MC Mining Ltd, which operates in South Africa, together with its subsidiaries, has provided an update for the three months ended 31 December 2020, the second quarter of the company's 2021 financial year (2Q FY21).
Salient operational and corporate features
- The focus on health and safety continued at the high-grade Uitkomst metallurgical and thermal coal mine, with one lost-time injury (LTI) recorded during the quarter (1Q FY21: three LTIs).
- Measures previously implemented by the company to prevent the spread of COVID-19 remain in place.
- Uitkomst experienced a high level of absenteeism due to COVID-19, which resulted in a decline of run-of-mine (ROM) coal production by 14% on the comparative December 2019 period (2Q FY21: 108 945 t vs second quarter of the company’s 2020 financial year [2Q FY20]: 127 021 t).
- Despite the lower coal production, Uitkomst generated coal sales of 81 486 t, only 4% lower than 2Q20 at 84 578 t, with 15 092 t of saleable coal on hand at the end of 2Q FY21 (2Q FY20: 766 t).
- Submission of Uitkomst Colliery and nearby leased Wykom siding integrated water use license (IWUL) renewal applications to the Department of Water & Sanitation (DWS) during 2Q FY21.
- Commencement of a staff restructuring process at the Uitkomst Colliery to make 42 positions redundant.
- Limited activities continued at the company's Makhado hard coking coal project, Vele semi-soft coking and thermal coal colliery and Greater Soutpansberg Projects (GSP) to prevent the spread of COVID-19.
Coal market and financial features
- The initial spread of the COVID-19 pandemic in 1H CY20 led to API4 thermal coal prices declining significantly. Average prices improved during 2Q FY21 but remained 4% below the comparative December 2019 period (US$73/t vs US$76/t).
- Resignation of Brenda Berlin, acting CEO and Executive Director effective 15 February 2021. An executive search is advanced and the company expects to announce an appointment shortly.
- The company submitted a formal application that was acknowledged by the Industrial Development Corporation of South Africa Limited (IDC), extending the repayment period of the US$11 million facility (Restructured Initial IDC Facility) as well as accrued interest beyond 30 November 2020, and negotiations are ongoing.
- Composite debt/equity funding initiatives for the Makhado Project continued during 2Q FY21 and are expected to be concluded in 1Q CY21.
- Available cash at quarter-end was US$2 million (US$1.6 million at the end of September 2020) and restricted cash was US$0.03 million.
Brenda Berlin, Acting CEO, commented: "MC Mining has implemented various measures to mitigate the risk of COVID-19 transmission at all of our sites, with employees and contractors screened daily for COVID-19 symptoms. The effects of COVID-19 resulted in the Uitkomst Colliery recording a higher incidence of absenteeism compared to 2Q FY20 and ROM coal production was 14% lower than the comparative December 2019 period. However, the higher than normal inventory levels at the beginning of the quarter ensured that Uitkomst was able to satisfy customer demand for its high-grade Uitkomst metallurgical and thermal coal, therefore sales volumes were only 4% lower than 2Q FY20. Uitkomst sells a portion of its coal at API4 index-linked prices and the colliery benefitted from the improvements in API4 coal prices during the period.
“The Restructured Initial IDC Facility together with accrued interest was due to be repaid at the end of November 2020 and, as previously announced, the company has formally applied to delay this repayment. Negotiations are ongoing to align the repayment of the first drawdown of US$8.3 million with the positive cash flows generated by the Makhado Project, while the second drawdown of US$2.8 million will be repaid from capital planned to be raised for the construction of Phase 1. The IDC has reiterated its support for the development of the Makhado Project and MC Mining is confident that a satisfactory position will be reached.
“MC Mining previously secured a significant portion of the Makhado Phase 1 composite funding package, including a new US$17 million IDC facility and in-principle funding agreements for a further US$14 million. The company continued its interactions with potential domestic and international funders for the remaining US$9 million for Makhado Phase 1 and anticipates that the process to secure the balance will be completed in 1Q CY21, with construction commencing shortly thereafter."
Read the article online at: https://www.worldcoal.com/coal/01022021/mc-mining-provides-quarter-update/