Wrap Text
Notice of Meeting & Explanatory Statement
MC Mining Limited
Previously Coal of Africa Limited
(Incorporated and registered in Australia)
Registration number ABN 008 905 388
ISIN AU000000MCM9
JSE share code: MCZ
ASX/AIM code: MCM
ABN 98 008 905 388
NOTICE OF MEETING & EXPLANATORY STATEMENT
Dear Shareholder
Notice is hereby given that a meeting ("Meeting") of Shareholders of MC Mining Limited ABN 98
008 905 388 (the "Company") will be held at 10 a.m. (Johannesburg time) on Thursday, 23 January
2025 at the offices of MC Mining Limited which are located on the Ground Floor, Greystone
Building, Fourways Golf Park, Roos Street, Fourways, South Africa (Meeting).
Information on the proposals to which the business of the Meeting relates is set out in the
Explanatory Statement. Details of how those entitled to attend can participate in the meeting,
including how they can participate in a vote taken at the meeting and speak at the meeting (to
the extent that they are entitled to do so) is contained in the Notice available on the Company's
website.
Shareholders are urged to attend the Meeting or participate by returning a completed Proxy
Form.
Shareholders are encouraged to complete and lodge either proxies online or otherwise in
accordance with the instructions set out in the proxy form and the Notice.
Your proxy voting instruction must be received by Tuesday, 21 January 2025 at 10:00 AM (South
African Time).
The Notice is important and should be read in its entirety. If you are in doubt as to the course of
action you should follow, you should consult your financial adviser, lawyer, accountant, or other
professional adviser. If you have any difficulties obtaining a copy of the Notice of Meeting, please
contact the Company's share registry Computershare Investor Services Pty Limited on +2711 370
5000 or via email: proxy@computershare.co.za.
The Company will update shareholders by way of announcement on the various stock markets if
changing circumstances impact the planning or arrangements for the Meeting. Details will also
be made available on our website at www.mcmining.co.za
This announcement has been approved by the Company's Disclosure Committee.
Authorised by:
Bill Pavlovski
Company Secretary
JSE Sponsor: BSM Sponsors Proprietary Limited
MC MINING LIMITED ABN 98 008 905 388
NOTICE OF MEETING &
EXPLANATORY STATEMENT
Date of Meeting
Thursday, 23 January 2025
Time of Meeting
10am (Johannesburg time) (4pm Perth time)
Place of Meeting
The South African offices of MC Mining Limited
Ground Floor, Greystone Building, Fourways Golf Park, Roos Street, Fourways 2191
A Proxy Form is enclosed
If you are unable to attend the Meeting, please complete and return (or submit
electronically) the enclosed Proxy Form in accordance with the instructions specified
on that form.
Independent Expert
The Independent Expert has concluded that the transaction the subject of Resolution
2 is not fair but reasonable to non-associated Shareholders (i.e. Shareholders other
than Kinetic Crest Limited and its Associates).
THIS DOCUMENT IS IMPORTANT AND SHOULD BE READ CAREFULLY AND
IN ITS ENTIRETY.
If you do not understand any part of this document, please contact your financial or
other professional adviser without delay.
1
MC MINING LIMITED
NOTICE OF MEETING
Notice is hereby given that a meeting of Shareholders of MC Mining Limited ABN 98
008 905 388 (ASX: MCM; JSE: MCZ) (MC Mining or the Company) will be held at
10am (Johannesburg time) (4pm Perth time) on Thursday, 23 January 2025 at the
offices of MC Mining which are located on the Ground Floor, Greystone Building,
Fourways Golf Park, Roos Street, Fourways, South Africa (Meeting).
Information on the proposals to which the business of the Meeting relates is set out in
the Explanatory Statement which accompanies this Notice of Meeting.
This Notice of Meeting should be read in conjunction with the accompanying
Explanatory Statement. The business to be considered at the Meeting is set out below.
BUSINESS OF THE MEETING
Resolution 1 - Ratification of Prior Issue of Shares
To consider, and if thought fit, to pass, with or without amendment, the following
Resolution as an ordinary resolution:
"That, for the purposes of Listing Rule 7.4 (and for all other purposes), Shareholders
ratify the prior issue by the Company of 62,102,002 new Shares to Kinetic Crest
Limited, a wholly owned subsidiary of Kinetic Development Group Limited, on the
terms set out in the Explanatory Statement."
Voting Exclusion Statement
The Company will disregard any votes cast in favour of this Resolution by or on behalf
of Kinetic Crest Limited and/or by or on behalf of any person who is an Associate of
Kinetic Crest Limited (which includes, for the avoidance of doubt, Kinetic Development
Group Limited). However, the Company need not disregard a vote cast in favour of this
Resolution by:
• a person as proxy or attorney for a person who is entitled to vote on this
Resolution, in accordance with directions given to the proxy or attorney to vote on
this Resolution in that way;
• the Chair as proxy or attorney for a person who is entitled to vote on this
Resolution, in accordance with directions given to the Chair to vote on this
Resolution as the Chair decides; or
• a holder acting solely in a nominee, trustee, custodial or other fiduciary capacity
on behalf of a beneficiary provided the following conditions are met:
o the beneficiary provides written confirmation to the holder that the
beneficiary is not excluded from voting, and is not an Associate of a person
excluded from voting, on this Resolution; and
o the holder votes on this Resolution in accordance with directions given by
the beneficiary to the holder to vote in that way.
2
Resolution 2 - Approval for Acquisition of Relevant Interest in Shares by
Kinetic Development Group Limited
To consider, and if thought fit, to pass, with or without amendment, the following
Resolution as an ordinary resolution:
"That, for the purposes of item 7 of section 611 of the Corporations Act (and for all
other purposes), Shareholders approve the acquisition by Kinetic Development
Group Limited (and its Associates) of such number of Second Closing Shares that
will result in Kinetic Development Group Limited (and its Associates) holding 51% of
the Company's issued and outstanding Shares and having a Relevant Interest in a
total of 51% of all of the Company's issued and outstanding Shares on the Second
Closing, on the terms and subject to the conditions set out in the Explanatory
Statement."
Independent Expert's Report
Shareholders should carefully consider the report prepared by the Independent Expert
to assist Shareholders understand and consider the merits of the transaction the
subject of Resolution 2. The Independent Expert's Report comments on the fairness
and reasonableness of the transaction the subject of Resolution 2 and concluded that
the transaction is not fair but reasonable to non-associated Shareholders (i.e.
Shareholders other than KCL and its Associates).
Voting Prohibition Statement
No votes may be cast in favour of Resolution 2 by:
• the person proposing to make the acquisition under Resolution 2 and their
Associates; or
• the persons (if any) from whom the acquisition is to be made under Resolution 2
and their Associates.
Accordingly, the Company will disregard any votes cast in favour of this Resolution by
or on behalf of Kinetic Crest Limited and/or by or on behalf of any person who is an
Associate of Kinetic Crest Limited (which includes, for the avoidance of doubt, Kinetic
Development Group Limited).
Resolution 3 - Approval for Acquisition of Relevant Interest in Shares by the
Company
To consider, and if thought fit, to pass, with or without amendment, the following
Resolution as an ordinary resolution:
"That, for the purposes of item 7 of section 611 of the Corporations Act (and for all
other purposes), Shareholders approve the acquisition by the Company of a Relevant
Interest in the Second Closing Shares on the Second Closing as a consequence of
the Company's entry into the Proposed Escrow Deed, on the terms and subject to
the conditions set out in the Explanatory Statement."
3
Voting Prohibition Statement
No votes may be cast in favour of Resolution 3 by:
• the person proposing to make the acquisition under Resolution 3 and their
Associates; or
• the persons (if any) from whom the acquisition is to be made under Resolution 3
and their Associates.
The Company will disregard any votes cast in favour of this Resolution by or on behalf
of the Company, Goldway, Senosi and by each member of Dendocept Group and/or
by or on behalf of any person who is an Associate of the Company, Goldway, Senosi
or any member of Dendocept Group 1.
Please note that the Company is not permitted to and does hold any of the Company's
shares.
OTHER BUSINESS
To deal with any other business which may be brought forward in accordance with the
Constitution and the Corporations Act.
ADDITIONAL INFORMATION
This Notice of Meeting is accompanied by the Explanatory Statement which provides
a detailed explanation of the business of the Meeting. Shareholders should read the
Notice of Meeting and the Explanatory Statement carefully and in full.
Independent Expert's Report
The Independent Expert has concluded that the transaction the subject of Resolution
2 is not fair but reasonable to non-associated Shareholders (i.e. Shareholders other
than Kinetic Crest Limited and its Associates).
Shareholders should carefully consider the report prepared by the Independent Expert
for the purposes of deciding how to vote on Resolution 2. A copy of the Independent
Expert's Report accompanies the Explanatory Statement at Annexure B.
SHAREHOLDER ACCESS
Shareholders who are unable to attend the Meeting in person but wish to listen to the
Meeting live are able to do by calling +27 21 834 0882. Please register your details
and attendance in advance by emailing the Company's Company Secretary at
bill.pavlovski@mcmining.co.za.
While Shareholders who call the above referred number will be able to listen to the
Meeting, they will not be able to ask questions or vote electronically during the Meeting.
To ask questions and/or to cast your vote electronically prior to the Meeting, please
follow the instructions detailed below.
1MC Mining will disregard any votes cast in favour of Resolution 3 by Goldway, Senosi and Dendocept
Group not because they are Associates of MC Mining for the purposes of Resolution 3, but rather
because they will also be deemed to acquire the Relevant Interest the subject of this Resolution.
