HomeCoalCoal in southern Africa: MC Mining, new name and new focus

Coal in southern Africa: MC Mining, new name and new focus

Coal of Africa’s name change to MC Mining in December last year reflects not only the eradication of long-term legacy issues but also the start of a new company with a clear focus and vision to become a mid-tier, 5 – 10 Mtpa premier hard coking coal producer in South Africa in the next three to five years, says CEO David Brown.

AUTHOR: Laura Cornish, editor of Mining Review Africa

“This article first appeared in Mining Review Africa Issue 3 2018. 

You can read the full digital magazine here or subscribe here to receive a print copy.”

Brown had no easy task ahead of him when he was appointed CEO of Coal of Africa in 2013 – the company was bleeding money, about R6 billion to be exact, following a series of “poor” acquisitions and decisions. Inheriting a company that required intensive effort just to survive presented a difficult road for anyone at the helm.

MC Mining
MC Mining CEO, David Brown

But it seems the optimistic, well experienced former CEO of platinum major Impala Platinum was the right man for the job.

This article first appeared in the March 2018 edition of Mining Review Africa.

“Both our Vele and Mooiplaats operations were losing money when I joined the company and I undertook to go through the painful exercise of putting them both on care and maintenance. I also quickly recognised that the company couldn’t continue to survive on shareholder donations,” explains Brown.

This situation drove the necessity to bring on-line a cash generating coal asset as quickly as possible, which would deliver self-sufficiency and better enable the company to bring its long-term vision assets, Makhado and the Greater Soutpansberg Projects (GSP) to fruition.

In April 2017 the company announced the successful acquisition of unlisted Pan African Resources’ 91% stake in the KwaZulu-Natal-based Uitkomst colliery.

“The cash cost had to be affordable, as was the manner in which the deal was structured. It had to have a reasonable lifespan, be cash positive, have good logistics in place, and require no significant amount of capex to continue operating. This made finding an asset quite difficult but Uitkomst fit the brief and we completed the acquisition in July 2017,” continues Brown.

The R180 million sale of Mooiplaats in October of the same year – a task which took years to complete – was the final piece of the puzzle needed to fully restructure the balance sheet and move the company forward towards becoming a mid-tier coal producer.

New company, new name

On the back of its Mooiplaats sale and a number of successful cash generating months from Uitkomst, the timing was right to introduce a new company to market – and the name MC Mining (metallurgical coal) was born which better reflects the company’s drive and focus.

“For the first time in this company’s history we have a cash generative asset which has exceeded our production and performance expectations. We are now in the position to look optimistically towards the future, leave our survival mode behind and concentrate on our primary objective to drive self-sufficiency through the generation of positive cash flow,” highlights Brown.

A second acquisition will augment MC Mining’s coal production and generate additional cash to cover working overheads while growing cash within the group to build its assets. The acquisition criteria, remains the same as those established for Uitkomst.

Darling Uitkomst

It consists of an existing underground coal mine (Uitkomst – South mine) which alone has 17 years of remaining lifespan. It also comprises a planned life of mine extension into the northern area (Klipspruit – North mine).

Existing infrastructure such as power supply, water supply, buildings, workshops, weighbridge, water storage and management facilities are all in place.

It produces a small 450 000 tpa of coal which it supplies to ArcelorMittal and other domestic energy users in the region.

MC Mining believes there is potential to expand the mine and will look to conclude studies on the viability of such a project towards the end of the year.

The options for Vele

Situated in Limpopo province, 48 km west of Musina, the Vele mine has been on care and maintenance since October 2013 and is costing the company around R25 million a year to maintain.

“Product mix, yields and logistics are the mine’s challenges and the primary reasons the project is not as attractive as other projects in the company’s portfolio,” says Brown.

“We in fact need to determine Vele’s future, which could also include selling the regulations-compliant asset. A decision regarding this asset will be finalised this year.”

Makhado: A value-creating asset

Makhado holds the cards to elevating MC Mining to a new level and thanks to a revised development plan is closer to seeing an execution plan successfully implemented.

A revised project – Makhado Lite – requiring a 12-month construction period and thereafter producing 1.7 Mtpa of coal (800 000 t of good quality hard coking coal and 0.9 Mt of thermal coal) moves it “into the realms of possibility”.