Member Info for JRtandi

The construction capital needed for "phase 1" was ~$35m.

They have $20m cash in the bank and a $15m loan deal from IDC on the table.

Recently they:
1. Decided to go for the more expensive "Makhado CPP" scenario requiring construction capital of $70m (1.2bn zar)
2. Took the cheaper Phase 1 Vele CPP option off the table by outsourcing Vele
3. Look to pushing ROM capacity from 3 to 4Mt pa.

Assuming this isn't our BOD being hubristic, wouldn't you agree this all seems to point to this thing finally getting done?

The Makhado Lite NPV was based on long term prices for HCC of 120$/t and Thermal 61$/t:

$135 million to $260 million (27p-53p in today's money).

The long term price assumptions they recently assumed was 212$/t for HCC and 106$/t for Thermal

So a big difference!

Makhado Lite was:
ROM 4Mtpa
HCC 0.7 to 0.8 Mtpa
Thermal 0.9 to 1.0 Mtpa

I do think they are looking to implementing Makhado Lite now.

Missed this in previous RNS:
"Both alternative development scenarios entail mining of the East Pit, followed by the Central and West Pits"

East pit was Makhado Lite/"phase 2". The West pit was to be mines first under "phase 1".

See: https://www.lse.co.uk/rns/MCM/activities-report-for-the-quarter-ended-30-sep-22-w1lkur3jqpajs6q.html

Hi FC, here's a link which has some info on it:

https://www.lse.co.uk/rns/MCM/report-for-the-quarter-ended-30-september-2017-dcrdthfpe5vno4q.html

But if you google (using quotation marks) Mc Mining "makhado lite", you will find plenty of references to it, including articles with David Brown. The "Lite" plan surfaces in 2017 and then in 2018 or so they started with the phased approach and basically "Lite" became "phase 2".

Sorry for bombarding this thread.

The plan to move from ROM 3mtpa to 4mtpa sounds suspiciously like the "Makhado Lite" plan they originally came up with a few years ago.

Makhado Lite involved starting on the East and Central pits and included the construction of the Makhado Project processing plant and related infrastructure. It would have a ROM of 4Mt pa yielding ****1.6 to 1.8 Mtpa of saleable product****.(!!!)

It got abandoned at the time, I believe, because they didn't have access to two properties at the time? All that got sorted since.

I may be not getting this 100% right but: as I understand it, Lite was replaced with a "Phase 1" which would start on the West Pit using Vele's CPP and they would move to the East and Central pits in a phase 2.

So, is the plan now to go for 1.6-1.8 Mt pa saleable product?

(The price tag at the time was ~75m which is what the BOOT with Makhado CPP has: 1.3B ZAR)

I'm assuming Erudite's study is not something they are doing in isolation and that there have been a few iterations following inputs from the various stakeholders.

The change of tack from 3mtpa ROM to 4mtpa seems to indicate such a dialogue is taking place? Hopefully Bozmo can get some more insights on this from his contacts. It could indicate that MCM have potentially access to more $$$ than they initially assumed?

After my BOOT-related question to Bozmo I realised that the one BOOT agreement already agreed in principle, for ZAR60 million, is exactly the amount that Dendocept had given MCM as standby loan facility (repaid following the RI).

At some point (after the CPP detailed design has been completed and reviewed, I guess) we will also get news on the ordering of long-lead time equipment:

"The proceeds of the Rights Issue will contribute towards early-works at the project, including confirmatory and geotechnical drilling, civils infrastructure and securing long-lead time equipment for the Makhado coal processing plant"

Hopefully MCM will share pictures of the earthworks and infrastructure over the next few weeks. After so many years finally having spades in the ground at Makhado is a great milestone. There's been enough talk, time to pull the sleeves up!

That would be great Bozmo.

If I could be greedy: can your contacts put some flesh on the bone re. the up to 663m-odd ZAR worth of BOOT agreements they are looking to put in place?

Can they give a (theoretical) example of how the arrangements might work out in practice?

Or of anyone here has any input?

(I understand the principle of BOOT but practically if you have several of them how does the OO aspect work? E.g. would it be a BOOT partner for the crusher, a BOOT for the excavators etc)

One thought i had is that with ~650ktpa saleable you could easily fill up a panamax every month.

Bozmo, if you're still in touch with your contacts at MCZ it would be good if you could get some colour on the recent release.

E.g.
How's the general mood?
Why the intriguing change to look at a CPP capable of ROM at 4mtpa?
Is there more to the 14% Uitkomst buyout or just coincidence?

Do you know if Senosi is exclusively running on trucking or does he have an allocation on the Transnet railway to RB that could become available once they sort themselves out?