4
How to vote Voting by proxy
Shareholders can vote by either: If a Shareholder is entitled to cast 2 or
more votes at the Meeting, they may
• attending the Meeting and voting appoint 2 proxies. A proxy may speak at
in person, or by appointing an the Meeting, vote and join in a demand
attorney to attend the Meeting and for a poll. A proxy need not be a
vote on their behalf, or, in the case Shareholder.
of corporate Shareholders, by
appointing a corporate If a Shareholder appoints 2 proxies and
representative to attend and vote; the appointment does not specify the
or proportion or number of the
Shareholder's votes each proxy may
• appointing a proxy to attend the exercise, each proxy may exercise half
Meeting and vote on their behalf of the votes.
using the Proxy Form
accompanying this Notice of If a proxy is not directed how to vote on
Meeting and by submitting their an item of business, the proxy may
proxy appointment and voting generally vote, or abstain from voting,
instructions in person, by post, by as they think fit.
facsimile or electronically.
Should any resolution other than those
Voting in person (or by attorney) specified in this Notice of Meeting be
proposed at the Meeting, a proxy may
Shareholders, or their attorneys, who vote on that resolution as they think fit.
plan to attend the Meeting are asked, if
possible, to arrive at the venue 15 If a proxy is instructed to abstain from
minutes prior to the time designated for voting on an item of business, they are
the Meeting so that their holding may be directed not to vote on the appointing
checked against the Company's share Shareholder's behalf either on a show
register and their attendance recorded. of hands or on the poll and the Shares
Attorneys should bring with them an the subject of the proxy appointment will
original or certified copy of the power of not be counted in calculating the
attorney under which they have been required majority.
authorised to attend and vote at the
Meeting. Shareholders who return their Proxy
Forms with a direction how to vote but
Voting by a corporate Shareholder do not nominate the identity of their
proxy will be taken to have appointed
A Shareholder that is a corporation may the Chair as their proxy to vote on their
appoint an individual to act as its behalf. If a Proxy Form is returned but
representative to attend and vote at the the nominated proxy does not attend
Meeting. The appointment must comply the Meeting, the Chair will act in place
with the requirements of section 250D of the nominated proxy and vote in
of the Corporations Act. The accordance with any instructions.
representative should bring to the
Meeting evidence of his or her Proxy appointments in favour of the
appointment, including any authority Chair that do not contain a direction
under which it is signed. how to vote will be used where possible
to support each of the Resolutions set
out in this Notice of Meeting, provided
they are entitled to cast votes as proxy
under the applicable voting exclusion.
5
If a Shareholder entitled to vote on a To be effective, proxies must be lodged
Resolution appoints the Chair as their by 10am (Johannesburg time) (4pm
proxy (or the Chair becomes their proxy (Perth time)) on Tuesday, 21 January
by default) and the Shareholder does 2025. Proxies lodged after this time will
not direct the Chair how to vote on the be invalid.
Resolution, the Chair intends to vote in
favour of that Resolution, as proxy for Further information for South
that Shareholder on a poll. African investors
Proxies may be lodged using any of the Shareholders who (i) hold their Shares
following methods: indirectly, (ii) hold their Shares in
dematerialised form on the South
• by returning a completed Proxy African register and (iii) wish to attend
Form by post to: the Meeting in person will need to
request their CSDP or broker provide
Computershare Investor Services them with the necessary letter of
GPO Box 242 representation. Similarly, any such
Melbourne, Victoria 3001 Shareholder who is unable to attend the
Australia Meeting and who wishes to be
represented by proxy must make
Private Bag X9000 necessary arrangements and provide
Saxonwold, 2132 Johannesburg their CSDP or broker with their voting
South Africa instructions.
• by submitting the Proxy Form Shareholders who are entitled to
online in accordance with the vote
directions provided on the online
version of that form In accordance with Regulations 7.11.37
and 7.11.38 of the Corporations
• by faxing a completed and certified Regulations 2001 (Cth), the Board has
copy of the Proxy Form to the determined that a person's entitlement
facsimile number provided on that to attend and vote at the Meeting will be
form the entitlement of that person set out in
the register of Shareholders as at 10am
Proxies given by corporations must be (Johannesburg time) (4pm (Perth time))
executed in accordance with the on Tuesday, 21 January 2025.
Corporations Act. Where the Changes in the register of Shareholders
appointment of a proxy is signed by the after this time will be disregarded in
appointer's attorney, a certified copy of determining the rights of any person to
the power of attorney, or the power attend and vote at the Meeting.
itself, must be received by the Company
at the above address, or by facsimile,
by 10am (Johannesburg time) (4pm
(Perth time)) on Tuesday, 21 January
2025. Bill Pavlovski
Director & Company Secretary
The Proxy Form must be signed by the 20 December 2024
Shareholder or its attorney
6
MC MINING LIMITED
EXPLANATORY STATEMENT
Explanatory Statement
This Explanatory Statement has been prepared for the benefit of MC Mining Limited
ABN 98 008 905 388 (ASX: MCM; JSE: MCZ) (MC Mining or the Company)
Shareholders in connection with the business to be conducted at the Meeting to be
held at 10am (Johannesburg time) (4pm Perth time) on Thursday, 23 January 2025 at
the offices of MC Mining Limited.
Important information
The purpose of this Explanatory Statement is to provide Shareholders with all
information that the Directors believe to be relevant to their (i.e. the Shareholder's)
decision in relation to how to vote on the Resolutions. This Explanatory Statement also
includes certain information prescribed by the Corporations Act and the Listing Rules.
You should read this document carefully
This Explanatory Statement and the accompanying Notice of Meeting are important
documents. You should read each document carefully and in their entirety before
deciding how to vote on the Resolutions. If you are in any doubt as to what you should
do, you should consult your legal, financial or other professional adviser without delay.
Independent Expert
Shareholders should also read the Independent Expert's Report (a copy of which
accompanies this Explanatory Statement at Annexure B) carefully and in its entirety
before deciding how to vote in relation Resolution 2.
The Independent Expert has concluded that the transaction the subject of Resolution
2 is not fair but reasonable to non-associated Shareholders (i.e. Shareholders other
than Kinetic Crest Limited and its Associates).
Role of ASIC and ASX
These Meeting Documents2 have been lodged with ASIC as suggested by paragraph
109 of RG 74 and with ASX as required by Listing Rule 15.1. Neither ASIC nor ASX
(or any of their respective officers or employees) take any responsibility for the contents
of any of the Meeting Documents.
Not investment advice
This Explanatory Statement does not constitute financial product advice and it does
not purport to contain all of the information that an investor in the Company may
require. This Explanatory Statement has been prepared without taking account of any
person's particular investment objectives, financial situation or needs.
2 A reference to the "Meeting Documents" in either the Notice of Meeting or the Explanatory Statement
includes a reference to the Notice of Meeting together with the Explanatory Statement (and includes
any of the Annexures thereto) either singly or collectively and as the context requires.
7
Glossary
Unless otherwise defined in a Meeting Document, capitalised words and terms used
in a particular Meeting Document have the meaning set out in the Glossary at the end
of this Explanatory Statement.
Important Dates: MCZ Shareholders (JSE: Secondary Listing)
Record Date to receive Notice and Explanatory Statement: Friday, 13 December 2024
Notice and Explanatory Statement published on SENS: Friday, 20 December 2024
Last Day to trade shares to be recorded in share register to vote at EGM: Tuesday, 14 January 2025
Record Date to be eligible to attend, participate and vote at EGM: Friday, 17 January 2025
Forms of Proxy to be received by 10am (SAST) 4pm (Perth Time): Tuesday, 21 January 2025
EGM to be held at 10am (SAST) and 4pm (Perth Time): Thursday, 23 January 2025
Results of EGM to be published on SENS on or about: Friday, 24 January 2025
8
Resolution 1 - Ratification of Prior Issue of Shares
Background information
On 28 August 2024, the Company announced to ASX and JSE (Market Release) that
it and Hong Kong Stock Exchange (HKSE) main board listed Kinetic Development
Group Limited 3 (KDG) had entered into a share subscription agreement pursuant to
which the Company has agreed to issue, and KDG (or its designee) has conditionally
agreed to subscribe for, such number of new shares in the Company (each, a Share)
that will ultimately result in KDG (or its designee) holding 51% of the Company's issued
Share capital (Subscription Agreement).
Under the Subscription Agreement, the aggregate purchase price payable by KDG for
the above referred 51% interest in the Company is US$90 million 4.
The issuance of and subscription for new Shares under the Subscription Agreement
has been structured such that:
• (First Closing) MC Mining would issue (and would do so by utilising its (then)
available Listing Rule 7.1 placement capacity), and KDG or its designee would
acquire, 62,102,002 Shares (First Closing Shares)5; and
• (Second Closing) MC Mining will issue, and KDG or its designee will acquire, such
number of additional Shares that will result in KDG having a Relevant Interest in
a total of 51% of the Company's issued Share capital (Second Closing Shares).
The First Closing Shares were issued to Kinetic Crest Limited (KCL), a wholly owned
subsidiary of KDG on 30 August 2024 (First Closing). The aggregate purchase price
paid by KDG for these shares was approximately US$13 million.
The issuance of the Second Closing Shares is contingent upon the satisfaction of
various conditions precedent (each, a Condition Precedent), including Shareholder
approval for the purposes of item 7 of section 611 of the Corporations Act.
The aggregate purchase price payable by KDG for the Second Closing Shares is
approximately US$77 million.
As noted in the Market Release, a copy of which accompanies this Explanatory
Statement at Annexure C, senior KDG executive Mr Huang Muhui was appointed as a
Director on and from the First Closing (First Closing).
Further detail in relation to Mr Huang Muhui's professional experience and the
proposed composition of the Board on and from the date on which the Second Closing
Shares will be issued (Second Closing) is set out in the explanatory notes for
Resolution 2.
3 KDG is an integrated coal mining group with a current market capitalisation of more than US$1.5 billion.
Please see the explanatory notes for Resolution 2 for further information in relation to KDG.
4Equivalent to approximately A$133 million and ZAR1.6 billion, based on reported cross rates as at
noon on 28 August 2024.
5On the First Closing (and as a result of the issuance of the First Closing Shares), KCL and KDG
obtained a Relevant Interest in 13.04% of the Company's issued Share capital.
9
The funds raised from the issuance of the First Closing Shares and the Second Closing
Shares (i.e. provided that all of the Conditions Precedent for that issuance are satisfied
or waived) will be used by the Company for the purposes noted in the table below.
