Slide 1: Results 2019 for the year ended 30 June 2019
Results 2019 for the year ended 30 June 2019 David Brown Chief Executive Officer Brenda Berlin Chief Financial Officer 30 September 2019
Slide 2: Disclaimer
Disclaimer THESE PRESENTATION MATERIALS (THE “PRESENTATION MATERIALS”) Company or its affiliates, subsidiaries, directors, officers, agents, advisers or The Presentation Materials are being issued on a strictly private and confidential ARE FOR INFORMATION PURPOSES ONLY AND DO NOT CONSTITUTE AN emplo
Slide 3: Disclaimer
Disclaimer The Presentation Materials are being issued on a strictly private and confidential The Presentation Materials are confidential and should not be copied, distributed The compilation of the reserves and resources for the Makhado Project, Vele basis and solely to and directed at, in the case
Slide 4: David Brown
David Brown 3
Slide 5: FY2019 key features
FY2019 key features Key area Result Safety • Four LTIs at Uitkomst in FY2019 • 472,647t of ROM coal mined Production • 12,466t of ROM coal purchased for washing • Sales from Uitkomst ROM of 295,051t Sales • 6,035t of coal sold from ROM coal purchased • First production of high-ash, coarse discard pr
Slide 6: FY2019 corporate and strategic achievements
FY2019 corporate and strategic achievements Strategy Status Result Advancement of Makhado • EA amendment approved by LEDET and DMR Project • MCM Board conditionally approved development of Makhado Project, reducing the period to first coal sales • Makhado Phase 1 FEED process completed Makhado Proje
Slide 7: MC Mining positioning
MC Mining positioning Positioned to be South Africa’s pre-eminent producer of hard coking coal Forecast growing demand as global per-capita steel consumption increases over time Portfolio of South African coal producing and development projects with an experienced management team GREATER SOUTPANSBUR
Slide 8: Project pipeline
Project pipeline OUR VISION to responsibly produce in excess of 1.4 – 1.5Mtpa of saleable product in CY2021 CURRENT SHORT-TERM MEDIUM-TERM LONG-TERM Makhado Makhado International coal Uitkomst Vele and GSP Phase 1 Phase 2 projects Production asset Surface rights secured Phasing of Makhado Review of
Slide 9: Location of operations and projects
Location of operations and projects 8
Slide 10: David Brown
David Brown 9
Slide 11: Uitkomst: safety
Uitkomst: safety • Four LTIs during FY2019 (FY2018: one LTI) • Renewed focus on retraining to entrench safety culture • Hazard identification retraining re-emphasised • Integration of ~340 ex-Khethekile employees (underground mining contractor) • Various shift arrangements trialled to increase face
Slide 12: Uitkomst: progress
Uitkomst: progress UNDERGROUND MINING CONTRACTOR OPERATIONS acquired in August 2018 facilitating: R R Direct production Improved asset Integration of cost control availability ~340 employees • Insourcing and integration of underground operations more challenging than anticipated • equipment conditio
Slide 13: Uitkomst: production
Uitkomst: production FY2019 FY2018 Mt Mt % Production tonnages Uitkomst ROM 472,647 505,130 (6) Purchased ROM to blend 12,466 102,830 (88) 485,113 607,960 (20) • ROM production decreased due to: • equipment availability challenges • dyke intrusions • unsuccessful shift reorganisation initiatives • s
Slide 14: Uitkomst: sales
Uitkomst: sales FY2019 FY2018 Mt Mt % Sales tonnages Own ROM 295,051 329,060 (10) Slurry used for blending – 53,689 (100) Purchased ROM to blend or wash 6,035 92,330 (93) Coarse discard sales 8,315 – 100 309,401 475,079 (35) Financial metrics Average API4 prices/tonne ($) 86.61 93.39 (7) Revenue/ton
Slide 15: Uitkomst: sales continued
Uitkomst: sales continued • ROM sales reduced due to decline in ROM coal mined • Expiry of ROM coal supply contracts in FY2018 resulted in no blending of slurry and lower total sales volumes as well as a change in sales mix • Plant modifications completed in H2 FY2019 resulted in first sales of high
Slide 16: David Brown
David Brown 15
Slide 17: Makhado Project
Makhado Project • Makhado Project is fully permitted • EA amendment during FY2019 allows for transport of coal by road rather than rail • All mining area surface rights owned – Lukin and Salaita properties acquired in FY2019 • MCM Board conditionally approved the phased development of Makhado on FY2
Slide 18: Makhado Project: funding update
Makhado Project: funding update • Total raise of $52m required for Makhado Project and current IDC loan repayment • IDC Credit Committee term sheet approved in July 2019 for $17m • Various alternative funding mechanisms being pursued for the balance of $35m with positive interest on a number of init
