MC Mining signs off-take agreement with ArcelorMittal South Africa

MC Mining announced the completion of a “major milestone” on Wednesday, with the signing of an off-take agreement with ArcelorMittal South Africa (AMSA).

The AIM-traded firm said the deal would result in AMSA purchasing hard coking coal (HCC) that would be produced from the first phase of the Makhado coking coal project.

It said the agreement reaffirmed the quality of Makhado's HCC, and followed the April announcement of an off-take with one of the world's largest producers and marketers of seaborne traded coal for all the by-product thermal coal to be produced by the first phase.

Completion of those off-takes satisfied a “key requirement” for the Makhado Project's economics, and allowed funding discussions to gain further traction, with construction expected to begin in the third quarter.

MC Mining said South Africa had a “very limited” production of high-quality coking coal, resulting in AMSA and other coke producers having to import HCC for the manufacture of metallurgical coke - a key ingredient in the production of steel.

Under the agreement, AMSA would purchase a minimum of 350,000 tonnes of first phase HCC annually, and had the right to acquire a further 100,000 tonnes per year.

MC Mining said the agreement would endure for the shorter of 10 years or the first phade life-of-mine, with HCC to be delivered to the Musina siding and railed to AMSA's Vanderbijlpark and Newcastle operations.

The HCC would be sold on a free on rail (FOR) basis, with sale prices to be calculated on a monthly basis, linked to a published, international dollar-denominated HCC index.

“The signing of the phase 1 HCC off-take agreement with AMSA is a massively positive step for Makhado,” said chief executive officer David Brown.

“MC Mining is now positioned to become South Africa's pre-eminent producer of high-grade metallurgical coal and the Makhado coking coal will partially replace coking coal currently imported.”