MC MINING saw its losses soar to $101.6m in the year to end-June (previous comparable period: $15.6m loss), but CEO David Brown reckoned the company now had a “… clean bill of health” and could “transition towards becoming a self-sufficient, mid-tier, multi-product mining group”.
The bulk of the latest loss resulted from an $87.5m impairment charge against the Vele colliery where future development has been pushed out up to five years and will depend on the outcome of the South Africa Energy Metallurgy Special Economic Zone (SEZ) being proposed for the Soutpansberg region of Limpopo. Brown did not rule out selling Vele if a favourable opportunity arose.
Brown has been “cleaning house” at MC Mining since he became CEO six years ago and he described this latest presentation as “the most upbeat” he has been able to give so far. Major developments over the past year have included the acquisition of the Uitkomst colliery in Kwa-Zulu Natal for $21.1m and the sale of the troubled Mooiplaats operation for $12.9m.
While MC Mining now owns a profit-generating asset in the form of Uitkomst the group’s short-term future depends on the development of the Makhado coking coal project and its long-term future on the implementation of the SEZ. Both developments have their problems.
MC Mining holds all the regulatory permits required to build Makhado, but has not been able to gain access to two key farms because of a bust up between the owners and the South Africa government over a land claim. The owners – Akkerland Boerdery – are fighting the land claim tooth and nail and have linked the fight into the highly-charged “land expropriation without compensation” debate.
Brown indicated several months ago that MC Mining was “… following a separate process to gain access in terms of the provisions of the Minerals and Petroleum Resources Development Act (MPRDA)”, but he conceded today the company may not be able to start construction as planned during 2019.
He pointed out the MPRDA process was a legal one and subject to the availability of courts which meant it could be protracted, particularly if the landowner was hostile. “If it’s a dogfight all the way then it could be 2020 before it is resolved,” said Brown.
MC Mining was now looking at an alternative “phased” approach through which it could start mining at Makhado during 2019 without accessing the two farms in question. He declined to give any specifics on this alternative approach at this stage and said these would be revealed probably in March. MC Mining has to gain access to those farms to build its processing plants.
Looking longer-term MC Mining could benefit handsomely from the proposed SEZ development assuming it is actually implemented. “The SEZ was gazetted in 2016 and Cabinet and the Department of Trade and Industry are working on it. I cannot say whether it will go ahead. I believe it will, but the timeframe could be five to ten years”.
Brown pointed out that – if it went ahead – the SEZ would require major volumes of both thermal and coking coal to supply the proposed coal-fired power station and the alloy smelting plants. He said that MC Mining – in addition to the Makhado and Vele operations – owned resources in the Soutpanberg which could be developed to meet that demand.
But he stressed Makhado’s development was not being pinned on the implementation of the SEZ, but was instead being based on domestic and foreign offtake agreements which were being negotiated and were expected to be finalised during the current financial year.