MC Mining Signs First Coal Offtake Deal for Makhado

MC Mining (ASX:MCM) has secured the first offtake agreement for hard coking coal (HCC) from its Makhado project in South Africa’s Limpopo province.

The agreement, set to last three years, is between Huadong Coal Trading Center, a Chinese enterprise and subsidiary of China Forestry Group, and Baobab Mining & Exploration, the MC Mining subsidiary that owns the Makhado project.

The offtake will see a minimum of 400,000 tonnes of hard coking coal go to Huadong per year, making up half of Makhado’s annual production. Makhado is expected to produce up to 800,000 tonnes of hard coking coal per year, along with between 900,000 and 1 million tonnes of export-quality thermal coal.

“The signing of the first HCC off-take agreement is a significant step for Makhado, reaffirming its world class coal qualities and international appetite for this type of coking coal. South Africa is a traditional producer of thermal coal with currently no significant HCC being produced which results in producers having to import the commodity,” MC Mining CEO David Brown said in a statement.

“Makhado’s coking coal has the necessary attributes to replace some of these imports whilst the development of the project will generate employment opportunities in the Limpopo province and make a positive contribution to the national balance of payments,” he added.

The first supply of hard coking coal to Huadong is due 18 months after construction begins at the Makhado project. The agreement also comes with conditions that include Baobab securing funding for capital, mining and operations at Makhado, along with Huadong and Baobab procuring necessary internal and regulatory approvals, all by April 1, 2019.

Additionally, as part of the agreement, Makhado site works must begin by June 30, 2020.

China Forestry owns the Zhonglin Rugao, Zhonglin Xinminzhou and Zhonglin Suqian ports and the Yangtze River water and harbor space and canal shoreline, along with 780,000 tonnes of berth space.

Huadong has logistic and bulk-commodity-trading interests, and uses China Forestry’s infrastructure; the company has traded over 5 million tonnes of iron ore and coal over the last two years.

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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.