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MC Mining announces Uitkomst coal sales and marketing agreement

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World Coal,

MC Mining Ltd has entered into a coal sales and marketing agreement with Overlooked (Proprietary) Ltd. The marketing agreement expires on 31 December 2022 and will facilitate the export of coal produced by Uitkomst, ensuring the colliery benefits from the prevailing international coal prices.

The anti-fossil fuel sentiment over the last few years has resulted in limited coal exploration or development of new coal projects and a tightening of supply globally. This has been exacerbated by the invasion of Ukraine in February 2022 and subsequent sanctions against Russian fossil fuel supplies, leading to a global energy shortage. This led to international thermal coal prices climbing to record highs and API4 coal prices averaged US$276/t for 1H22, compared to US$151/t in 2H21.

As a consequence, MC Mining commenced a review of its marketing arrangements for Uitkomst which include the production of various grades of higher quality, low ash pulverised coal injection (PCI) coal, as well as higher-yielding API4 thermal coal. The high API4 prices confirm that the export of thermal coal is currently the optimal marketing strategy for the colliery. However, Uitkomst does not have access to export allocation at any of the South African coal ports and produces limited quantities of thermal coal on a monthly basis. A collaborative approach with an exporter, which already has access to these markets and additional volumes of API4 coal, led to the conclusion of the marketing agreement with Overlooked, providing the company with a route to market. The salient features of the marketing agreement are:

  • Contract expiring in December 2022.
  • Sale of at least 20 000 tpm of Uitkomst coal at API4-linked, US dollar denominated prices.
  • Overlooked is responsible for the transportation, stockpiling and export of the coal at port and will receive a market related commission.
  • Overlooked charges a competitive marketing fee of 5% of the sales price which is reasonable considering competing proposals received by Uitkomst, for providing access to the international market.

Godfrey Gomwe, Managing Director and CEO of MC Mining, commented: “Uitkomst is a small mine that produces high quality coal and the trial production of different coal products earlier in the year ensured that we have a better understanding of what the colliery can produce and the effects these have on our processing plant yields. The colliery does not produce sufficient coal to fill a ship on a monthly basis and a partnership with Overlooked will facilitate more frequent shipments at higher international thermal coal prices. These prices have remained higher than previously forecasted and the Marketing Agreement ensures that Uitkomst benefits from the prevailing price, particularly our pea-sized products, as these were historically sold into domestic fixed-price contracts. The colliery will continue to supply coal to the local market, but at reduced volumes.”

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South Africa coal news