MC Mining raised R29.7m in a coal pre-payment from a customer in an effort to stay afloat after posting losses and a cash outflow for the year ended June.
The metallurgical and thermal coal mining and development firm also extended two loans held with the Industrial Development Corporation (IDC), the South African government-owned institution, until end-January 2022 whilst it sought other fund-raising measures.
As a consequence of its loss-making, the firm’s auditor PwC said there was a material uncertainty in the ability of MC Mining to continue as a going concern. Its distress mirrors the recent insolvency of Resource Generation (Resgen), a coal development company that was seeking to build the Boikarabelo mine in South Africa’s Limpopo Province.
MC Mining has raised some, but not all, funds for the development of the first phase of its Makhado metallurgical and thermal coal project, also in the Limpopo province. Unlike Resgen, however, MC Mining generates revenue from Uitkomst, a mine in KwaZulu-Natal.
The mine registered improved coal prices towards the end of the 12 months to June of about $115 per ton compared to $53/t at the beginning of the year in 2020 which bodes well for the current financial year. Nonetheless, for the year under review, MC Mining recorded a $1.35m cash outflow. Losses totalled $11.3m, mostly a function of $6.8m in net impairments on the firm’s mothballed Vele mine and processing facilities.
MC Mining interim CEO, Sam Randazzo said the company was confident it could dig itself out of its working capital problems through either the issue of equity, project funding by issuing development concessions to a contractor, the sale of the firm’s minority stake in the subsidiary of the Makhado project, or further debt funding.
MC Mining owes the IDC some R120m, the repayment of which is now only from the end of January 2022. This loan can be converted into equity if MC Mining is unable to make the payment. As of February this year, the IDC has a 6.7% stake in MC Mining.
A further R160m is owed in project finance debt to the IDC which comprises the drawn-down portion of a R240m facility. The facility was cancelled with R80m undrawn. As of June 30, MC Mining had cash facilities totalling $3.2m.
MC Mining is also looking for a replacement CEO after Brenda Berlin, the former CFO of Impala Platinum, resigned as CEO effective from end-February.