Mc Mining Secures Director’s Consent On Conditional Basis To Proceed With Phase 1 of Makhado Development

MCM

Mc Mining Limited (ASX: MCM) announced on 14th March 2019 that the company is developing its hard coking and thermal coal flagship project “Makhado” on a sequential basis through a phased approach.

The company currently owns a 69% interest in Baobab Mining and Exploration (Pty) Limited who owns the Makhado project, with balance being held by the Industrial Development Corporation of South Africa Limited, which is a consortium of seven communities located in the vicinity of Makhado and a black industrialist. 

Mc mining subsidiary recently completed the purchase of Makhado project surface rights.

The company previously announced about the Makhado ‘Lite’ project plan, which produced 4.0Mtpa of run-of-mine coal, which yielded 1.6Mtpa to 1.8Mtpa of saleable product. The project faced a halt for a year as the company has not been able to acquire the key properties in the area, required to locate the east pit processing and other infrastructure.

However, apart from devising strategies to acquire the required properties, the management of the company assessed alternative project developments plans such as developing the project in phases, which included commencing mining on the west pit and processing through the existing Vele plant (phase 1) and then progressing to the east pit (phase 2).

The phase 1 involves commencing mining on the west pit where the company completed a large diameter confirmatory drilling in Q4 CY2018. The other task slated for the phase 1 entails, utilising the existing but to be modified Vele processing plant, which will allow the company to reduce the construction time and cost; and using previously tested logistics infrastructure.

The Directors of the company now approve Phase 1 on the condition of fulfilling the requirements such as finalising the thermal offtake by Q2 CY2019 and secure a debt funding of approx. $20 million by the same period. The Director’s condition also includes the repayment of the IDC and contribution towards phase 1 by raising equity funding of approx. $30 million.

If the company meets all the conditional obligations, the construction will commence in Q3 CY2019 with a construction period of nine months.

Phase 1 which involves the development of the Makhado pit, contains coal that has not been oxidised below 17m, indicated by the drilling programme completed by the company in CY2018.

The ROM (run-of-mine) production is expected to be around 3.0Mtpa, and the life-of-mine is expected to be 9 years. The peak funding required by the company for the phase 1 development is around $33.5million, with an estimated payback of less than 2.5 years.

The Makhado project hosts JORC-compliant measured, indicated and inferred, mineable resource in-situ at 344.766 million tonnes and proven and probable at 172.757 million tonnes.

The company recently reported its December quarter results, and the comprehensive loss of the company decreased to $11.6 million in H1FY19 as compared to $84.0 million in H1FY18.

It also released half yearly results for 1H FY19 with a dip in Net Loss from $97.3 million (69.04 cents) in H1 FY18 to $3.6 million (2.49 cents) in H1 FY19. The company reports Total Assets of $196.57 million and Total Liabilities of $37.13 million for the period. During the half yearly period, the company saw $3.7 million operating cash outflow, $1.12 investing cash outflow and $214k financing cash outflow. The Net cash and cash equivalents stood at ~$5.5 million at the end of December 2018.

The shares of the company closed the day’s trading at A$0.950 (as on 15th March 2019), flat as compared to its previous close.


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