A summary of the material terms of the Subscription Agreement, including the key
Conditions Precedent required to be satisfied before the Second Closing Shares will
be issued, is set out in Schedule 1.
Information required by the Listing Rules
Broadly speaking, and subject to a limited number of exceptions set out in Listing Rule
7.2, Listing Rule 7.1 limits the number of equity securities that a listed company can
issue without the approval of its shareholders over any 12-month period to 15% of the
total number of fully paid ordinary shares it had on issue at the start of that 12-month
period.
As the issue of the First Closing Shares does not fit within any of the exceptions in
Listing Rule 7.2 and, as it has not yet been approved or ratified by Shareholders, it
effectively uses up part of the 15% limit in Listing Rule 7.1, thereby reducing the
Company's capacity to issue further equity securities without approval under Listing
Rule 7.1 for the 12 months following the date of issue.
Listing Rule 7.4 allows the shareholders of a listed company to ratify an issue of equity
securities after it has been made or agreed to be made. If they do, the relevant issue
of securities is taken to have been approved under Listing Rule 7.1 such that it does
not reduce the company's capacity to issue further securities without approval under
that rule.
The Company wishes to retain as much flexibility as possible to issue additional equity
securities in the future without having to obtain Shareholder approval for any such
future issues under Listing Rule 7.1. To this end, Resolution 1 seeks Shareholder
ratification of the issue of the First Closing Shares on the First Closing for the purposes
of Listing Rule 7.4.
If Resolution 1 is passed, the issue the subject of Resolution 1 will be excluded from
calculating the Company's 15% limit in Listing Rule 7.1, effectively increasing the
number of equity securities the Company can issue without Shareholder approval over
the 12 months following the date of issue (which was 30 August 2024).
If Resolution 1 is not passed, the issue the subject of Resolution 1 will be included in
the Company's 15% limit in Listing Rule 7.1, effectively decreasing the number of
equity securities the Company can issue without Shareholder approval over the 12
months following the date of issue.
In accordance with the disclosure requirements of Listing Rule 7.5, the following
information is provided by the Company:
Listing Rule Required Information
7.5.1 The Company issued the First Closing Shares to Kinetic Crest
Limited, a wholly owned subsidiary of Kinetic Development
Group Limited.
10
Listing Rule Required Information
7.5.2 The Company issued 62,102,002 fully paid ordinary shares on
the First Closing. The First Closing Shares rank equally with all
other Shares on issue at the time of their issue.
7.5.3 N/A
7.5.4 The First Closing Shares were issued on 30 August 2024.
7.5.5 The First Closing Shares were issued for a total purchase price
of US$12,970,588, yielding an implied price per Share of
US$0.2089 (equivalent to A$0.3083 or ZAR3.7206 6).
7.5.6 The funds raised from the issue of the First Closing Shares (and
the Second Closing Shares, subject to their issue) will be used
by the Company for the following purposes:
• maintenance, security and compliance costs related to all
of the Company's projects including Makhado, Vele and
GSP;
• commissioning of a coal handling and preparation plant at
Makhado;
• establishment of power and water infrastructure and civil
works at Makhado; and
• the partial repayment of certain outstanding loans.
7.5.7 A concise summary of the Subscription Agreement is set out in
Schedule 1.
7.5.8 The voting exclusion statement for Resolution 1 is set out in the
Notice of Meeting.
Other If Shareholders do not approve Resolution 1, the Company's
placement capacity will be reduced by 62,102,002 Shares
under Listing Rule 7.1 until 30 August 2025.
The First Closing Shares were issued by MC Mining under its
then (i.e. 30 August 2024) available Listing Rule 7.1 placement
capacity.
Recommendation
The Directors (other than Mr Huang Muhui, who abstains from making a
recommendation 7) recommend that Shareholders vote in favour of Resolution 1.
The Chair intends to vote all undirected proxies in favour of Resolution 1.
6 Based on the AUD/USD and ZAR/USD exchange rates as at 28 August 2024.
7 Mr Huang Muhui has abstained from making a recommendation as he is also a senior KDG executive.
11
Resolution 2 - Approval for Acquisition of Relevant Interest in Shares by
Kinetic Development Group Limited
Background information
As at the date of this Explanatory Statement and following the issuance of the First
Closing Shares to KCL on 30 August 2024, KDG has a Relevant Interest 8 in
62,102,002 Shares (equivalent to 13.04% of the Company's issued Share capital).
Under the Subscription Agreement, and subject to the satisfaction of the Conditions
Precedent (including Shareholder approval of Resolution 2 and the receipt by the
Company of the approximately US$77 million payable to the Company in consideration
for the Second Closing Shares), MC Mining will issue KDG (or its designee) with such
number of additional Shares as will deliver it 51% of the Company's issued Share
capital.
Based on the Company's current issued Share capital of 476,115,351 Shares, the
Company expects to issue KDG (or its designee) with an additional 368,809,851
Second Closing Shares in order for KDG (or its designee) to hold 51% of the
Company's issued Share capital on the Second Closing. Shareholders should note
however that the number of Second Closing Shares may increase if the Company
issues additional Shares between the date of these Meeting Documents and the date
on which the Second Closing Shares are issued (Second Closing Date). As of the
date of this Explanatory Statement, the Company is not currently party to any
agreements for the issue of any Shares.
As noted in the ASX Release, KDG is an integrated coal mining group listed on the
main board of the HKSE which has a current market capitalisation of over US$1.5
billion 9. KDG's business covers the full coal value chain including mining, processing,
logistics and marketing. The key coal resource under operation of the Group is the
underground thermal coal Dafanpu Coal Mine. KDG's vision is to become a leading
integrated coal provider.
Further information in relation to the structure, operations, assets, management and
financial condition of KDG is set out in its 2023 annual report (which is available at
https://www1.hkexnews.hk/listedco/listconews/sehk/2024/0410/2024041000353.pdf)
and in its 2024 interim financial report (which is available at
https://www1.hkexnews.hk/listedco/listconews/sehk/2024/0828/2024082800545.pdf).
KDG and its Associates 10
The persons noted in the table below are "Associates" 11 of KDG for the purposes of
the transaction the subject of Resolution 2. The circumstances giving rise to the
Association are also noted below.
8Under section 608(1) of the Corporations Act, a person has a Relevant Interest in securities if they (i)
are the holder of the securities, (ii) have the power to exercise, or control the exercise of, a right to vote
attached to the securities or (iii) have the power to dispose of, or control the exercise of a power to
dispose of, the securities. KDG has a Relevant Interest in the Shares held by KCL.
9 As at 20 December 2024.
10 KCL and each of its Associates are excluded from voting in favour of Resolutions 1 and 2.
11 Please see the definition of Associate under the heading "Section 611 of the Corporations Act" below.
12
Person Nature of Association
King Lok Holdings Limited An entity that holds a 62.96% of the shares in KDG
and controls KDG.
The Zhang Family Overseas A discretionary family trust that holds 100% of the
Limited shares in King Lok Holdings Limited and controls
King Lok Holdings Limited.
TMF (Cayman) Ltd. The trustee of The Zhang Family Overseas Limited
and holder of 100% of the units in The Zhang Family
Overseas Limited.
KCL A wholly-owned subsidiary of KDG
Further information in relation to KDG and the various entities (some of which may also
be "Associates" of KDG) that make up the KDG "group" of companies is set out in
Schedule 3.
MC Mining's current and expected issued capital structure
The following table sets out the Company's equity capital structure as at the date of
this Explanatory Statement as well as the Company's expected equity capital structure
on completion of the Share issuance the subject of Resolution 2 (i.e. assuming
Resolution 2 is approved by Shareholders).
Total Number on Issue Number to be Issued Total Number on Issue
(as at date of Explanatory (assuming Resolution 2 is (as at the Second Closing)
Statement) passed)
Shares 476,115,351 368,809,851 844,925,202
Options N/A Nil Nil
Warrants N/A Nil Nil
Performance N/A Nil Nil
Rights
The above table has been prepared on the assumption that the Company does not
issue any Shares between the date of these Meeting Documents and the Second
Closing. Although no issuances are expected, if additional Shares are issued between
the date of these Meeting Documents and the Second Closing, the number of Second
Closing Shares will be increased to the extent necessary to ensure that on completion
of that issue KDG has a Relevant Interest in 51% the Company's issued Share capital.
As of the date of this Explanatory Statement, the Company is not currently party to any
agreement for the issue of Shares.
For further information in relation to the Company's issued Share capital structure,
please see the Company's prior period continuous and periodic disclosures given to
ASX and JSE which are available on the Company's website (www.mcmining.co.za).
13
MC Mining's current and expected ownership structure
The below table sets out the number of Shares held by and the Relevant Interest of
KDG (and each of its Associates) as at the date of these Meeting Documents as well
the expected number of Shares held by and the expected Relevant Interest of KDG
(and its Associates) on the Second Closing.
Name Number of Percentage of Relevant Number of Percentage of Relevant
Shares Held Shares Held Interest Shares Held Shares Held Interest
(as at 20 (as at 20 (as at 20 (on Second (on Second (on Second
December December December Closing) Closing) Closing)
2024) 2024) 2024)
KDG Nil 0% 62,102,002 Nil 0% 430,911,853
KCL 62,102,002 13.04% 62,102,002 430,911,853 51% 430,911,853
King Lok Nil N/A 62,102,002 Nil N/A 430,911,853
TZFOL Nil N/A 62,102,002 Nil N/A 430,911,853
TMF Nil N/A 62,102,002 Nil N/A 430,911,853
14
Impact on substantial holders
The table below sets out the expected impact of the issue of the Second Closing
Shares on the proportionate interests of the Company's substantial Shareholders 12.
