MC Mining Limited has completed a bankable feasibility study (BFS) for its fully licenced Makhado hard coking coal project. The BFS was prepared by Minxcon (Pty) Ltd, an independent mining industry consulting firm, and is a key milestone in securing the funding for Makhado. The company expects to finalise the financing for the Makhado Project in 3Q22, with construction commencing soon thereafter. The BFS confirmed that Makhado has JORC/SAMREC compliant 296 million mineable t in situ (MIS) of Measured and Indicated Coal Resources, 7.2 million t MIS of inferred coal resources and 69.3 million t of proved and probable coal reserves under the proposed opencast mining and coal processing methods.
Background MC Mining has a 68% interest in the Makhado Project through its subsidiary, Baobab Mining & Exploration (Pty) Ltd, with the Industrial Development Corporation of South Africa Limited (IDC) owning 6.7%, seven local communities owning 20%, and the remaining 6% held by a Black Economic Empowerment industrialist. The development of Makhado will provide significant direct and indirect benefits to local communities in one of the poorest areas of South Africa. MC Mining remains committed to the sustainable development of Makhado Project. The company also owns the surface rights of the properties required for the project and has the requisite regulatory approvals to commence mining at Makhado.
Striving to unlock near-term shareholder value, the Makhado Project’s development plan in the BFS was designed to minimise the upfront capital expenditure by utilising existing infrastructure that is currently on care and maintenance. The BFS envisages the initial mining of the West Pit which is followed by mining of the East and Central Pits while the existing coal processing plant (CPP) at the Vele Colliery will be modified allowing it to simultaneously produce hard coking coal (HCC) and export quality thermal coal. The West, East and Central pits will be mined at a combined average rate of 3.2 million tpy with the run of mine (ROM) material being crushed and screened at Makhado prior to dispatch to the Vele CPP. Over the life-of-mine (LOM), approximately 2 million tpy of crushed and screened coal will be transported 134k m, to the Vele CPP where the coal will be processed to produce two marketable products – a mid-volatile HCC for sale domestically and internationally and, a 5500 kcal (API3) thermal coal for sale on the international market. Makhado has an offtake agreement with ArcelorMittal South Africa Ltd for the domestic supply of up to 450 000 tpy of HCC and has also commenced off-take discussions with various parties for the balance of the HCC as well as the export of the thermal coal.
The salient features of the Makhado Project are:
- Coal resources of 296 million t MIS in the measured and indicated categories.
- Coal Reserves of 69.3 million t in the proved and probable categories.
- Overall stripping ratio over the LOM is 2.48:1.0 (bank m3 of waste: tonne of coal).
- 6 million t of saleable coal produced over the LOM comprising:
- 7 million t of HCC.
- 9 million t of 5500 kcal thermal coal.
- Approximately 22 years LOM.
- Outsourcing of mining and processing operations to experienced third parties that currently operate several other sites in South Africa.
- Creation of an estimated 650 permanent employment positions (including contractors).
- Capital cost (including contingencies) of ZAR 625 million (US$41.7 million) and a peak funding requirement of ZAR 727 million (US$51.7 million).
- Confirms Makhado’s robust economics with a positive post-tax internal rate of return (IRR) and an estimated payback period of 3.8 years.
- Positions the project to take advantage of the current higher global coal prices.
- Generation of significant cash flows for MC Mining from the development of Makhado’s Resources.
Sam Randazzo, Interim CEO of MC Mining, commented: “The completion of the BFS reflects a key advancement of Makhado and confirms the project’s robust economics. The BFS is based on the project plan with the lowest capital cost options and results in Makhado’s ROM coal being transported to the Vele Colliery for processing for the entire LOM. The forecast HCC and thermal coal prices used in the BFS were sourced from independent advisors and are considerably lower than current index prices, reflecting Makhado’s robust economics and significant upside. The BFS is a key milestone in securing the funding for Makhado.”