MC Mining to get Makhado coal project on the road with long-awaited $40m rights offer

Godfrey Gomwe, CEO, MC Mining

MC MINING plans to start construction of a new thermal and metallurgical coal mine planned for the Limpopo province in January provided it can successfully get a $40m rights offer away, launched today.

The company will sell shares for R3.36/share, equal to a 48% discount to the VWAP on the Johannesburg Stock Exchange. Shares in MC Mining were trading at R4.40/share, equal to a market capitalisation of R67.6m.

MC Mining shareholders Senosi Group Investment Holdings and Dendocept Proprietary have underwritten the offer which will be used to part fund the development of the Makhado project. Proceeds from the rights issue are critical in terms of the firm’s obligations to some $26m in debt funding that’s also been arranged.

The underwritten offer and debt funding represents an enormous step forward for MC Mining which has struggled to make progress for the last three years. Makhado divides optinion because while it offers employment and industry in a sparsely developed area of South Africa, it is unpopular among environmentalists.

MC Mining has also battled to launch the project owing to an absence of stable management at the company.

Following the resignation of the late David Brown in 2019, the company was led on an interim basis by Brown’s former Impala Platinum colleague, Brenda Berlin – until she surprisingly resigned in late 2020. The company was then effectively managed by board members on an interim basis until in June MC Mining underwent its second management coup in a decade.

Offering new finance as a condition, Denodocept and Senosi Group installed coal mining veteran Godfrey Gomwe as its new CEO in June. The board was also refreshed following the resignation of MC Mining stalwarts Sam Randazzo and Bernard Pryor with the non-executive appointment of Nhlanhla Nene, a former finance minister of South Africa.

Gomwe was previously chief operating officer of Anglo American and prior to that headed up the group’s thermal coal operations in South Africa. He is currently a non-executive director of Orion Minerals and AECI, the chemicals company.

Makhado which has been scoped to produce one million tons of coal comprising 540,000 tons of hard coking coal and 570,000 tons of thermal coal by-product. The approval of the project comes at a time when coal prices are at record highs amid an energy supply crunch, especially in Europe.

Newcastle futures for October jumped 5% to $463.75 a ton earlier this month representing the highest price in data stretching back to January 2016. Europe’s benchmark coal price was also trading at a record.

“Any severe disruptions to Australian coal shipments could push the high-calorific value price even to fresh highs,” Morgan Stanley analysts including Marius van Straaten said in a note.