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, but 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
Baobab Mining & Exploration has paid the final instalment of R35-million to the Lukin and Salaita property owners to secure key surface rights for the Makhado hard coking coal project.

MC Mining announced on January 11 that Baobab and the property vendor had agreed to extend the due date for payment to February 28.

Now that the final instalment has been paid, the mortgages over the properties held by the vendor are being released.

The R35-million payment was sourced from funds advanced under the staged R86-million convertible advance and subscription agreement with mining group Senosi Group Investment Holdings (SGIH).

MC Mining has said it has developed a positive working relationship with SGIH and that its successful record of developing and operating coal mines in South Africa is of significance as the finalisation of a funding package to develop the Makhado project draws closer.

To date, SGIH has advanced R40-million to MC Mining in terms of the agreement. An additional R6.04-million is due to be advanced by March 31 and, subject to the approval of the South African Reserve Bank, the total advances of R46.04-million will convert into 38.36-million new ordinary MC Mining shares at R1.20 a share.

This will result in SGIH owning 19.9% of MC Mining’s total issued share capital.

SGIH has also agreed to advance an additional R40-million to the company from April to July, which will convert into 33.33-million new ordinary shares at R1.20 a share, subject to the receipt of all required approvals, including the approval of MC Mining’s shareholders.

MC Mining noted on January 28 that the IDC had agreed to extend the repayment date for the R160-million loan, plus accrued interest, to November 30.

The IDC also agreed to extend the terminal drawdown date of the additional R245-million IDC term loan for the development of Phase 1 of Makhado to the same date, subject to the IDC reaffirming its due diligence.

MC Mining interim CEO Sam Randazzo has said these developments have ensured that MC Mining is “well placed and in the best position it has been for several years to finalise the funding package required to develop the Makhado project”.

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.