Name Number of Percentage of Issue of Number of Percentage of Percentage
Shares Held Shares Held Second Shares Held Shares Held Change
Closing
(as at 20 (as at 20 (on the Second (on the Second (on the Second
December 2024) December 2024)
Shares Closing) Closing) Closing)
Goldway 13 125,386,172 26.34% - 125,386,172 14.84% -11.50%
Senosi 14 95,357,455 20.03% - 95,357,455 11.29% -8.74%
KCL 62,102,002 13.04% 368,809,851 430,911,853 51.00% +37.96%
Shining 35,000,000 7.35% - 35,000,000 4.14% -3.21%
Capital
Dendocept 15 28,265,593 5.94% - 28,265,593 3.35% -2.59%
Jun Liu & Lu 26,499,345 5.57% - 26,499,345 3.14% -2.43%
Zhang 16
Pacific Goal 24,927,757 5.24% - 24,927,757 2.95% -2.29%
All Others 78,577,027 16.50% - 78,577,027 9.30% -7.20%
The table below sets out the expected impact of the issue of the Second Closing
Shares on the Relevant Interests in Shares of the Company's substantial holders after
taking into account of the impact of the Escrow Deed and the Proposed Escrow Deed
on the Company's, Goldway's, Senosi's and Dendocept Group's Relevant Interests in
the First Closing Shares and the Second Closing Shares17.
This table excludes the impact of the Escrow Deed and the Proposed Escrow Deed on the Company's,
12
Goldway's, Senosi's and Dendocept's Relevant Interests in Shares.
13 Goldway is a special purpose acquisition vehicle owned and controlled by members of the
Consortium.
14 Mr Mathews Senosi, a Director, controls Senosi.
15 Ms Christine He, a Director, controls Dendocept.
16These Shares are held by Jun Liu & Lu Zhang as trustees for the Golden Eagle Trust, of which
Christine He is a beneficiary.
17 Under section 608(3)(a) of the Corporations Act, if a person owns 20% or more of a company, that
person will also have a Relevant Interest in the shares that the company has a Relevant Interest in. This
means that Goldway has a Relevant Interest in the First Closing Shares and will have a Relevant Interest
in the Second Closing Shares as it (i.e. Goldway) has a Relevant Interest in at least 20% of the
Company's shares (noting that the Company has (or will have) a Relevant Interest in the First Closing
Shares and the Second Closing Shares as a consequence of its entry into the Escrow Deed and the
Proposed Escrow Deed). Further, and in addition to its current and impending Relevant Interest in the
First Closing Shares and the Second Closing Shares (which arises (or will arise) because of its greater
than 20% Relevant Interest in the Company's shares), Senosi also has a Relevant Interest in the Shares
held by Goldway because Senosi owns more than 20% of Goldway's shares. Dendocept Group is also
deemed to have a Relevant Interest in the First Closing Shares and will also be deemed to have a
Relevant Interest in the Second Closing Shares as it (i.e. Dendocept Group, as a collective) has a
Relevant Interest in at least 20% of the Company's shares. Dendocept Group also has a Relevant
Interest in the Shares held by Goldway because the individual members of Dendocept Group collectively
own more than 20% of Goldway's shares.
15
Name Relevant Relevant Issue of Relevant Relevant Percentage
Interest Interest Second Interest Interest Change
Closing
(as at 20 (as a Shares (on the (as a (on the
December percentage of Second percentage of Second
2024) all Shares) Closing) all Shares) Closing)
Goldway 18 187,488,174 39.38% - 556,298,025 65.84% +26.46%
Senosi 19 282,845,629 59.41% - 651,655,480 77.13% +17.72%
KCL 62,102,002 13.04% 368,809,851 430,911,853 51.00% +37.96%
Shining 35,000,000 7.35% - 35,000,000 4.14% -3.21%
Capital
Dendocept 20 283,052,687 59.45% - 651,862,538 77.15% +17.70%
Jun Liu & Lu 283,052,687 59.45% - 651,862,538 77.15% +17.70%
Zhang 21
Pacific Goal 22 283,052,687 59.45% - 651,862,538 77.15% +17.70%
MC Mining 23 62,102,002 13.04% - 430,911,853 51.00% +37.96%
Shareholders should note that even though the Company's entry into the Escrow Deed
and the Proposed Escrow Deed has and will result in each of the Company, Goldway,
Senosi and Dendocept Group acquiring a Relevant Interest in the Shares the subject
of those deeds (i.e. the First Closing Shares and the Second Closing Shares), none of
the Company, Goldway, Senosi or Dendocept Group (or any individual member of
Dendocept Group) have or will obtain any power to influence the exercise of any votes
attached to either the First Closing Shares or the Second Closing Shares.
18 Goldway's post-Second Closing Relevant Interest in 556,298,025 Shares has been calculated by
combining its registered Shareholding of 125,386,172 Shares with the 62,102,002 First Closing Shares
and the 368,809,851 Second Closing Shares. If Mr Liu's joint holding of 26,499,345 Shares (and his
registered holding of 6,735,240 Shares) were included, Goldway's and its Associate's collective
Relevant Interest would increase by a total of 33,243,585 Shares. These holdings have instead been
incorporated into the calculation of Dendocept Group's Relevant Interest.
19 Senosi's post-Second Closing Relevant Interest in 651,655,480 Shares is calculated by combining its
registered Shareholding of 95,357,455 Shares with the 125,386,172 Shares held by Goldway, the
62,102,002 First Closing Shares and the 368,809,851 Second Closing Shares.
20 Dendocept's post-Second Closing Relevant Interest in 651,862,538 Shares is calculated by combining
its registered Shareholding of 28,265,593 Shares with the 125,386,172 Shares held by Goldway, the
26,499,345 Shares held by Jun Liu & Lu Zhang, the 24,927,757 Shares held by Pacific Goal, the
8,664,674 Shares held by Christine He, the 6,735,240 Shares held by Jun Liu, the 264,846 Shares held
by Golden Archer, the 207,058 Shares held by Eagle Canyon, the 62,102,002 First Closing Shares and
the 368,809,851 Second Closing Shares.
21 Jun Liu & Lu Zhang are deemed to have the same Relevant Interest in Shares as do the other
members of Dendocept Group.
22Jun Liu is a director of Pacific Goal and a director and majority shareholder in Eagle Canyon, which
owns 50% of (and controls) Pacific Goal. Pacific Goal is deemed to have the same Relevant Interest in
Shares as do the other members of Dendocept Group.
23 Please see the Explanatory Statement in respect of Resolution 3 for further detail.
16
Independent Expert's Report
The Company has engaged BDO Corporate Finance Australia Pty Ltd ACN 050 038
170 (Independent Expert) to provide an opinion as to whether the transaction the
subject of Resolution 2 is "fair and reasonable" to Shareholders (i.e. Shareholders
other than KCL and its Associates).
The Independent Expert's Report was prepared in accordance with the
recommendations of ASIC Regulatory Guide 74 (titled "Acquisitions approved by
members") (RG 74), Regulatory Guide 111 (titled "Content of expert reports"),
Regulatory Guide 112 (titled "Independence of experts"), Regulatory Guide 170 (titled
"Prospective financial information) and Information Sheet 214 (titled "Mining and
Resources: Forward-looking statements").
The Independent Expert is of the opinion that the transaction the subject of Resolution
2 is not fair but reasonable to non-associated Shareholders (i.e. Shareholders other
than KCL and its Associates).
The Directors recommend that you read the Independent Expert's Report carefully and
in full (including the scope of the report, the methodology of the valuation and the
sources of information and assumptions made) before making any decision in relation
to Resolution 2.
Specific disclosures required by the Corporations Act and ASIC
General
Subject to Shareholders approving Resolution 2, KDG (or its designee) will acquire
such number of Second Closing Shares that will result in it (together with its designee)
holding (and having a Relevant Interest in) 51% of the Company's issued Share capital
on the Second Closing in consideration for the payment by KDG of an additional US$77
million.
As noted elsewhere in these Meeting Documents, the issuance of the Second Closing
Shares (assuming Shareholders approve Resolution 2) to KDG or its designee will
result in KDG having a Relevant Interest in a total of 51% of the Company's issued
Share capital, which is expected to be 430,911,853 Shares assuming no further Shares
are issued by the Company between the date of this Explanatory Statement and the
Second Closing.
As noted elsewhere in these Meeting Documents, the number of Second Closing
Shares to be issued to KDG (or its designee) may change if MC Mining issues any
Shares between the date of these Meeting Documents and the Second Closing.
Listing Rules 7.1 and 10.11
Listing Rule 7.1
Broadly speaking, and subject to a limited number of exceptions, Listing Rule 7.1 limits
the amount of equity securities that a listed company can issue without the approval of
its shareholders over any 12-month period to 15% of the fully paid ordinary shares it
had on issue at the start of that 12-month period. Without Shareholder approval under
(or reliance on an exception to) Listing Rule 7.1, the proposed issue of Shares the
subject of Resolution 2 would not be permitted.
17
The Company is not however proposing to seek Shareholder approval under Listing
Rule 7.1 and is instead intending to rely on the exception in Listing Rule 7.2 (Exception
8). Listing Rule 7.2 (Exception 8) exempts ASX listed companies from obtaining
shareholder approval under Listing Rule 7.1 if the relevant issue of securities is
approved by shareholders under item 7 of section 611.
Listing Rule 10.11
Listing Rule 10.11 provides that unless one of the exceptions in Listing Rule 10.12
applies, a listed company must not issue or agree to issue any equity securities to:
(a) a Related Party of the company;
(b) a person who is, or was at any time in the 6 months before the issue or
agreement to issue, a substantial (i.e. 30%+) holder of the company's shares;
(c) a person who is, or was at any time in the 6 months before the issue or
agreement to issue, a substantial (i.e. 10%+) holder of the company's shares
and who has nominated a director to the board of the company pursuant to a
relevant agreement which gives them a right or expectation to do so;
(d) an Associate of a person referred to in Listing Rules 10.11.1 to 10.11.3 (i.e. an
Associate of a person listed in any of paragraphs (a) to (c) above); or
(e) a person whose relationship with the company is such that, in ASX's opinion,
the issue or agreement to issue should be approved by its shareholders,
unless the company obtains approval from its shareholders.
