A sizable $87.5m impairment at MC Mining, formerly Coal of Africa, pushed the junior miner deeper into the red in the year to end-June.
The successful integration of a cash-generating asset in the form of Uitkomst has, however, led to a healthier balance sheet and allowed for normalisation of the company's relationship with SA's commercial banks. This has further boosted its chances of proceeding with its flagship Makhado project, MC Mining CEO David Brown said on Thursday.
The coal company impaired its investment in the Vele colliery, which is on care and maintenance. All in all, net nonrecurring, noncash charges were $91.8m for the review period.
Consequently, net loss widened to $101.6m, from $15.6m in the same period a year ago. MC Mining has only one operating mine, Uitkomst, which it bought from Pan African Resources late in 2017. Uitkomst sold 475,079 tonnes of coal, generating sales revenue of $32.7m.
The company is also searching for a second cash-generating asset, reviewing several options during the period. That acquisition should ensure the miner was "self-sufficient" and improve cash generation, Brown said.
"Uitkomst was a great acquisition and has provided us with impetus, but it doesn't cover our entire overhead and we are getting stuck into Makhado as well. We are currently running a little heavier than we should, for two or three operating assets," he said.
MC Mining is banking 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.
During the period, the company successfully overturned a 2014 interdict against its environmental authorisation for the project. The company has also revised development plans for the project, something that is expected to shorten construction time from 28 months to 12, as well as to reduce capital costs.
The plan would also lower production and extend the life of the mine. The company is yet to agree with lenders on a financing deal for the project, but has secured a $1.5m banking facility with Rand Merchant Bank.
The redevelopment plan had brought the finance costs for the project to about $100m from $300m, and was likely to be a more attractive prospect for funders, Brown said.
It is hoped that a funding package will be in place by June 2019, he said. At year-end, the group also had $9.2m left of an $18.4m loan from the Industrial Development Corporation.
Improved cost controls and balance-sheet restructuring meant cash on hand improved 13% to $10.9m at year-end.
MC Mining's share price was unchanged at R4 on Thursday, having fallen 45.43% in 2018.
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