Slide 19: Makhado Project: milestones
Makhado Project: milestones Process Status Licences, permits and environmental authorisations for Makhado and Vele Completed Access to Makhado Project surface rights Completed Necessary studies to commence with construction of Phase 1 Completed Phase 1 thermal coal by-product off-take agreement Comp
Slide 20: Makhado Project: phased approach
Makhado Project: phased approach Phased development reduces execution risk Road and rail and siding infrastructure tested and previously used Makhado Phase 1 Makhado Phase 2 Construction expected to commence in Q4 CY2019/ Construction can commence from circa CY2022 subject Q1 CY2020 to coal markets
Slide 21: Makhado Project: phased approach continued
Makhado Project: phased approach continued Makhado Phase 1 Makhado Phase 2 ROM production 3.0Mtpa 4.0Mtpa LOM 9 years >37 years Hard coking coal production 0.54Mtpa 0.7 – 0.8Mtpa Thermal coal by-product production1 0.57Mtpa 0.9 – 1.0Mtpa Construction capital (real)2 R460m ($32m) R1.2bn ($83m) Constr
Slide 22: Vele: brownfields project
Vele: brownfields project • Fully permitted project, currently on care and maintenance • Existing Vele processing plant will be modified to process Makhado Phase 1 ROM coal • Phase 1 saleable coal will be trucked to the Musina siding where it will be sold FOR • Musina siding previously used when Vel
Slide 23: Greater Soutpansberg Project: massive pipeline – long-term potential
Greater Soutpansberg Project: massive pipeline – long-term potential • Chapudi, Generaal and Mopane Projects – early stage coking and thermal coal exploration projects in Soutpansberg Coalfield • Over 1.6Bt mineable tonnes in situ • Consolidation of tenements and ore bodies required to improve mine
Slide 24: Brenda Berlin
Brenda Berlin 23
Slide 25: Income statement normalisation
Income statement normalisation Income statement loss of $33.7m (FY2018: $103.8m) included non-recurring, non-cash items FY2019 FY2018 $m $m Net loss from continuing operations (33.7) (103.8) Net impairments (exploration and development assets) 21.9 87.5 Receivable impairment (Mooiplaats Colliery pro
Slide 26: Coal prices (impairment trigger)
Coal prices (impairment trigger) 300 250 • HCC prices reflected robustness 200 in FY2019 but declined ~20% post year end 150 • Thermal coal prices trended 100 positively in H1 FY2019 but declined by 34% in H2 50 0 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 API#4 thermal coal (US$
Slide 27: Cash generated
Cash generated FY2019 FY2018 $’000 $’000 Loss before tax per the income statement (33,522) (97,043) Profit from discontinued operations – 2,185 Group loss for the year before tax (33,522) (94,858) Add back non-cash items 28,245 96,860 (continuing and discontinued operations): Depreciation and amorti
Slide 28: Cash flow analysis – FY2019 (#039;000)
Cash flow analysis – FY2019 ($’000) 1 070 135 10 000 252 3 499 665 8 000 5 277 6 000 10 931 760 6 457 8 811 4 000 3 917 2 000 - Opening cash Net cash Khethekile PPE, Proceeds on Sale of assets Repayment of Net interest, Foreign Financial Cash at year balance utilised in acquisition exploration & sal
Slide 29: Cash flow projections
Cash flow projections • Cash balance at year-end of $8.8m can fund corporate overhead • Composite debt/equity funding required to: • construct and ramp-up Makhado Phase 1 $52m • repay existing IDC debt • Debt, equity and other funding initiatives • $17m new IDC debt secured • various initiatives to
Slide 30: David Brown
David Brown 29
Slide 31: Moving forward
Moving forward KEY ADVANTAGES • Major coal resource in South Africa - 8.8Bt in situ with extended LOM – over 100 years • Well positioned for future provincial growth opportunities • HCC differentiator – local and export supply • Logistics in place and well tested • Regulatory environment well unders
Slide 32: Key deliverables to unlock intrinsic value
Key deliverables to unlock intrinsic value CY2019 CY2020 CY2021 Finalise composite debt/equity • Construct Makhado Phase 1 • Ramp-up of Phase 1 HCC funding for Phase 1 of the • Makhado west pit and and thermal coal by-product Makhado Project infrastructure • Potential 1.4 to 1.5Mtpa • Vele processin
Slide 33: Contacts
Contacts Name David Brown Designation Chief Executive Officer Office +27 10 003 8000 Email david.brown@mcmining.co.za Name Brenda Berlin Designation Chief Financial Officer Office +27 10 003 8000 Email brenda.berlin@mcmining.co.za 32