MC Mining is not proposing to seek Shareholder approval under Listing Rule 10.11
and is instead intending to rely on Listing Rule 10.12 (Exception 6). Listing Rule 10.12
(Exception 6) exempts listed companies from seeking approval under Listing Rule
10.11 if the relevant issue is approved by shareholders under item 7 of section 611.
Accordingly, since MC Mining is seeking Shareholder approval for the purposes of item
7 of section 611 of the Corporations Act, MC Mining considers it is unnecessary to also
seek separate Shareholder approvals under either Listing Rule 7.1 or Listing Rule
10.11.
Section 611 of the Corporations Act
Unless a specific exemption in section 611 of the Corporations Act applies, section 606
of the Corporations Act prevents a person from acquiring a Relevant Interest in issued
voting shares in a listed company through a transaction which results in the person's
voting power in the company:
(a) increasing from below 20% to more than 20%; or
(b) increasing from a starting point of more than 20% to a higher percentage.
The voting power of a person in a body corporate is determined in accordance with
section 610 of the Corporations Act. The calculation of a person's voting power in a
company involves determining the voting shares in the company in which the person
and the person's Associates have a Relevant Interest.
18
For the purposes of determining voting power under the Corporations Act, a person
(the "second person") is an "Associate" of the other person (the "first person") if:
(a) the first person is a body corporate and the second person is:
(i) a body corporate the first person controls;
(ii) a body corporate that controls the first person; or
(iii) a body corporate that is controlled by an entity that controls the person;
(b) the second person has entered or proposes to enter into a relevant agreement
with the first person for the purpose of controlling or influencing the composition
of the company's board or the conduct of the company's affairs; or
(c) the second person is a person with whom the first person is acting or proposes
to act, in concert in relation to the company's affairs.
Associates are, therefore, determined as a matter of fact. For example, where a person
controls or influences the board or the conduct of a company's business affairs, or acts
"in concert" with a person in relation to the entity's business affairs, that person would
be considered to be an Associate of the first person.
Furthermore, section 608(1) of the Corporations Act provides that a person has a
Relevant Interest in securities if they:
(a) are the holder of the securities;
(b) have the power to exercise, or control the exercise of, a right to vote attached
to the securities; or
(c) have power to dispose of, or control the exercise of a power to dispose of, the
securities.
It does not matter how remote the Relevant Interest is or how it arises. If two or more
people can jointly exercise one of the powers, each of them is taken to have that power.
In addition, section 608(3) of the Corporations Act provides that a person has a
Relevant Interest in securities that any of the following has:
(a) a body corporate in which the person's voting power is above 20%;
(b) a body corporate that the person controls.
An acquisition of a Relevant Interest (such as the acquisition of the Second Closing
Shares by KDG or its designee) is not prohibited under section 606 if it has been
approved by a resolution at a general meeting of the listed company under and in
accordance with item 7 of section 611 of the Corporations Act.
Accordingly, and in order to permit the issuance of the Second Closing Shares (and
therefore KDG's (or its designee's) acquisition of a Relevant Interest in 51% of the
Company's issued Share capital) in consideration for approximately US$77 million, the
Company is seeking Shareholder approval under item 7 of section 611.
19
Specific disclosures required by RG 74
Specific information is required to be provided to Shareholders in relation to an
acquisition being approved under item 7 of section 611 of the Corporations Act. In
particular, item 7 of section 611 and RG 74 requires the following information be
provided to Shareholders:
(a) The identity of the person proposing to make the acquisition and their
Associates
Subject to Shareholders passing Resolution 2, the Company will issue Kinetic
Development Group Limited (or its designee) with such number of Second
Closing Shares that will result in KDG (or its designee) holding a total of 51% of
the Company's issued Share capital.
As the date of these meeting documents, it is expected that the number of
Second Closing Shares to be issued to KDG (or its designee) to achieve the
required 51% is 368,809,851. As noted elsewhere in these Meeting Documents,
the number of Second Closing Shares will be increased if the Company issues
any Shares between the date of these Meeting Documents and the Second
Closing.
Kinetic Development Group Limited is a company incorporated under the laws
of Cayman Islands with limited liability. KDG is a HKSE main board listed
company. In this regard, please see:
• the ASX Release (a copy of which accompanies this Explanatory Statement
at Annexure C) and KDG's 2023 annual report 24 for further information in
relation to the structure, operations, assets, management and financial
condition of KDG; and
• Schedule 3 and the disclosures under the heading "KDG and its
Associates" for the Associates of KDG and the reason the Associate
reference applies to those persons.
(b) The maximum extent of the increase in that person's voting power in the
company that would result from the acquisition
The maximum extent of the increase in KDG's (and together with its Associates)
voting power is the higher of 368,809,851 (which, based on MC Mining's issued
Share capital as at the date of these Meeting Documents, is the number of
Shares required to ensure KDG has a Relevant Interest in 51% of MC Mining's
voting shares) and such number of Second Closing Shares as is required to
ensure KDG has a Relevant Interest in 51% of MC Mining's voting shares.
Please see the table under the heading "MC Mining's current and expected
ownership structure" for further details.
24 https://www1.hkexnews.hk/listedco/listconews/sehk/2024/0410/2024041000353.pdf
20
(c) The voting power that person will have as a result of the acquisition
On the Second Closing, KDG's (and together with its Associates') voting power
will increase from 62,102,002 to 430,911,853 or such higher number of Shares
as is required to ensure that it (and together with its Associates) will hold 51%
of all then existing voting shares.
Please see the table under the heading "MC Mining's current and expected
ownership structure" for further details.
(d) The maximum extent of the increase in the voting power of each of that
person's Associates that would result from the acquisition
As noted in the table under the heading "MC Mining's current and expected
ownership structure", the maximum extent of the increase in the voting power
of each of KDG's Associates is as follows:
Name Number of Percentage of Relevant Number of Percentage of Relevant
Shares Held Shares Held Interest Shares Held Shares Held Interest
(as at 20 (as at 20 (as at 20 (on Second (on Second (on Second
December December December Closing) Closing) Closing)
2024) 2024) 2024)
KDG Nil 0% 62,102,002 Nil 0% 430,911,853
KCL 62,102,002 13.04% 62,102,002 430,911,853 51% 430,911,853
King Lok Nil N/A 62,102,002 Nil N/A 430,911,853
TZFOL Nil N/A 62,102,002 Nil N/A 430,911,853
TMF Nil N/A 62,102,002 Nil N/A 430,911,853
(e) The voting power that each of that person's Associates would have as a
result of the acquisition
Please refer to the table immediate above for detail of each of KDG's
Associate's voting power on completion of the Share issuance the subject of
Resolution 2 (i.e. on the Second Closing).
(f) An explanation of the reasons for the proposed acquisition
The Company will, subject to Shareholders passing Resolution 2, issue the
Second Closing Shares in order to use the proceeds raised from that issuance
(i.e. together with the funds raised following the issuance of the First Closing
Shares) for the following corporate purposes:
• maintenance, security and compliance costs related to all of the Company's
projects including Makhado, Vele and GSP;
• commissioning of a coal handling and preparation plant at Makhado;
• establishment of power and water infrastructure and civil works at
Makhado; and
• the partial repayment of certain outstanding loans.
21
The proposed investment by KDG will not only advance MC Mining's flagship
Makhado steelmaking hard coking coal project (Makhado) towards production
but is also expected to accelerate the Company's broader strategy to develop
its various tenements in the Vhembe region of Limpopo Province, including the
Greater Soutpansberg Projects (GSP) and the Vele Aluwani Colliery (Vele).
All funds raised by the Company from the issuance of the First Closing Shares
must be spent in accordance with the Use of Proceeds Plan.
Shareholder approval in accordance with item 7 of section 611 of the
Corporations Act is required before the Second Closing Shares can be issued
because this issuance will result in KDG's (and together with its Associates')
Relevant Interests increasing from below 20% (i.e. KDG has, as at the date of
the Meeting Documents, a Relevant Interest in 13.04% of the Company's
shares) to above 20% (i.e. KDG will have, immediately following the issuance
of the Second Closing Shares, a Relevant Interest in 51% of the Company's
shares).
(g) When the proposed acquisition is to occur
Assuming Shareholders pass Resolution 2 (and each of the other Conditions
Precedent have been satisfied), it is expected that the Company will issue the
Second Closing Shares to KDG on or immediately after the receipt of the
approximately US$77 million payable by KDG to MC Mining in consideration for
those Shares.
The Second Closing Shares must be issued by no later than 270 days after the
date of the Subscription Agreement.
Please see Schedule 1 for a description of the Conditions Precedent that need
to be satisfied or waived in order for the Second Closing Shares to be issued.
(h) The material terms of the proposed acquisition
There are no material terms in relation to any agreement or other arrangement
in relation to the issuance of the Second Closing Shares that have not been
disclosed in these Meeting Documents.
(i) Details of any other relevant agreement between the acquirer and the
target entity or vendor (or any of their associates) that is conditional on
(or directly depends on) member approval of the proposed acquisition
N/A.
(j) A statement of the acquirer's intentions regarding the future of the target
entity if members approve the acquisition
Other than as disclosed elsewhere in this Explanatory Statement, the Company
understands that KDG:
• has no present intention of making any significant changes to the business
of the Company;
• has no present intention to inject further capital into the Company;
22
• has no present intention of making changes regarding the future
employment of the present employees of the Company;
• does not intend to redeploy any fixed assets of the Company;
• does not intend to transfer any property of the Company; and
• has no intention to change the Company's existing policies in relation to
financial matters or dividends.
These intentions are based on information concerning the Company, its
business and the business environment which is known to KDG at the date of
this document. These present intentions may change as new information
becomes available, as circumstances change or in the light of all material
information, facts and circumstances necessary to assess the operational,
commercial, taxation and financial implications of those decisions at the
relevant time.
(k) Any intention of the acquirer to significantly change the financial or
dividend policies of the entity
The Company understands that KDG has no present intention of significantly
changing the Company's financial or dividend policies.
