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It seems to me it would be a no-brainer to outsource Uitkomst also - once Makhado is fully financed.

I wonder if the buy-out to increase MCM's ownership to 84% has anything to do with it.

Got a bit carried away with my Senosis there.

Correction: the remainder (BOOT) funding would be:

ZAR663m -144m (Vele) - 60m (BOOT already agreed in principle) = ZAR458m

Note: This is based on the costings by Minxcon. The Erudite study was thought to bring additional cost savings and efficiencies.

This may be a coincidence but would be a curious one if so:

August 2022 RNS "Makhado, Vele and GSP Updates":

"The option of moving the Vele CPP provides the most attractive financial metrics but removes the Vele asset from MC Mining's portfolio and limits future exploitation of the Vele Colliery. The construction of a new plant at Makhado provides similar results but requires additional peak funding of ZAR145m while also keeping the Vele CPP intact for future exploitation"

So a brand new CPP at Makhado would cost 145m ZAR more compared to shifting the Vele CPP to Makhado.

The outsourcing of Vele provides a cash generating unit for MCM at 200 ZAR/t, with the intention of producing 60kt salebale thermal coal per month.

As it happens 200x60,000x12 is....144m ZAR

So not only is Vele becoming an active asset, it is generating ~exactly the additional funds needed for the "new CPP at Makhado" scenario.

Thanks Mr. Senosi!

Wouldn't be a stretch to see Mr Senosi find a similar creative solution re. the ZAR663m BOOT funding to complete the financing.

Mr Sensoi

Met coal has been strong - up over 20% since start of the year. Should further make the case of how Makhado will put MCM on a resilient footing, especially so with practically guaranteed off-take from ArcelorMittal.

While thermal has seen a sell-off, it looks like it will establish an all-time-high bottom.

Some jitters on the Australian exchange across coal stocks but I think what we will see is Newcastle closing the gap with Richard Bay with API4 RB remaining robust longer term.

Folks should keep in mind this is a cyclical business.

Yeah, it has no direct impact on MCM's business.

If the whole MMSEZ were to be abandoned tomorrow it would not affect MCM as ArcelorMittal's offtake is not dependent on it and export opportunities of course also not.

The originally planned coal-fuelled Musina-Makhado power plant would have been great for MCM as it would be right on the doorstep so a no-brainer for the supply of thermal coal. It was scrapped last summer so a shame but it wasn't part of the plan for MCM's Makhado originally anyhow - Makhado's thermal coal had been earmarked for export to Maputo.

FluffyCrayon:
It's unrelated. The makhado coal mine is not part of the MMSEZ. The environmental authorisation was given in 2013, many years before MMSEZ even was conceived of.

Bozmo - any luck with your grapevine?

What are your thoughts re. the increasing scope of Makhado? Last summer the ROM was 2mtpa (nameplate spec of the existing Vele CPP). Then it became 3m and now they are looking at 4m.

Did the optimisation study by Erudite simply show they could do more for the same buck?

Did the positive input from e.g. BOOT providers/funders give them scope to be more ambitious?

A more cautious person might have left Vele CPP on the table until funding was 100% secure?

After all, the changes meant going from ~$35m to $75m capital expenditure.

The only way I can make sense of it would be that they know they have the $75m in the bag and that right now they are working with the BOOT to custom design hardware needed.

If ArcelorMittal took 16% ownership of Makhado, leaving MCM with 51%, then that would cover all of the remaining funds needed to get Makhado in production. (Based on the most recent post-tax NPV(10%) valuation)

It could guarantee them basically at cost supply of coking coal for the next decades? (Based on 16% share of profit on whole saleable 750ktpa HCC/850ktpa API4 output offsetting the 400ktpa offtake for them)

From ACL's update today: "Plans are progressing to enable ArcelorMittal South Africa to improve its servicing of the important commercial coke market. An improvement is expected in 2023, with a meaningful impact from 2024 onwards."

The Makhado thermal coal is 5,500kcal which could be ideal for the Indian Market?

*they can't blame us

You can't blame us for getting our hopes up.

