Mc Mining Regulatory News (MCM)

REPORT FOR THE QUARTER ENDED 30 JUNE 2019

MAKHADO PHASE 1 COAL OFF-TAKES AND DEBT FUNDING SECURED

MC Mining Limited ("MC Mining" or the "Company") which operates in South Africa, together with its subsidiaries, hereby provides its update for the three months ended 30 June 2019, the final quarter (the "Quarter") of the Company's 2019 financial year. All figures are denominated in United States dollars unless otherwise stated[1]. Safety metrics are compared to the preceding quarter while financial and operational metrics are measured against the comparable period in the previous financial year. A copy of this report is available on the Company's website, www.mcmining.co.za.

Salient operational features

·; The various safety initiatives completed at the high-grade Uitkomst metallurgical and thermal coal mine ("Uitkomst Colliery" or "Uitkomst") yielded positive results and no lost-time injuries ("LTIs") were recorded during the Quarter (FY2019 Q3: three LTIs);

·; Revised mining cycles implemented earlier in CY2019 resulted in Uitkomst's run of mine ("ROM") coal production increasing from the March 2019 period's 113,190 tonnes ("t") to 121,742t for the Quarter, marginally lower than the comparable FY2018 Q4's 123,771t;

·; Sales of high-grade metallurgical and thermal coal derived from Uitkomst ROM coal were 75,643t (FY2018 Q4: 90,509t) with the comparative period's sales tonnages which were elevated due to delays of sales in the March 2018 quarter which then took place in the June 2018 quarter;

·; No sales of high-ash middlings product during the Quarter due to train schedule delays, with inventory of over 2,500t at Quarter-end railed to customers early in Q1 FY2020;

·; During the Quarter Uitkomst received a premium above API4 thermal coal prices for its sized coal, resulting in average revenue per saleable tonne declining 27% to $71/t (FY2018 Q4: $97/t), a smaller decline than the 33% year-on-year reduction in the Richards Bay API4 export price;

·; As expected, no coal was purchased from third parties due to supply contracts expiring in FY2018 (FY2018 Q4: 13,265t);

·; Conclusion of a hard coking coal ("HCC") off-take agreement (the "Agreement") with ArcelorMittal South Africa Limited ("AMSA") for the annual purchase of 350,000t to 450,000t of HCC that will be produced at Phase 1 of the Makhado coking coal project ("Makhado Project" or "Makhado");

·; Thermal coal off-take agreement signed with one of the world's largest producers and marketers of bulk commodities for the purchase of the Makhado Phase 1 by-product;

·; Dismissal of appeals against the Makhado Project Environmental Authorisation ("EA") amendments, facilitating the transport of coal by road rather than rail and reaffirming the project's permitted status; and

·; Vele semi-soft coking and thermal coal colliery ("Vele Colliery") remained on care and maintenance during the Quarter but the Vele processing plant is expected to be refurbished and recommissioned as part of Phase 1 of the Makhado Project.

Corporate and financial features

·; Premium HCC prices averaged $202/t during the Quarter (FY2018 Q4: $188/t) while API4 thermal coal prices declined from $100/t in the comparable period to $67/t due to reduced demand;

·; Co-operation agreement signed with Haohua Energy International (Hong Kong) ("HEI"), aligning substantial shareholders' threshold to appoint directors to the MC Mining board;

·; Negotiated settlement of the full outstanding Mooiplaats thermal coal colliery ("Mooiplaats Colliery") sale proceeds resulting in the receipt of $4.1 million during the Quarter, contributing to the available cash at Quarter-end of $8.7 million ($4.7 million at the end of March 2019) with restricted cash of $0.03 million; and

·; Subsequent to the Quarter-end, the Company received approval by the Industrial Development Corporation of South Africa Limited ("IDC") Credit Committee of a term loan facility of R245 million ($17.5 million), which subject to finalisation of documentation, is the initial step in the composite debt and equity funding package for the construction of Phase 1 of the Makhado Project.

David Brown, CEO commented:

"The last three months of the 2019 financial year were very successful for the Company and included the signature of off-take agreements for the Makhado hard coking coal as well the thermal coal by-product. South Africa produces significant quantities of thermal coal but has very limited quantities of high-quality metallurgical coal and the off-take with the country's largest steel producer will result in the majority of Makhado Phase 1's coking coal being sold domestically, replacing some coal imports. The development of the Makhado Project will make MC Mining the pre-eminent South African producer of hard coking coal which 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's coking coal is supported by global steel demand that is expected to grow over the next ten years, with economic development and urbanisation driving increases in per capita steel usage. Makhado Phase 1 has an internal rate of return in excess 45%, generating significant near-term benefits for shareholders. The development of the next phase of the project is expected to yield approximately 1.7Mtpa of saleable coal, including 0.8Mtpa of hard coking coal once in production, with construction anticipated in circa CY2022 funding and coal market dependent.