(l) The interests that any director has in the acquisition or any relevant
agreement disclosed under paragraph (i) above
Although none of the current Board members have a material personal interest
in the outcome of Resolution 2, Mr Huang Muhui has chosen not to provide a
recommendation on Resolution 2 as he is a nominee director of KCL.
(m) Details about any person who it is intended will become a director if
members approve the acquisition
The Company understands that the below noted persons will be appointed as
Directors on and with effect from the Second Closing.
For further biographical information in relation to each of the below noted
proposed appointees please refer to KDG's 2023 annual financial report 25.
Name: Mr Ju Wenzhong
Mr Ju Wenzhong is currently the Chairman of KDG. Mr Ju joined KDG in
September 2010 and has been an Executive Director since May 2020. Mr Ju is
responsible for leading the production and sales of KDG.
Mr Ju obtained a professional qualification in precision machinery from the
Department of Mechanical Engineering, Shenzhen University in July 1990. Prior
to joining KDG, Mr Ju served as a senior manager and director of several
companies including Guangdong One Generation Advertising Co., Ltd.
25 https://www1.hkexnews.hk/listedco/listconews/sehk/2024/0410/2024041000353.pdf.
23
Name: Mr Li Bo
Mr Li is currently an Executive Director and the Chief Executive Officer of Kinetic
Development Group Limited and is also the Chairman of Kinetic Coal Limited.
Mr Li is responsible for the planning and management of operations of KDG's
operations at the Dafanpu Coal Mine.
Mr Li graduated from the University of Science and Technology Beijing in 2004
with a bachelor's degree in management and obtained a professional certificate
of mining engineering from China University of Mining and Technology in 2016.
Mr Li also obtained the qualification of Senior Economist in 2021.
Name: Ms Wang Lanlan
Ms Wang is the Vice President and Chief Financial Officer of KDG and is
responsible for KDG's financial management. Ms Wang is also the President of
Kinetic (Asia) Limited. Ms Wang obtained a master's degree in business
administration from Fudan University and the University of Hong Kong.
Ms Wang has over 10 years of experience in corporate finance, listing and asset
appraisal. Prior to joining KDG, Ms Wang served as a senior project manager
at Jones Lang LaSalle (Beijing) Consultants Limited and as a director of investor
relations at China New Material Technology Holdings Limited.
(n) Interests in the Company
The Company understands that none of the incoming directors:
• have a Relevant Interest in any Shares; or
• are Associates of any of the Company's current Shareholders (i.e. other
than KCL).
(o) The advantages passing the resolution
The Company considers the advantages of passing Resolution 2 to include
each of the following:
Advancement of core projects
Following receipt of the funds from the issue of the Second Closing Shares, the
Company will receive an additional US$77.03 million. It is expected that these
funds will enable the Company to significantly advance its flagship Makhado
Project and accelerate the development of its other mineral assets.
Company and KDG will collaborate
The Company expects to collaborate with KDG and leverage off of its coal
project development and production expertise. This should minimise project
implementation risk for the Makhado Project and optimise operational efficiency
across the Company's other mineral assets.
24
Continue as a going concern
As noted in various of the Company's recent financial reports, the Company's
auditor has highlighted a material uncertainty over the Company's ability to
continue as a going concern. Specifically, the auditor outlined that the
Company's ability to continue as a going concern is dependent on it raising
additional debt and equity funding.
Accordingly, if Shareholders pass Resolution 2 and the Second Closing Shares
are issued, the Company will receive an additional US$77.03 million which will
allow the Company to continue as a going concern and meet its working capital
requirements.
(p) The disadvantages of passing the resolution
The Company considers the disadvantages of passing Resolution 2 to include
each of the following:
Dilution
If Shareholders pass Resolution 2 and the Second Closing Shares are issued
to KCL (which currently holds 13.04% of the Shares), the proportionate interests
of all other Shareholders will be diluted (noting that KCL will ultimately hold 51%
of the Company's shares).
KCL's 51% holding of Shares will allow KCL to control the Company and to
either pass or block resolutions put to members.
Future takeover offers
If Shareholders pass Resolution 2 and the Second Closing Shares are issued
to KCL, KCL (i.e. as holder of more than half of the Company's Shares) will be
able to prevent a change of control transaction from occurring.
Such a significant ownership interest will therefore likely deter third party bidders
from either acquiring Shares on market or from making a takeover offer for all
of the Company's shares.
Further detail
The advantages and disadvantages of passing Resolution 2 are outlined in
further detail in section 13.1 and 13.2, respectively of the Independent Expert's
Report.
(q) Consequences of not passing Resolution 2
Alternative sources
If Shareholders do not pass Resolution 2, the Company will not receive the
US$77.03 million it expects to receive from the issue of the Second Closing
Shares. This will likely result in the Company needing to raise funds from
alternative sources to:
• continue to advance the Makhado Project; and
25
• continue as a going concern.
Shareholders should note that there can be no certainty that the Company will
be able to procure alternative funding either on terms acceptable to the
Company, on terms superior to those the subject of Resolution 2 (i.e. those set
out in the Subscription Agreement) or at all.
Buy-back
As outlined below and in Schedule 1, if the issue of the Second Closing Shares
does not occur within 270 days of the date of the Subscription Agreement (which
is 27 May 2025) other than due to a breach of that agreement by KDG, KCL has
the right to require MC Mining to buy-back the First Closing Shares.
Based on the Company's 30 September 2024 quarterly cash flow report, the
Company had cash and cash equivalents of US$10.8 million, being less than
the approximately US$13 million it would need to buy-back and cancel the First
Closing Shares.
Therefore, if Shareholders do not pass Resolution 2, and KDG exercises its right
to require the Company to buy-back and cancel the First Closing Shares, the
Company will be required to raise considerable additional debt or equity in order
to fund the buy-back price.
Shareholders should note that there can be no certainty that the Company will
be able to procure sufficient additional funding to allow the Company to buy-
back the First Closing Shares from KCL either on terms acceptable to the
Company or at all.
Further detail
The consequences of not passing Resolution 2 are outlined in further detail in
section 13.5 of the Independent Expert's Report.
Other
Proposed changes to composition of the Board
In addition to the above proposed Director appointments, and as permitted under the
SSA, it is expected (but not settled) that Mr An Chee Sin and Mr Brian Zhen will retire
from the Board on the Second Closing to ensure that Directors appointed by KDG
constitute the majority of the board of (and therefore, KDG will control) the Company.
Escrow
Subject to the terms of the escrow deed (a copy of which is attached to the ASIC Form
603 – "Notice of initial substantial holder" that was given to ASX by the Company on
30 August 2024) between the Company, KDG and KCL dated 30 August 2024
(Escrow Deed26), the First Closing Shares are subject to a 12-month period of
voluntary escrow.
26The restrictions in the Escrow Deed are subject to the requirements of the Listing Rules and all other
applicable rules and laws.
26
The Second Closing Shares will also be subject to a 12-month period of voluntary
escrow with the applicable restrictions set out in a separate escrow deed (Proposed
Escrow Deed27), the form of which (save for the restrictions included in the Escrow
Deed as they relate to the below mentioned buy-back) will be substantially the same
as the Escrow Deed.
Buy-back
The Second Closing must be completed within 270 days of the date of the Subscription
Agreement, failing which, KDG has the right, if the Second Closing has not occurred
other than as a result of KDG's breach, to require the Company to buy back the First
Closing Shares in compliance with all applicable laws (including the Corporations Act
– which will require the approval of the Company's shareholders at a general meeting).
The rights and liabilities attaching to the Second Closing Shares
The Second Closing Shares (as well as the First Closing Shares) are fully paid ordinary
shares in the Company. A summary of the rights and liabilities applicable to these
Shares is set out in Schedule 4.
Association
Other than as disclosed in the Explanatory Statement, the Company is not aware of
any Association (whether formal or informal) between KDG (or any Associate of KDG)
with any existing Shareholder (i.e. other than KCL) or with any other person.
Board recommendation
The Directors (other than Mr Huang Muhui, who abstains from making a
recommendation 28) recommend that Shareholders vote in favour of Resolution 2.
The Chair intends to vote all undirected proxies in favour of Resolution 2.
The Board is not aware of any other information that Shareholders might reasonably
require to make a decision whether it is in the best interest of the Company to pass
Resolution 2.
27 The restrictions in the Proposed Escrow Deed will also be subject to the requirements of the Listing
Rules and all other applicable rules and laws.
28 Mr Huang Muhui has abstained from making a recommendation as he is also a senior KDG executive.
27
Resolution 3 - Approval for Acquisition of Relevant Interest in Shares by the
Company
Background information
The Company intends to issue the Second Closing Shares (in accordance with
Resolution 2) on the Second Closing. Following that issuance, KDG will have a
Relevant Interest in 51% of the Company's issued Share capital.
As set out in the explanatory notes for Resolution 2, the Second Closing Shares will
be subject to a 12-month period of voluntary escrow with the applicable restrictions set
out in the Proposed Escrow Deed.
Under the Corporations Act, by entering into the Proposed Escrow Deed, the Company
is deemed to acquire a Relevant Interest in the Second Closing Shares as the
Proposed Escrow Deed will give the Company the power to dispose of, or control the
exercise of a power to dispose of, those shares 29.
Furthermore, under section 608(3)(a) of the Corporations Act, a person that has a
Relevant Interest in at least 20% of the voting securities of a company will be deemed
to have the same Relevant Interest in shares as that company has. This means that
Goldway, Senosi and Dendocept Group (each, as a greater than 20% holder of the
Company's shares) will also acquire a Relevant Interest in the Second Closing Shares
as a consequence of the Company's entry into the Proposed Escrow Deed 30.
As the issue of Second Closing Shares will result in KDG acquiring a Relevant Interest
in more than 20% of the Company's issued Share capital on the Second Closing and
because the Company's entry into the Proposed Escrow Deed will cause it (i.e. the
Company) to acquire a Relevant Interest in those Second Closing Shares, approval
under item 7 of section 611 of the Corporations Act is required.