Interesting that they are looking at increasing ROM for Makhado from 3m to 4m tpa. Are they aiming for ~650kt pa HCC? If so, I think that would add ~10p to the Makhado valuation?

Is this an indication they are comfortable making it a bigger project or a consequence of the cost savings anticipated by Minxcon?

Spades in the ground for Makhado in February -- that will be a milestone.

The additional income from Vele (and ~$1m pa corporate reduction) should help soften the downside of the cyclical nature of the business. One way to look at it is that Vele's 11$/t is the equivalent of adding $44/t to the revenue for Uitkomst's export of 15kt/m.

Thanks. Not sure which index they'll use for the HCC as i don't think there are any meaningful HCC shipments from Africa happening right now. MCM would be the main/only supplier, AFAIK. Logistically it would make sense to supply to AMSA as that would just be a hop and a skip, virtually. But if e.g. Dendocept can do a prepay to help MCM complete funding then that would make a difference.

The Uitkomst thermal coal is being trucked to Durban, per the RNS from last year.

I wonder where the Vele coal is going.

Google Maps tells me that from Musina it's a 9hrs drive to Maputo and 12hrs to RB.

Does anyone know if there is a published index for export coal prices from Maputo? I guess it's not exactly the same as API4 FOB RB?

The first off-take agreement MCM negotiated was with the Chinese - see RNS from 2018 below. It was a 3-year agreement for minimum 400ktpa of premium HCC, FOB at the Matola Terminal in Maputo, Mozambique.

It is not too ridiculous to assume that given the recent changes in largest shareholders (Senosi and Dendocept) are not a coincidence and will play out in terms of where MCM's product ends up?

Sensosi is already involved with MCM's thermal coal from Uitkomst (directly via the export sales agreement) and Vele (via JCI Mining subcontracting).

It's not a huge leap to see Sensoi further involved in Makhado's ~500ktpa thermal and the Chinese (via Dendocept) for the ~500ktpa premium HCC?

https://www.lse.co.uk/rns/MCM/makhado-project-hard-coking-coal-off-take-secured-7u2ku2wfbm0o4v9.html

Thanks Granth81!

Recap of the near-term news (not necessarily exhaustive or in chronological order, please add if I forgot something):

• Likely this Tuesday 31st Jan, Activities Report for the Quarter Ended 31st Dec 2022 (with the headline figure being the gross profit for the quarter beating the whole of FY2022?)

• Erudite detailed study on Makhado. Minxcon suggested this may potentially result in substantial cost savings and reduced peak funding needs. The report was supposed to have been completed last month and then reviewed by the various potential providers.

• Makhado Project funding arrangement. Could we see a deepening involvement of Senosi e.g. a deal for Makhado's 500ktpa saleable thermal coal? Any other partners coming to the fore? Dendocept? AMSA? Could we see a prepay on (part of) the 500ktpa saleable premium HCC? Based on my own rough calculations I think that with the cash likely generated so far and the cash likely to be generated over the next year that the additional funding needs will be in the order of $5-$20m, depending on whether or not IDC further extends the R160 million outstanding loan (plus interest) to e.g. after the first sales start. That sounds very doable to me for either a straight-up loan or a package involving also e.g. prepay, delayed vendor payment terms until after production start (construction is only 12 months) etc. The fact that MCM now has a good degree of "proven" cash in-flows should help with putting together something like this?

• ~15th March Interim Results.

• Vele colliery first coal sales (we get $11/t free ride).

• Not sure when, but there was also talk of them needing to add an Australian based director to fulfil ASX requirements? This will probably be more of an administrative box-ticking thing, but who knows, maybe they may surprise us with an interesting name?

• Seems likely we will see an announcement re. Makhado coking coal take-off agreement?

If this had more eyes on it there might have been a boost in the anticipation of the last quarter results, which should be spectacular and a gigantic milestone for the company.

As it is, perhaps the news flow about results and/or Makhado funding complete and construction start may finally get the eyeballs on MCM.

At some point the Market should take notice that MCM is on the cusp of going from ~20m revenue pa to ~$250m pa.

MCM's Makhado valuation is based on "benchmark real long-term" prices of 212$/t for premium HCC and 106$/t for API4.

Looking at the current futures it wouldn't be unreasonable to assume that prices will find support longer term at e.g. 250$/t for premium HCC and 125$/t for API4.

Using a conservative forward PE of 2.5, and assuming I didn't make any wrong calculations, then that would add another 15p to the valuation of Makhado in today's money, or ~60p in total.

The offtake agreement with ArcelorMittal was based on international prices. At current prices the revenue for 500kt pa would be ~$200m. That's nearly 10-fold the revenue MCM did in the last financial year....