The South African government's dismissal of the appeal against the Makhado EA amendment during the Quarter reinforces the robustness of the project's permitting processes while the off-take agreements reaffirmed the world-class quality of Makhado's coal and satisfied a key requirement for funders. During July 2019 the IDC's Credit Committee approved a term loan facility for Phase 1 of the Makhado Project. Discussions with potential equity funders for the balance of the Phase 1 funding are ongoing and we anticipate that this process will be completed in Q3 CY2019, with construction commencing later in the period.

The optimisation of mining cycles at Uitkomst Colliery implemented in the March 2019 quarter yielded positive results and ROM coal production is very similar to the coal mined in the comparative three-months. Studies for the north adit extension continued during the Quarter and the development thereof is dependent on the granting of the water use license and subject to regulatory approvals, the Company anticipates commencing in early CY2020."

QUARTERLY COMMENTARY

Uitkomst Colliery - Utrecht Coalfields (70% owned)

Safety continued to be a key focus at Uitkomst and the colliery recorded no LTIs during the Quarter (FY2019 Q3: three LTIs).

The re-organisation of underground mining operations via the implementation of alternative shift programmes during the March 2019 quarter yielded improved results and ROM coal production was similar to the comparable period in the previous financial year (121,742t vs 123,771t) while no ROM coal was purchased from third parties during the Quarter (FY2018 Q4: 13,265t) due to the expiry of a coal supply agreement in the prior year. The ROM coal generated high-grade metallurgical and thermal coal sales of 75,643t compared to 90,509t in the comparative quarter which were elevated due to the inclusion of some of March 2018 quarter sales that were delayed as a result of rain preventing access to site. There were no sales of the high-ash middlings coal during the Quarter due to train scheduling and at the end of June 2019, Uitkomst had over 2,500t of this product on-hand (FY2018 Q4: 0t) which was sold in July 2019.

Uitkomst's revenue was adversely affected by continued pressure on international thermal coal prices during the Quarter and the average API4 coal price was 33% lower than the same period in the prior year ($67/t vs $100/t). The decline in coal prices was somewhat offset by the premium Uitkomst received for sized coal and the sales prices attained for this type of coal is expected to prevail for the remainder of CY2019.

^ costs are all South African Rand based

The Uitkomst Colliery has an estimated 15-years life-of-mine ("LOM") which includes the development of a north adit (horizontal shaft). The colliery awaits the granting of the Integrated Water Use License and anticipates that this will be granted in the near-term with development of the north adit commencing in early CY2020.

Makhado Hard Coking Coal Project - Soutpansberg Coalfield (69% owned)

The Makhado Project recorded no LTIs (FY2019 Q3: nil) during the Quarter.

Phase 1 of the Makhado Project entails the construction of the west pit and trucking of scalped and screened ROM coal to the existing, but to be modified Vele Colliery for final processing. The development of Phase 1 has a low capex requirement and a short construction phase, reducing the period for delivery of saleable coal to market while utilising previously tested road and rail infrastructure. The east and central pits will be developed in Phase 2, producing approximately 4Mtpa of ROM coal that will yield some 1.7Mtpa of saleable HCC and thermal coal.

Construction of the Phase 1 west pit and Vele Colliery plant modifications will occur simultaneously and take nine months to complete, followed by first coal sales in month ten. Phase 1 will generate an estimated 3Mtpa of ROM coal producing approximately 0.54Mtpa of HCC and 0.57Mtpa of a thermal coal by-product and the saleable coal will be transported to the Musina siding for railing to customers.

South Africa has a very limited production of high-quality metallurgical (coking) coal, resulting in AMSA and other coke producers having to import HCC for the manufacture of metallurgical coke, a key ingredient in the production of steel. The Agreement signed with AMSA during the Quarter reaffirms the quality of Makhado's HCC and sales prices are linked to a published, international US dollar denominated HCC index. The off-take will endure for the shorter of ten years or the Phase 1 LOM and AMSA will purchase between 350,000t and 450,000t of Phase 1 HCC annually.

MC Mining also concluded a coal Sale and Purchase Agreement for the Phase 1 thermal coal by-product during the Quarter. This off-take is with one of the world's largest producers and marketers of bulk commodities and sales prices are linked to the API4 price, expressed in US dollars.

The conclusion of the two off-take agreements allowed the Company to progress the composite debt/equity funding initiatives for Phase 1 and resulted in the July 2019 IDC Credit Committee approval of a R245 million ($17.5 million) term loan facility to fund the construction of the project. The equity portion of the funding package is expected to be completed in Q3 CY2019.

The appeals against the Makhado EA amendments were dismissed during the Quarter, allowing for the transportation of coal to Musina by road rather than rail. These amendments were previously approved by the Department of Mineral Resources ("DMR") and Limpopo Department of Economic Development, Environment and Tourism and confirms the Makhado Project's permitted status.

Vele Coking and Thermal Coal Colliery - Limpopo (Tuli) Coalfield (100% owned)

The Vele Colliery remained on care and maintenance during the Quarter and no LTIs were recorded during the period (FY2019 Q3: nil).