Shareholders should note that while the issue of the Second Closing Shares and
corresponding entry into the Proposed Escrow Deed by the Company will result in
Goldway, Senosi and Dendocept Group also acquiring a Relevant Interest in those
Shares approval under item 7 of section 611 of the Corporations Act for that ancillary
acquisition is not required under section 606 because of section 606(1)(b) 31).
29 Under section 608(1) of the Corporations Act, a person has a Relevant Interest in securities if they (i)
are the holder of the securities, (ii) have the power to exercise, or control the exercise of, a right to vote
attached to the securities or (iii) have the power to dispose of, or control the exercise of a power to
dispose of, the securities. As a consequence of its entry into (and for the duration of) the Proposed
Escrow Deed (and the Escrow Deed), the Company will have a Relevant Interest in all of the Shares
held by KCL (save for any Shares held by KCL and its Associates that are not subject to these deeds).
30Given that each of Goldway, Senosi and Dendocept Group had a greater than 20% interest in the
Company's shares at the time the Company entered into the Escrow Deed (i.e. the escrow deed in
respect of the First Closing Shares), the Company considers that it may have unintentionally caused
each of Goldway, Senosi and Dendocept Group to acquire a Relevant Interest in the First Closing
Shares in contravention of section 606 of the Corporations Act.
31The effect of section 606(1)(b) of the Corporations Act is that the prohibition in section 606 (i.e. the
prohibition that prevents a person (together with its Associates) from increasing its (or their aggregate)
sub-20% Relevant Interest to above 20% or from increasing its (or their aggregate) greater than 20%
Relevant Interest, in either case, unless an exception is available) is not triggered if the acquisition of
the Relevant Interest is not caused by a deliberate act by or on behalf of the person acquiring the
28
As Senosi and Dendocept Group each hold more than 20% of the voting shares in
Goldway, each of Senosi and Dendocept Group are also deemed to have a Relevant
Interest in the 125,386,172 Shares held by Goldway.
Dendocept Group is comprised of Dendocept, Jun Liu & Lu Zhang as trustees for the
Golden Eagle Trust, Pacific Goal, Christine He, Jun Liu, Golden Archer and Eagle
Canyon. Each member of Dendocept Group is deemed to have the same Relevant
Interest in Shares as do the other members. Dendocept Group's Relevant Interest
includes (or will include as the case may be) the First Closing Shares and the Second
Closing Shares because it (i.e. Dendocept Group) collectively holds more than 20% of
the Company's issued and outstanding shares.
Material terms of the voluntary escrow arrangements in respect of the Second
Closing Shares
A summary of the expected material terms of the Proposed Escrow Deed is set out in
Schedule 2.
Shareholder approval
Resolution 3 seeks Shareholder approval of the Company's deemed acquisition of a
Relevant Interest in the Second Closing Shares for the purposes of item 7 of section
611 of the Corporations Act which will occur on execution of the Proposed Escrow
Deed as a consequence of the application of section 608(1) and section 608(3)(a) of
the Corporations Act.
The commencement of the operation of the voluntary escrow arrangements (the
material terms of which are set out in Schedule 2) in respect of the Second Closing
Shares is conditional on Resolution 3 being passed at the Meeting. For the avoidance
of doubt, if Resolution 3 is not approved by Shareholders, the Proposed Escrow Deed
will be of no effect and the Proposed Escrow Deed will not be executed.
Specific disclosures required by the Corporations Act and ASIC
Section 611 of the Corporations Act
As noted above, unless a specific exemption in section 611 of the Corporations Act
applies, section 606 of the Corporations Act prevents a person from acquiring a
Relevant Interest in issued voting shares in a listed company through a transaction
which results in the person's voting power in the company:
(a) increasing from below 20% to more than 20%; or
(b) increasing from a starting point of more than 20% to a higher percentage.
Relevant Interest. Said differently, because the "ancillary" acquisition by Goldway, Senosi and
Dendocept Group of the Relevant Interest in the Second Closing Shares will be as a result of the
Company's entry into the Proposed Escrow Deed (and not by any deliberate act by any of Goldway,
Senosi or Dendocept Group), Shareholder approval of the acquisition of the Relevant Interest in the
Second Closing Shares by Goldway, Senosi and Dendocept is not required under section 606.
29
The voting power of a person in a body corporate is determined in accordance with
section 610 of the Corporations Act. The calculation of a person's voting power in a
company involves determining the voting shares in the company in which the person
and the person's Associates have a Relevant Interest.
Also noted above, an acquisition of a Relevant Interest is not prohibited under section
606 if it has been approved by a resolution at a general meeting of the listed company's
shareholders under and in accordance with item 7 of section 611 of the Corporations
Act or it occurs as a result of genuine third-party conduct.
As a consequence of the voluntary escrow arrangements the subject of the Proposed
Escrow Deed, the Company, Goldway, Senosi and Dendocept Group will be deemed
to have acquired a Relevant Interest in the Second Closing Shares, which, when
coupled with the Relevant Interest they already have in the First Closing Shares (i.e.
as a consequence of the Company's entry into the Escrow Deed), will result in:
(a) the Company's Relevant Interest in all of its issued and outstanding Shares
increasing from 13.04% to 51%;
(b) Goldway's Relevant Interest in all of the Company's issued and outstanding
shares increasing from 39.38% to 65.84%;
(c) Senosi's Relevant Interest in all of the Company's issued and outstanding
shares increasing from 59.41% to 77.13%; and
(d) Dendocept Group's Relevant Interest in all of the Company's issued and
outstanding shares increasing from 59.45% to 77.15%.
Accordingly, and in order to permit the voluntary escrow arrangements in respect of
the Second Closing Shares and the acquisition of a Relevant Interest by the Company
in the Shares the subject of the Proposed Escrow Deed, Shareholder approval under
item 7 of section 611 is being sought.
Specific disclosures required by RG 74
Specific information is required to be provided to Shareholders in relation to an
acquisition being approved under item 7 of section 611 of the Corporations Act. In
particular, item 7 of section 611 and RG 74 requires the following information be
provided to Shareholders:
(a) The identity of the person acquiring the Relevant Interest and their
Associates
The Company is the person acquiring the Relevant Interest the subject of
Resolution 3 as a consequence of its entry into the Proposed Escrow Deed.
As described above and while Shareholder approval is not required, Goldway,
Senosi and Dendocept Group will also acquire a Relevant Interest in the Second
Closing Shares.
30
The Company
The Company is a coal exploration and development company, with
metallurgical and thermal coal assets in South Africa. The Company's flagship
asset is the Makhado Project.
For further information in relation to the Company, please see the Company's
prior period continuous and periodic disclosures given to ASX and JSE which
are available on the Company's website (www.mcmining.co.za).
Goldway
Goldway is a Hong Kong-registered special purpose vehicle that was
incorporated to conduct the (now completed) Takeover Bid.
Goldway holds 125,386,172 Shares (equivalent to 26.34% of the Company's
issued and outstanding shares).
Mr Jun Liu, the sole director of Goldway, jointly holds 26,499,345 Shares
(equivalent to 5.57% of the Company's issued and outstanding Shares).
Mr Liu has extensive experience in the mining industry.
Goldway is owned by the Consortium. The ownership interests of the
Consortium are as follows:
• Senosi: 41.23%
• Shining Capital: 8.58%
• Dendocept: 6.93%
• Jun Liu & Huan Qu: 6.50%
• Pacific Goal: 6.11%
• Ying He Yuan Investment (S) Pte Ltd: 5.25%
• Longelephant: 3.72%
• Christine He: 2.12%
• Jun Liu: 1.65%
• Golden Archer: 0.06%
• Eagle Canyon: 17.85%
The joint bid deed that governed the manner in which the Consortium would
conduct the Takeover Bid is no longer of any force or effect.
Senosi
Senosi is a South Africa-based investment company with experience in
investing in and assisting in the development of South African resource projects.
Senosi holds 95,357,455 Shares (equivalent to 20.03% of the Company's
issued and outstanding shares).
Senosi is controlled by Mr Mathews Senosi, a Director.
Mr Senosi is a director of Senosi and of the trustee company that owns 100%
of Senosi's issued share capital.
31
Mr Senosi is a qualified mining engineer with over 25 years' experience in
mining and project execution. Mathews gained experience at Anglo Coal before
successfully pursuing personal business interests in mining, engineering and
consulting as well as civil and construction projects. Mr Senosi has extensive
experience in opencast and underground coal mining and is the CEO of
Overlooked Mining Group which produces over 7.5 million tonnes of thermal
coal per annual.
Dendocept Group
Dendocept is South Africa-based investment company with experience in
investing in and assisting in the development of South African resource projects.
Dendocept holds 28,265,593 Shares (equivalent to 5.94% of the Company's
issued and outstanding shares).
Dendocept is owned and controlled by Christine He, a Director.
Ms He has a bachelor's degree in English Literature from Sichuan University
and over 20 years' experience at senior management level. Her broad
commercial experience includes, amongst other matters, the financing,
development and execution of large construction and mining projects.
As noted above, Dendocept Group is comprised of Dendocept, Jun Liu & Lu
Zhang as trustees for the Golden Eagle Trust 32, Pacific Goal33, Christine He,
Jun Liu 34, Golden Archer 35 and Eagle Canyon 36.
Each member of Dendocept Group is deemed to have the same Relevant
Interest in Shares as do the other members.
(b) The maximum extent of the increase in that person's voting power in the
company that would result from the voluntary escrow arrangements
Following the Company's entry into the Escrow Deed in respect of the First
Closing Shares, the Company has a Relevant Interest in 13.04% of the
Company's shares. Similarly, Goldway, Senosi and Dendocept Group currently
have a Relevant Interest in 39.38%, 59.41% and 59.45% of the Company's
shares, respectively.
The maximum extent of the increase in the Company's (and together with its
Associates') voting power is 51% of the total Shares on issue after the voluntary
escrow arrangements in relation to the Second Closing Shares become
effective. This equates to a 37.96% increase.
32 Christine He is a beneficiary of the Golden Eagle Trust.
33Jun Liu is a director of Pacific Goal and a director and majority shareholder in Eagle Canyon, which
owns 50% of Pacific Goal.
