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MC Mining: Recommencement of coal production and lockdown update

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World Coal,

MC Mining Ltd has provided a market update with regards to the impact on the company of the global COVID-19 pandemic. The company remains focused on taking the necessary precautions to prevent the spread COVID-19 and reducing the threat to its employees, contractors and stakeholders.

Operations at the Uitkomst Colliery

The South African government issued a directive on 23 March 2020 requiring a 21-day national lockdown), effective midnight 26 March 2020 to midnight 16 April 2020. The directive was as a result of a level 5 national coronavirus alert assessment and resulted in the high-grade Uitkomst metallurgical and thermal coal mine being placed on care and maintenance. The lockdown was subsequently extended and on 23 April 2020, the government announced a phased, risk-based approach to lifting restrictions and the alert level reduced to level 4 from 1 May 2020.

Level 4 of the lockdown authorises some business activity, subject to extreme precautions and under specific conditions. The underground Uitkomst Colliery is permitted to ramp up to 50% of labour capacity and must adhere to detailed health and safety protocols and introduce workplace plans to enable disease surveillance at site and prevent the spread of infection.

The Department of Mineral Resources and Energy has also issued COVID-19 directives. These require mining companies to ensure screening of employees and where indicated, testing, and employees who have tested positive for the virus will need to be quarantined. All data collected during the screening and testing programme is to be submitted to the authorities.

The Uitkomst Colliery has implemented standard operating procedures that comply with the required measures and limited activities at the mine recommenced on 4 May 2020. Uitkomst is a mechanised underground operation and it will be possible to ramp-up to 50% capacity within 7 to 10 days. During this period, the colliery will assess the effects that the lockdown has had on critical suppliers while the coal offtake market remains challenging due to the restrictions imposed on businesses. The mine is in constant communication with its customers to ensure their requirements are met and the colliery is only expected to return to full operating capacity following further reductions in the national coronavirus alert assessments and once coal off-takes have normalised.

Effects of the lockdown on MC Mining’s other sites

The lockdown also impacted activities at the Makhado, Vele and Greater Soutpansberg Projects, as well as the company’s corporate office and led to the implementation of business continuity measures as well as stringent health and safety procedures. This also resulted in the company having to implement a ‘no work, no pay’ policy for nonessential staff and a portion of wages were paid by the government’s temporary Employee/Employer Relief Scheme, reducing the adverse financial impacts that the lockdown is having on staff. The company has also adopted a work-from-home strategy and where possible, staff will continue to work remotely.

Available cash and facilities

The company has an available cash balance of US$1.1 million as well as the US$6.5 million second tranche of the existing Industrial Development Corp. of South Africa Ltd loan available for drawdown. The company is engaged in discussions with its lender group regarding drawdown from existing and potential new finance facilities. As previously communicated, the company is also in the process of securing the balance of the funding required to commence construction of Phase 1 of the fully permitted Makhado hard coking coal project and this is expected to be completed in 2Q20/3Q20.

Brenda Berlin, the company’s CEO, commented: “The move to lockdown level 4 facilitates Uitkomst resuming production of its high-grade coal, albeit at 50% of normal production. Safety of our people is critical and normalised operating activities at the Uitkomst Colliery and MC Mining’s other sites will only resume when it is safe to do so and in line with Government regulations. Where possible, key activities for rest of the group will continue remotely in isolated, safe environments and we remain very mindful of the economic toll that the pandemic has on our employees and their families.

“The company continues to interact with potential domestic and international capital-providers to secure the balance of funding required to commence development of Makhado Phase 1 and anticipates that the process will be completed in 2Q20/3Q20.”

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South Africa coal news