There were no further developments to report during the Quarter and the Vele processing plant is expected to be refurbished and recommissioned as part of Phase 1 of the Makhado Project

Greater Soutpansberg Project - Soutpansberg Coalfield (74% owned)

The Greater Soutpansberg Project ("GSP") recorded no LTIs (FY2019 Q3: nil) during the Quarter.

The Chapudi, Mopane and Generaal Projects comprise MC Mining's longer-term coking and thermal GSP. The GSP contains over 6.3 billion gross tonnes in situ of inferred coal resources[2] and mining right applications for the three project areas were submitted to the DMR during 2013. The Chapudi Project mining right was granted in December 2018 and the Mopane and Generaal Project mining right applications are at an advanced stage. The Company continues to have regular interactions with the DMR and is hopeful that the granting thereof will occur in the near future.

Corporate

HEI co-operation agreement

During the Quarter the Company signed a new co-operation agreement with HEI, a wholly owned subsidiary of Shanghai-listed Beijing Haohua Energy Resource Co. Limited, the largest exporter of anthracite coal from China. The agreement facilitates a long-term, mutually beneficial strategic partnership and aligns HEI's threshold with other substantial shareholders eligible to have a board seat. Mr Shangren Ding is HEI's current representative and will remain on the board as their nominee and HEI will need to maintain an interest of at least 5.4% to have the right to nominate a director to the MC Mining board.

Mooiplaats disposal proceeds

The Company agreed to the sale of the Mooiplaats Colliery during Q4 CY2017 for a total sale price of R179.9 million ($12.9 million) and the initial sale proceeds of R67.0 million ($4.8 million) were received. The balance of the purchase price of R112.9 million ($8.1 million) was due to be paid in ten equal quarterly instalments and the first three of these instalments were subsequently received. The significant decline in global thermal coal prices during the last six months resulted in MC Mining de-risking the remaining instalments and negotiating early settlement of the outstanding balance, resulting in the Company receiving $4.1 million during the Quarter, a 12% discount on the purchase price.

Markets

Continued tight global metallurgical coal supply resulted in average premium HCC prices of $202/t during the Quarter (FY2018 Q4: $188/t) and based on market fundamentals, long-term forecasts continue to reflect favourable pricing. API4 thermal coal prices remain under pressure and average prices reduced from FY2018 Q4's $100/t to $67/t during the Quarter as a result of subdued demand in parts of the northern hemisphere as well as competition from the increased supply of 'cheaper' liquefied natural gas, also used as a bulk energy source.

Authorised by

David Brown

Chief Executive Officer

This announcement is inside information for the purposes of Article 7 of Regulation 596/2014.

About MC Mining Limited:

MC Mining is an AIM/ASX/JSE listed coal exploration, development and mining company operating in South Africa. MC Mining's key projects include the Uitkomst Colliery (metallurgical coal), Makhado Project (coking and thermal coal). Vele Colliery (coking and thermal coal), and the Greater Soutpansberg Projects (coking and thermal coal).

Forward-Looking Statements

This Announcement, including information included or incorporated by reference in this Announcement, may contain "forward-looking statements" concerning MC Mining that are subject to risks and uncertainties. Generally, the words "will", "may", "should", "continue", "believes", "expects", "intends", "anticipates" or similar expressions identify forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Many of these risks and uncertainties relate to factors that are beyond MC Mining's ability to control or estimate precisely, such as future market conditions, changes in regulatory environment and the behaviour of other market participants. MC Mining cannot give any assurance that such forward-looking statements will prove to have been correct. The reader is cautioned not to place undue reliance on these forward looking statements. MC Mining assumes no obligation and do not undertake any obligation to update or revise publicly any of the forward-looking statements set out herein, whether as a result of new information, future events or otherwise, except to the extent legally required.

Statements of intention

Statements of intention are statements of current intentions only, which may change as new information becomes available or circumstances change.

MC Mining has ensured that the mineral resources quoted are subject to good governance arrangements and internal control. The Company has engaged external independent consultants to update the mineral resource in accordance with the JORC Code 2012 and SAMREC 2016. The units of measure in this report are metric, with Tonnes (t) = 1,000kg. Technical information that requires subsequent calculations to derive subtotals, totals and weighted averages may involve a degree of rounding and consequently introduce an error. Where such errors occur MC Mining does not consider them to be material.

Coal Resources completed for the Greater Soutpansberg Project - Mineral Resources:

MC Mining completed a review and update to its Mineral Resource for the GSP during 2017. The review and verification was undertaken by Venmyn Deloitte (Pty) Ltd, commissioned to prepare an Independent Competent Persons report in accordance with the AIM Rules. The Coal Resources for the GSP assets were estimated and signed-off by MC Mining's Competent Person, Mr J Sparrow (Pr.Sci.Nat.), MC Mining's Group Geologist.

Tenements held by MC Mining and its Controlled Entities

* Form part of the Greater Soutpansberg Projects

- Lapsed - Mining Right Application Lodged

-- Valid - Mining Right Application Lodged

~ Tenement located in the Republic of South Africa

^ Tenement located in Australia

# MC Mining's interest will reduce to 69% on completion of the 26% Broad Based BEE transaction