MC Mining – The Makhado Opportunity
MC Mining is a company whose primary focus is developing the only hard coking coal deposit in South Africa, the Makhado Project. We learn about the company behind South Africa’s only hard coking coal project.
“It’s very valuable, very long life, and fully permitted. We’ve been raising finances and can effectively start. The detailed engineering is 90% done and we can go as soon as we’ve got the funding,” explains Brenda Berlin, MC Mining’s CEO. “Technically it is a very easy project, an open cast mine with an existing wash plant that we just need to refurbish and enhance to produce the final product. Existing and tested infrastructure exists to get the final product to end markets. That’s the value story. But it is absolutely informed by the last of the fundraising we need to do.”
While the Makhado Project is MC Mining’s flagship operation, it’s far from its only one.
“We’ve also a small operating mine in Newcastle Natal in South Africa. It’s a nice little operation and it’s good to have an operating asset in our mix, but that’s not we’re about,” Berlin tells us. “In addition. We’ve got blue sky coal deposits in areas near the Makhado Project going into the future. To be honest given how long it takes things to happen and the fact that the Makhado Project has a 46-year life-of-mine – we have enough to keep us going for a long time before we need to turn those on.”
Unique Opportunities, Unique Challenges
However, the Makhado Project represents a unique opportunity in South Africa.
“There’s no other hard coking coal in South Africa, non-whatsoever. It’s all imported, so there’s a significant benefit to South Africa,” Berlin points out. “Our cost of delivering hard coking coal to the local steel market is much lower than our competitors who are mainly based in Australia, so that’s a significant advantage. Another advantage the Australians don’t have is that our cost is lowered considerably because thermal coal is produced as a by-product, reducing our costs for hard coking coal. It’s a very large project in a region really desperate for economic development.”
The project is well-positioned to avoid many of the usual challenges mining companies face in South Africa.
“For example community support for mining projects is essential, and we have community support in spades,” Berlin says happily. “Those communities are shareholders in the project, we’ve worked with them for a long time, and they are getting benefits and are hugely supportive. We also have a lot of support in government circles, thanks to our job creation and downstream benefits.”
The key obstacle, Berlin explains, has simply been attaining the final piece of funding needed to launch the project once and for all.
“In the first instance South Africa is not necessarily a prime investment destination if you have a global choice, and people are choosy right now about where their dollars go,” she admits. “Anti-coal sentiment is noisier and even though we emphasise we produce clean coal a lot of people say they don’t have any interest in coal no matter what coal it is.”
Counter-intuitively, the fact that Makhado doesn’t need much more funding to get going has also been an issue.
“We’re not looking for a lot of money, which means most of the big investors aren’t interested,” Berlin says. “So we’ve had to come back home and look for local sources of funding with a lot of support from the government and local communities. There’s non-traditional local funding that can fill the gaps.”
Of course, the other inevitable challenge everyone has faced this year has been the COVID-19 pandemic. While Makhado hasn’t had enough on-site activity for this to be a real issue, it has affected the business in other ways.
“The issue is that with the best will in the world while fundraising is one, two and three on my to-do list, the remote working during the pandemic means it has gone a bit slower than it otherwise would have and it’s taken us longer to arrange the funding than I would have liked,” Berlin says. “But we’re getting there now.”
Meanwhile, MC Mining’s operating facilities have also had to adapt.
“We had to put our operating mine into care and maintenance for a month then restarted at 50% capacity,” Berlin says. “We’re now back to full capacity, with screening, social distancing, and obviously sending people home with any sign of COVID. We had 19 positive cases, but no deaths, so it has been disruptive and we have experienced absenteeism out of fear with a lot of communication needed to allay those fears. We’ve been relatively unscathed.”
One of the ways the Makhado Project is proving a boon for the local communities is not just in the creation of jobs, but in helping people attain the skills to do those jobs.
“We established the Makhado Centre of Learning in 2016 with the first intake of trainees in 2017 and we have spent a lot of time and effort in training programmes,” Berlin says. “We’ve also compiled a database of all the suppliers that exist in the area and companies that can produce goods in the area. It’s the only database that exists of local skills and entrepreneurs.”
These standards for local talent aren’t limited to MC Mining however, they expect the same standards across their supply chain.
“It’s been a part of our agreement with contractors that we appoint for establishing the mine, transportation and processing. We’re strict on their procurement and employment policies. All unskilled labour has to be sourced from the area. In addition, preference for semi-skilled and skilled jobs has to be given first to the communities, then the local district and then the Limpopo province on skills matching basis. Close involvement of communities in terms of shareholding, training, jobs and procurement opportunities is the only way to work in the long term.”
Once the necessary funding is finally secured, it’s clear Berlin is excited for the long and prosperous future ahead for Makhado.
“The Makhado Project is what we’re about and what we’ve done is split it into two phases, a small phase one in terms of capital footprint and life-of-mine, that enables us to retest all the infrastructure,” she says. “It’s very quick, nine months, then it’s done and it generates pretty strong cashflows and returns to facilitate the bigger phase two. We’re doing it in a measured way rather than biting off more than we can chew. I want to get phase one at a nice steady state before we launch phase two.”