MC Mining’s Brown weighs Vele, once SA’s most controversial mine
MININGMX/ 04 APRIL 2018 - 14.18 / DAVID MCKAY
DAVID Brown, CEO of MC Mining (MCM), previously known as Coal of Africa, claims to be in a much happier place these days. “There’s been a complete sea-change at the company. Nearly all the legacy issues are out of the way and if we acquire another cash generator, we will be self sufficient,” he said in an interview with Miningmx.
The legacy issues were, in a nutshell, unprofitable colleries, heavy debt, and a surfeit of shares after the company had time and again raised finance from shareholders. Most of the non-core mines are sold, the debt – principally to Rio Tinto – is gone, and there was a 20:1 share consolidation along with a name change which applied the cherry to the cake.
Image - Miningmx
Brown also abandoned hugely ambitious plans for a massive $500m coking coal mine in South Africa’s Limpopo province, opting instead for ‘Makhado Lite’, which will cost $100m to build, but will produce less coal, most of which will be sold domestically thereby minimising the most thorniest of challenges for any bulk miner – freight costs.
Yet there’s still work to do. The share is 40% lower on a 12-month basis despite a reduction in the cash burn to a mere $3m in the last six months. The concern may be about how MCM goes about funding Makhado.
“We won’t be issuing shares,” said Brown. “About 60% to 65% of the total capex will be funded through debt, and the balance through equity – most likely by the black economic empowerment party. We’ve also got a R120m facility from the Industrial Development Corporation while the sale of Mooiplaats will also bring in funds,” he added. And there may be yet another, and final, sale of an old asset.
This is the Vele mine situated a stone’s throw from Mapungubwe. The mine was a hot news ticket a couple of years ago owing to its application to use of water in an area of the country so short of it, and because Mapungubwe happened to be a UNESCO World Heritage site. Environmentalists clubbed together and had the mine shut for the best part of a year.
Brown wasn’t CEO at the time but following his appointment in February 2014, he decided to re-engineer Vele which, in turn, required a new water use licence and new government applications. That process is largely complete, but the strength of the rand against the dollar is a major stick in the spokes of Vele.
“We haven’t made a final decision,” said Brown. “We have one of several options one of which is a disposal.” In the end, that would be handy. Vele only came back into the frame for MC Mining because the export traded coking and thermal coal prices jumped after several years of depression.
Selling the mine now might help ease pressure on the balance sheet, not to mention cut into overheads further, and that can only be good news for Brown and shareholders alike.
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