MC Mining reported a drop in revenue for the six months to end-December on lower coal sales volumes and prices, which was worsened by operational challenges at its Uitkomst Colliery.
In a statement on Friday, the company said revenue fell 67% year on year to $8.4m while its cost of sales was down 48% to $12.5m, resulting in a gross loss.
The issues at Uitkomst — a producer of thermal and metallurgical coal in KwaZulu-Natal — included “geological complexities and faults” and resulted in a 31% decrease in production volumes to 185,558 tonnes, the company said.
The drop in production was compounded by a decrease in sales tonnage, with the colliery selling 121,793 tonnes of coal compared with 202,715 tonnes in the previous corresponding period.
That resulted in a gross loss of $4.2m compared with a gross profit of $1.1m in the previous period. The loss after tax widened to $8.4m from $6m.
MC Mining, formerly known as Coal of Africa, specialises in coking and thermal coal production. It is listed on the JSE, the Australian Securities Exchange, and the AIM of the London Stock Exchange.
While prices of premium steelmaking hard coking coal have remained elevated, the coal market has experienced fluctuations in demand and prices, including depressed thermal coal prices, the company said.
In addition the suspension of operations at the Vele Aluwani Colliery — a semisoft coking and thermal coal colliery in Limpopo — further reduced its overall production capacity, affecting its ability to meet sales targets.
Despite the depressed performance, the company said its Makhado project, a hard coking and thermal coal project in Limpopo, is “shovel ready” after the construction of power supply lines and a temporary bridge.
Last week the company announced shareholder Kinetic Development Group (KDG) had increased its stake to a controlling 51% from 13.04% for about $77m. The investment by the Hong Kong-listed coal mining and trading company will provide MC Mining with the funding to develop its Makhado project.
The hard coking coal expected to be produced from the project has the potential to become a significant supply to the global steel industry, it said.
KDG’s increased stake grants it the right to appoint the majority of MC Mining’s directors, effective from the date of the final instalment payment.
Besides Makhado, Vele and Uitkomst Colliery, MC Mining owns the Greater Soutpansberg projects, which produce coking and thermal coal near Makhado in Limpopo.
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