Sometimes you have to "read the signs"

• Why did Senosi get involved?
• Why did Dendocept?
• Why Nene and Gomwe?
• Why did they choose not to go with the cheapest capital expenditure option for Makhado of Vele CPP (~$35m)? Indeed - this "phase 1" was the #1 plan for several years and by outsourcing Vele it is now totally off the table.
• Why are they looking into 4mtpa ROM instead of the earlier 3mtpa?
• Why commit $4m worth of early works at Makhado this month?

In the best case this month will mark the start of Makhado's 12 month construction period, for real. If so I would expect news very soon as the long lead time items will need to be decided upon pretty soon in that case.

If the plan is 4mtpa ROM and ~750kt pa HCC, ~850kt pa thermal then we could see two offtake agreements? One with ArcelorMittal and one with China?

I do expect some news sooner than that, FC.

There's the interims of course (15th March) but we should get some more news sooner or later this quarter?

Eg.
• Vele Colliery commercial production start & payments to us.
• I don't expect Makhado finance completion this quarter but some news re. what shape the arrangement will take (BOOT, senior debt etc)
• Following the spades in the ground at Makhado will we some further expenditures this quarter? E.g. Long lead-time items being ordered? Infrastructure?

B&E International is a subsidiary of JSE-listed Raubex Group.

Have been looking at coal sector BOOT providers in ZA. There's a few e.g. B&E International.

A BOOT arrangement would be expedient for MCM: the BOOT provider takes on all the upfront project cost (e.g. for the crusher etc) and then just charges it through on a per tonne saleable coal basis once the project is in production.

Normally they will also be responsible for achieving mine plan targets on output etc.

This could be an ideal solution for MCM for the first couple of years - with the still very high premium HCC prices MCM should be able to very quickly build up cash flow.

The old CEO, David Brown, is all over YouTube. A lot of the fundamentals will be the same but a lot has changed of course. (Mainly the obstacles he had to face have all been overcome)

Would be good to see Mr Gomwe being interviewed about MCM, don't think he has done one yet in his current role. He was COO of Anglo American's thermal coal business so I guess there must be loads of them in his previous guise.

Anyone know if MCM is presenting at the Mining Indaba this week?

An interview with our CEO would be good too.

Cash flows from operating activities:

FY2021 net
cash outflow: $1.4 million
FY2022 net cash outflow: $2.5 million

For FY2023: the Vele restart should result in ~$0.5m cash outflow reduction due to it being outsourced and we could see >$2m additonal cash *inflows* between now and end of financial year just from Vele.

For FY2024: excluding the Makhado operation, which should hopefully be in construction, we should have a net cash *inflow* of at least $6.5m?

For FY2022 Uitkomst was 100% domestic prices so I would expect the cash flow picture for FY2023 to be significantly better.

E.g. It's unfortunate that the Q2 update missed out on the 36,764t of coal that had been at port in December but didn't get shipped until January. If I read the RNS correctly, during December they received $1.5 prepayment for it so the balance received in January should have been another ~$2m? (I'm assuming average sales price first week of January of $180/t, so net of 5% to Overlooked and the $70 trucking etc charges that leaves $100/t. However, presumably most of those $70 trucking charges would have been already borne in the December cost figures? So potentially the actual cash receipts could have been up to $2.5m higher?)

AMSA consumed 1Mt of coal in H1 2022

Extract from their H1 results call transcript: "We will continue to explore opportunities to accelerate the regionalization of hard coking coal opportunities to replace as far as possible, imported coking coal"

Not sure it's the context for the recent shareprice movement. The recent drop in SP was more to do with unmet expectations around MCM profiting from higher export prices (the $70/t trucking etc deduction being the spoilsport for us there).

The MMSEZ would be a real "nice to have" and added bonus for MCM but between AMSA and export there should be enough to be getting on with for MCM at the Makhado mine. MCM's Makhado is nearby but not part of the MMSEZ

The enviros exhausted their litigation with MCM and all is shovel ready now. Just need to close the funding and start construction.

A cash bonanza at Uitkomst would have been awesome but the big prize is still the HCC from Makhado generating upward of $50m pa gross profits.