholder in MC Mining subsidiary, Baobab Mining & Exploration, the owner of the Makhado project.

Project Description
Makhado is classified as an evaluation asset and has not historically been mined.

The project has very favourable economics and its phased development is expected to deliver positive returns for shareholders.

The project will be completed in two phases.

Phase 1 will start with the development of Makhado’s west pit, producing three-million tonnes a year run-of-mine (RoM) coal. The coal will be mined by an independent mining contractor using truck-and-shovel, modified terrace mining methods.

RoM coal will be partially beneficiated before being dispatched to MC Mining’s Limpopo Coal Company subsidiary’s modified Vele colliery for processing. About two-million tonnes a year of RoM coal (ex-discard) will be trucked to Vele for processing at the colliery’s enhanced plant. Plant modifications include a new fines circuit comprising a reflux classifier, in series with the existing spiral plant, a low-density secondary wash plant and a froth flotation plant to capture the ultrafine coal.

At steady state, the operation will produce 1.1-million tonnes of saleable coal – 540 000 t/y of hard coking coal and 570 000 t/y of 5 500 kcal thermal coal.

The saleable coal will be trucked to the Musina siding for railing to domestic and/or export clients.

Phase 1 is a critical step in the development of Phase 2 of the Makhado project.

Phase 2 involves the implementation of the Makhado Lite plan, which will produce about 1.7-million tonnes a year of saleable coal comprising 700 000 t/y to 800 000 t/y of hard coking coal, and between 900 000 t/y and one-million tonnes a year of thermal coal. The project involves the development and mining of the east and west pits, the Makhado processing plant and associated infrastructure.

The entire Makhado project has a minimum life-of-mine of 46 years.

Potential Job Creation
Phase 1 mining and processing will be outsourced to experienced third parties that have previously operated in South Africa, and is expected to create about 650 permanent employment opportunities.

Net Present Value/Internal Rate of Return
Phase 1 has an estimated internal rate of return of more than 45%, with a payback of 2.5 years.

Capital Expenditure
DRA Projects completed the initial Makhado Phase 1 capital estimate in October 2019; owing to the lapse in time and the known increase in steel prices, MC Mining contracted DRA to review the Makhado Phase 1 development cost estimate during the quarter ended June 30, 2021. This review has resulted in a revised development cost estimate for Makhado Phase 1 of R650.5-million.

Planned Start/End Date
The construction of the Phase 1 pit, including plant and infrastructure, is planned to take nine months, with the first coal sales in month ten.

The Phase 2 east and central pits are proposed to be developed in about 2023.

Latest Developments
MC Mining is making progress to secure funding for its Makhado project.

The IDC has reaffirmed its support for South African coal miner MC Mining’s Makhado project by formally extending the repayment date of the existing R160-million loan to January 31, 2022.

The IDC has also agreed to extend the terminal drawdown date for the conditional R245-million Makhado project development term loan facility, to January 31, 2022, subject to confirming the miner’s due diligence.

Should MC Mining not repay the loan by January 31 next year, and further extensions are not granted, the existing IDC facility may be converted into equity of MC Mining or its subsidiary, Baobab Mining and Exploration.

In a statement on October 29, MC Mining said several parties were continuing their due diligence review for providing the balance of the funding required by the company to develop Makhado.

MC Mining remains confident that the parties taking part in the process will commit the necessary funds to complete the funding package, expected to be finalised during the first quarter of 2022, with construction to start in the following quarter.

MC Mining is also progressing several alternative strategies to raise additional funding including, but not limited to, the issue of new equity for cash in MC Mining or subsidiary companies, or further debt funding.

While the aforementioned funding discussions are expected to be subject to successful negotiations, MC Mining has warned that there can be no guarantee that any such discussions will be concluded, or as to the timing or terms of such funding.

Key Contracts, Suppliers and Consultants
Minxcon (competent person’s report) and DRA Projects (initial Phase 1 capital estimate in October 2019 and the subsequent review in the quarter ended June 30, 2021).

Proposals for full mining services have been sourced from various contract mining companies, with turnkey processing plant construction and operating quotes obtained from potential service providers.

Contact Details for Project Information
MC Mining, tel +27 10 003 8000, fax +27 11 388 8333 or email adminza@mcmining.co.za.