Emerging coal developer MC Mining’s Uitkomst thermal and metallurgical colliery in KwaZulu Natal faced production challenges during the quarter ended 31 March, but continued to be cash generative.
Production at the Uitkomst colliery was adversely affected by mining contractor equipment shortages, resulting in reduced ROM production, which MC Mining is in discussions with to resolve.
As a result, Uitkomst produced 115 750t of ROM coal during the three months, which was 18% lower than the previous quarter.
Moreover, a lack of available third party coal, which MC Mining purchases to process or blend with the Uitkomst coal, resulted in no blending ROM coal being purchased together with a decline in available third party ROM coal for processing.
The shortage of buy-in coal combined with the reduced ROM coal and elevated stock levels at the end of the quarter due to rainfall affecting loading of trucks, resulted in sales of metallurgical, high quality and blended thermal coal at Uitkomst for the three months declining by 51% from 142 843 t in the previous quarter to 70 627 t in the quarter.
This comprised a 33% (30 668t) reduction in sales of coal produced from Uitkomst ROM and a 41 548 t reduction in sales emanating from purchased ROM.
Uitkomst sized coal stock levels at the end of March 2018 were 5 420 t higher than December 2017 due to rain affecting the number of trucks that could access site at the end of the period, delaying sales.
The stockpiled coal will be sold during the June 2018 quarter.
Despite these challenges, Uitkomst was cash generative for the three months and is assessing expansion opportunities to increase ROM production at the colliery
Despite revenue being adversely affected by a 12% stronger South African rand against the US dollar during the quarter, the relative revenue per tonne improved. This is due to the change in sales mix as no lower cost slurry was sold during the Quarter (FY2018 Q2: 17 201 t sold).
The sales volumes of higher margin Uitkomst ROM coal were adversely affected by rain in March 2018, preventing trucks accessing site.
Mining and processing (production) costs were largely in line with the previous quarter with unit production costs increasing due to the 24 347t (78%) decline in sales of purchased ROM for processing and blending.
BEE transaction finalised
In order to meet the requirements of South Africa’s Mining Charter ownership requirements, MC Mining concluded the process of selling an additional 21% interest in Uitkomst colliery to its BEE partners during the quarter ended 31 March 2018.
Completed on a vendor finance basis, the formal documentation for the BEE transaction was completed in early April 2018. This will result in the current BEE shareholders, which includes employees and local communities, increasing their interest in the Uitkomst colliery.