MC Mining suspends coal production and pay for non-essential staff

MC Mining announced the lockdown and suspension of coal production on Thursday, following a directive from the South African government requiring a 21-day national lockdown, effective midnight from 26 March to 16 April, in a bid to contain the spread of the Covid-19 coronavirus.

The AIM-traded firm said further to that, the Department of Mineral Resources and Energy (DMRE) released a statement on 25 March, which noted that for some mining operations and plants a complete shutdown may not be feasible, as a restart from scratch could be too costly.

It said the directive impacted operations at its Uitkomst Colliery, the Makhado, Vele and Greater Soutpansberg Projects, as well as its corporate office.

In line with the directive’s measures, the Uitkomst Colliery would be placed on care and maintenance during the lockdown period.

The scaled back operations would be monitored and managed according to procedures enacted to protect the health and safety of all of the company's people, MC Mining said, which cover communication and training, hygiene response, security controls, health monitoring, resilience and contingency plans.

“It is worth noting that the Uitkomst Colliery is a mechanised underground operation and upon completion of the lockdown period, it will be possible to ramp-up to steady state production levels within a relatively short time frame,” the board said in its statement.

However, given the continued uncertainty around the outlook for the pandemic in South Africa, 2020 production guidance was suspended until the firm was in a better position to quantify the full impact of the lockdown.

The lockdown had also resulted in MC Mining implementing a “no work, no pay” policy for non-essential staff at its various sites.

Its board said it understood the adverse impact the policy had on staff, and was aware of alternative mitigating financial measures proposed by the government, including wage payments through the Temporary Employee Relief Scheme.

MC Mining said it was investigating those measures, and would use its “best endeavours” to ensure staff received the financial support for which they qualified.

The company said it had available cash of $1m as well as the available $1.1m general banking facility from ABSA Bank.

MC Mining also had the $7m second tranche of the existing Industrial Development Corporation loan available for drawdown.

As it had previously said, the firm was also in the process of securing the balance of $32m required to commence construction of the first phase of its fully-permitted Makhado hard coking coal project.

“MC Mining supports all measures to limit the impact of COVID-19 and the lockdown has impacted our Uitkomst Colliery as well as our corporate office and project sites,” said chief executive officer Brenda Berlin.

“We anticipate that activities at all of the sites will resume as soon as it is safe to re-commence.”

Berlin said discussions with potential funders for the first phase of the flagship Makhado hard coking coal project would continue during the lockdown period.

“The company still aims to finalise the composite debt/equity package for phase 1 during the first half of 2020, with construction commencing later this year.”

At 1457 GMT, shares in MC Mining were down 5.72% at 8.48p.