Lockdown in South Africa and Suspension of Coal Production
By Jessica Casey
March 29, 2020 - MC Mining Ltd. has announced the following market update with regards to the impact on the company of the COVID-19 pandemic.
The guidance and advice that the company is providing employees follow World Health Organization guidelines and is supplemented by direction provided by the South African government. The Executive Committee regularly reviews and updates the advice to employees and monitors the business continuity measures to ensure managerial oversight is effective and properly coordinated.
The South African government issued a directive on March 23, 2020 requiring a 21-day national lockdown, effective midnight March 26 to midnight April 16, 2020, to contain the spread of the coronavirus in the country. Further to this, the Department of Mineral Resources and Energy released a statement on March 25, 2020 noting that “for some mining operations and operating plants a complete shutdown will not be feasible, as a restart from scratch may be too costly.” They further state that “mining operations will be scaled down significantly.”
The directive impacts operatons at the company’s Uitkomst Colliery, the Makhado, Vele and Greater Soutpansberg Projects, as well as its corporate office. In line with measures detailed in the directive, the Uitkomst Colliery will be placed on care and maintenance during the lockdown period. The scaled back operations will be monitored and managed according to procedures enacted to protect the health and safety of all of the company’s people, which remains MC Mining’s priority. These procedures cover employee communication and training, hygiene response, security controls, health monitoring, resilience and contingency plans.
Uitkomst Colliery is a mechanized underground operation upon completion of the lockdown period, it will be possible to increase to steady state production levels within a relatively short timeframe. However, given the continued certainty around the outlook for control of COVID-19 in South Africa, FY2020 production guidance is suspended until the company is in a better position to quantify the full impact of the lockdown.
The company has an available cash balance of US1 million, as well as the available US1.1 million generally banking facility from ABSA Bank Ltd. The company is also in the process of securing the balance the US$32 million required to commence construction of Phase 1 of its fully permitted Makhado hard coking coal project.
Brenda Berline, MC Mining CEO, commented: “MC Mining supports all measures to limit the impact of COVID-19 and the lockdown has impacted our Uitkomst Colliery as well as our corporate office and project sites. We anticipate that activities t all of the sites will resume as soon as it is safe to re-commence. Discussions with potential funders for Phase 1 of our lagship Makhado hard coking coal project will continue during the lockdown period. The company still aims to finalise the composite debt/equity package for Phase 1 during 1H20 with construction commencing later this year.”