LONDON: MC Mining Limited has announced the development of its flagship Makhado hard coking and thermal coal project through a phased approach. The construction will commence in the third quarter of 2019.

[the_ad id=”32940″]MC Mining Limited effectively owns 69% of Baobab Mining & Exploration (Pty) Ltd, the owner of the Makhado Project, the balance being and/or to be held by the Industrial Development Corporation of South Africa Limited (IDC), seven communities located in the vicinity of Makhado and a black industrialist, a notice issued to London Stock Exchange said.

The development of Makhado will provide significant direct and indirect benefits to these communities located in one of the poorest areas of South Africa.

MC Mining previously announced the Makhado ‘Lite’ project plan, producing 4.0Mtpa of ROM coal yielding 1.6 to 1.8Mtpa of saleable product. The development of Makhado Lite was delayed for approximately one year mainly due to lack of access to two key properties where the east pit, processing and other infrastructure would be located.

The impact of this delay results in, amongst other things, the repayment date for the existing IDC Loan occurring ahead of significant cashflows from Makhado Lite.

Consequently, in parallel with pursuing various strategies to obtain access to the two properties, management assessed alternative project development plans, which included developing Makhado in phases by commencing mining on the west pit and processing through the existing Vele plant (Phase 1) and then progressing to the east pit (Phase 2).

David Brown, Chief Executive Officer of MC Mining, commented: “The approval for the phased development reflects further advancement of Makhado and its ability to generate significant near-term value by positioning MC Mining to be able take advantage of positive future global coking coal prices due to limited supply. The use of the existing Vele processing plant reduces the project’s capital expenditure requirements and together with the completed FEED process, shortens the construction time while moderating execution risk.

“The Company is in advanced thermal coal offtake discussions with various parties and expects that the marketing and fundraising elements will be completed in early Q3 CY2019.

“The planned commencement of construction later in Q3 CY2019 also reduces the period for delivery of saleable coal to market and generates positive returns for shareholders in the near-term.

“MC Mining remains committed to the sustainable development of the Makhado Project, recognising its potential to drive significant socio-economic transformation and seeking co-operation between mining, agriculture and heritage land uses.”