Lower volumes and volatile coal prices hit MC Mining
The junior coal miner reported a $33.7m loss, a 67% improvement on the previous year, when it was hit by an $87.5m impairment at its mothballed Vele colliery
Junior SA coal miner MC Mining, formerly known as Coal of Africa, said on Monday volatile international coal prices and reduced volumes at its Uitkomst colliery resulted in a 63% fall in cash generated from operations in its year to end-June.
MC Mining reported a $33.7m loss, a 67% improvement on the previous year, when it was hit by an $87.5m impairment at its mothballed Vele colliery.
The company’s loss per share fell to 23.72 dollar cents, from 71.99 previously.
MC Mining relies on Uitkomst for cash generation, but its priority is its flagship Makhado project, which will produce coking coal and thermal coal once production begins. The project has faced significant environmental hurdles, as well as legal battles over access via two farms to the site, though these issues have been resolved.
Uitkomst experienced a 35% fall in sales volumes during the period, also hit by the expiration of a supply contract in 2018, which resulted in an 88% fall in run-of-mine purchased coal.
During the period hard coking coal prices were 2% higher, though these declined 20% from June to August 2019.
Thermal coal prices fluctuated significantly during the year, but averaged 7% lower due to competition from the increased supply of liquefied natural gas — also used as a bulk energy source.
The company reported progress in its Makhado project, with the Industrial Development Corporation approving a R245m loan to fund the first phase of the project.
The company’s priority for 2020 remains that of securing funding for the project.
“The development of the Makhado Project will result in MC Mining being the pre-eminent SA producer of hard coking coal,” CEO David Brown said.
“This coal trades at a significant premium to thermal coal and is a key ingredient contributing to the manufacture of steel. The long-term viability of Makhado is supported by forecast long-term growth in global steel demand, with economic development and urbanisation driving increases in per capita steel usage,” Brown said.