MC Mining completes sale and purchase agreement for Makhado coal

MC Mining announced the conclusion of a coal sale and purchase agreement for the export quality thermal coal to be produced by the first phase of the Makhado hard coking and thermal coal project on Tuesday.

The AIM-traded firm said the parties to the agreement were its wholly-owned subsidiary Limpopo Coal Company, and “one of the world's largest” producers and marketers of bulk commodities.

Another one of its subsidiaries, Baobab Mining & Exploration, was the owner of the Makhado Project, with the nine-month first phase construction period expected to start in the third quarter.

MC Mining said that phase would generate around three million tonnes per annum of run-of-mine coal from the west pit, which would undergo preliminary processing at the mine, yielding an estimated two million tonnes per annum of run-of-mine coal.

The resultant run-of-mine coal would be transported and sold to Limpopo which would, with its modified plant, complete the final processing producing up to 0.57 million tonnes per annum of export quality thermal coal and 0.54 million tonnes per annum of hard coking coal.

Construction of the second phase of the Makhado Project in around 2022 was expected to produce four million tonnes per annum of run-of-mine coal from the east and central pits, resulting in around one million tonnes per annum of thermal coal.

The company said the key highlights of the agreement were that sales prices should be an API4 linked price expressed in dollars, and would be calculated and agreed on a quarterly basis.

Saleable thermal coal will be delivered to the Musina siding and sold on a free-on-rail basis, which took into account the actual rail and port charges.

MC Mining said the agreement remained subject to various conditions standard for an agreement of such nature.

“We have contracted with one of the world's largest producers and marketers of seaborne traded coal for the majority of the life of the first phase,” said MC Mining chief executive officer David Brown.

“The signing of this agreement is a further significant step in the advancement of Makhado.”

Brown said the phased development of the Makhado Project would generate a !”significant” number of employment opportunities in the Limpopo province, with the export of the thermal coal utilising previously-tested logistics infrastructure.

“Negotiations for a composite debt and equity funding arrangement continue and we anticipate that they will be completed in the third quarter of 2019, with the first phase of construction commencing later in the quarter.”