34 Jun Liu is the spouse of Christine He.
35 Christine He's brother, Brian Zhen, a Director, is a director of Golden Archer.
36 Eagle Canyon owns 50% of (and controls) Pacific Goal.
32
The maximum extent of the increase in Goldway's, Senosi's and Dendocept
Group's (and together with their respective Associates') voting power is 65.84%,
77.13% and 77.15% of the total Shares on issue, respectively, an increase of
26.46%, 17.72% and 17.70% respectively.
(c) The voting power that person will have as a result of the voluntary escrow
arrangements
The Company will be deemed to have the voting power of 51% of the Company.
Goldway, Senosi and Dendocept Group will be deemed to have a voting power
of 65.84%, 77.13% and 77.15% of the Company. Voting power arises where a
person has a Relevant Interest in voting securities (i.e. such as the Shares).
However, and as noted above, none of the Company, Goldway, Senosi or
Dendocept Group (or any member of it) will obtain any power to influence the
exercise of any votes attached to the Second Closing Shares as a consequence
of the Company's entry into the Proposed Escrow Deed. For the avoidance of
doubt, none of these parties have any power to influence the exercise of any
votes attached to the First Closing Shares as a consequence of the Company's
entry into the Escrow Deed.
The Company's voting power results from a Relevant Interest arising due to
entry into voluntary escrow arrangements with KDG (or its designee) that
restricts the disposal of the First Closing Shares and the Second Closing
Shares.
Goldway's, Senosi's and Dendocept Group's voting power results from their
respective greater than 20% interests in the Company's shares. As noted
elsewhere, section 608(3)(a) deems a person to have a Relevant Interest in the
securities held by a company in which that person holds more than 20% of.
(d) The maximum extent of the increase in the voting power of each of that
person's Associates that would result from the voluntary escrow
arrangements
Any Associate of the Company, Goldway 37, Senosi and Dendocept Group will
be deemed to have the same increase in voting power as the Company,
Goldway, Senosi and Dendocept Group respectively have due to the imposition
of the holding lock over the First Closing Shares and Second Closing Shares.
As noted above, none of the Company, Goldway, Senosi or Dendocept Group
(or any member of it) will obtain any power to influence the exercise of any votes
attached to the Second Closing Shares as a consequence of the Company's
entry into the Proposed Escrow Deed.
37If Mr Liu's joint holding of 26,499,345 Shares is included, Goldway's and its Associate's collective
Relevant Interest would increase by 26,499,345 Shares.
33
Recommendation
The Directors (other than Mr Mathews Senosi, Mr Huang Muhui, Ms Christine He and
Mr Brian Zhen who abstain from making a recommendation 38) recommend that
Shareholders vote in favour of Resolution 3.
The Chair intends to vote all undirected proxies in favour of Resolution 3.
The Board is not aware of any other information that Shareholders might reasonably
require to make a decision whether it is in the best interest of the Company to pass
Resolution 3.
Mr Mathews Senosi has abstained from making a recommendation as he is also a director of Senosi.
38
Mr Huang Muhui has abstained from making a recommendation as he is also a senior KDG executive.
Ms Christine He has abstained from making a recommendation as she owns and controls Dendocept.
Mr Brian Zhen has abstained from making a recommendation as he is also a director of Golden Archer.
34
Glossary
ASIC means the Australian Securities and Investments
Commission
Bidder's Statement the bidder's statement issued by Goldway in
respect of the Takeover Bid
Board means the board of Directors of the Company
Chair means the person appointed as chairperson of the
Meeting
Company means MC Mining Limited ABN 98 008 905 388
(ASX: MCM; JSE: MCZ)
Consortium means the shareholders of Goldway, being
Senosi (41.23%), Shining Capital (8.58%),
Dendocept (6.93%), Jun Liu and Huan Qu as
trustees for the Golden Eagle Trust (6.50%),
Pacific Goal (6.11%), Ying He Yuan Investment
(S) Pte Ltd (5.25%), Longelephant (3.72%), Yi He
(2.12%), Jun Liu (1.65%), Golden Archer (0.06%)
and Eagle Canyon (17.85%)
For further information in relation to Goldway's
Relevant Interest in Shares, please see the ASIC
Form 604 filed by Goldway (and released on ASX)
on 13 December 2024.
Control has the meaning given in section 50AA of the
Corporations Act
Corporations Act means the Corporations Act 2001 (Cth)
Dendocept means Dendocept Proprietary Limited
Director means a director of the Company
Dendocept Group means Dendocept together with its Associates,
being Jun Liu & Lu Zhang as trustees for the
Golden Eagle Trust, Pacific Goal, Christine He,
Jun Liu, Golden Archer and Eagle Canyon
For further information in relation to Dendocept
Group's Relevant Interest in Shares, please see
the ASIC Form 604 filed by the Dendocept Group
(and released on ASX) on 13 December 2024.
Eagle Canyon means Eagle Canyon International Group Holding
Limited
35
Explanatory Statement means the explanatory statement accompanying
the Notice of Meeting
Golden Archer means Golden Archer Investment (Pty) Ltd
Goldway means Goldway Capital Investment Limited, the
entity that conducted an off-market takeover bid
for all of the Shares in the Company that members
of the Consortium did not already own 39
Independent Expert means BDO Corporate Finance Australia Pty Ltd
ACN 050 038 170
Independent Expert's Report means the report prepared by the Independent
Expert, a copy of which accompanies this
Explanatory Statement at Annexure B
KCL means Kinetic Crest Limited of 18F, 80 Gloucester
Road, Wanchai, Hong Kong
KDG means Kinetic Development Group Limited of
18F, 80 Gloucester Road, Wanchai, Hong Kong
Listing Rules means the official listing rules of ASX, as
amended or waived from time to time
Longelephant means Longelephant International Trade Limited
Makhado Project means the Company's coking coal exploration
and development project
Meeting means the meeting convened by the Notice of
Meeting
Meeting Documents means the Notice of Meeting together with the
Explanatory Statement (and includes any of the
Annexures thereto) either singly or collectively
and as the context requires
Mining Rights means the mining rights held by the Company and
each of its subsidiaries
MPTRO means the Mineral and Petroleum Titles
Registration Office of South Africa
Notice of Meeting means the notice of meeting accompanying this
Explanatory Statement
Pacific Goal means Pacific Goal Investment Limited
39For further information in relation to the (now concluded) Takeover Bid, please see
the Bidder's Statement given to ASX by the Company on 2 February 2024.
36
Proxy Form means the proxy form accompanying this
Explanatory Statement at Annexure A
Related Party has the meaning given in section 228 of the
Corporations Act
Relevant Interest has the meaning given in section 608 of the
Corporations Act
Resolution means a resolution set out in the Notice of
Meeting
Senosi means Senosi Group Investment Holdings
Proprietary Limited
For further information in relation to Senosi's
Relevant Interest in Shares, please see the ASIC
Form 604 filed by Senosi (and released on ASX)
on 13 December 2024
Share means a fully paid ordinary share of the Company
(and a Shareholder is a person who holds one or
more Shares)
Shining Capital means Shining Capital GP Limited
Takeover Bid means the now concluded takeover bid for all of
the Shares not owned by members of the
Consortium
37
Schedule 1 - Summary of Subscription Agreement
The principal terms of the Subscription Agreement are set out below.
Date 26 August 2024
Parties MC Mining Limited and Kinetic Development
Group Limited
Subscription Shares Under the Subscription Agreement, MC Mining
has agreed to issue and KDG has agreed to
acquire new Shares in MC Mining as follows:
• at the First Closing, KDG agrees to subscribe
for, and MC Mining agrees to issue, the First
Closing Shares; and
• at the Second Closing, KDG agrees to
subscribe for, and MC Mining agrees to
issue, the First Closing Shares.
KDG may nominate a wholly owned subsidiary of
KDG to hold the First Closing Shares and the
Second Closing Shares.
Total Consideration The total consideration payable by KDG under the
Subscription Agreement amounts to
US$90,000,000. This total consideration
comprises of US$12,970,588 to be paid by KDG
in consideration for the First Closing Shares (First
Closing Funds) and US$77,029,412 to be paid
by KDG in consideration for the Second Closing
Shares (Second Closing Funds).
Use of Proceeds MC Mining must use the First Closing Funds and
the Second Closing Funds to develop, exploit and
operate its coal business solely and only in
accordance with the use of proceeds plan which
sets out in reasonable detail the projected time
and purpose for each individual use of proceeds
and which was delivered to KDG prior to the First
Closing (Use of Proceeds Plan).
Conditions Precedent The issue of the Second Closing Shares is
contingent upon the satisfaction or waiver of a
number of Conditions Precedent, the most
material of which are:
• MC Mining's shareholders pass all
resolution/s required under the Corporations
Act (including a resolution for the purposes of
item 7 of section 611 of the Corporations Act)
and the Listing Rules (if applicable).
38
• MC Mining shall have taken all necessary
corporate action such that immediately on
the Second Closing KDG nominee directors
constitute the majority of the Board (including
as a result of the appointment/removal of
Directors as specified by KDG).
• Various technical reports commissioned by
KDG conclude that the geology and quality
of coal at Makhado is substantially consistent
with the findings of MC Mining's competent
person reports as previously disclosed by
MC Mining to KDG.
• If applicable, receipt of any approval required
by the Competition Act of South Africa for the
implementation of the Subscription
Agreement, either unconditionally or subject
to such conditions as have been approved in
writing by that date, by the parties affected by
such conditions, it being agreed that such
approval shall not be unreasonably withheld
or delayed.
• Subject to certain exceptions, qualifications
and disclosures specified in the Subscription
Agreement, each of the representations and
warranties of MC Mining contained in the
Subscription Agreement shall have been
true, correct, complete and not misleading
when made and shall be true correct,
complete and not misleading on and as of the
Second Closing with the same effect as
though such representations and warranties
had been made on and as of the date of the
Second Closing, except in either case for
those representations and warranties that
address matters only as of a particular date,
which representations will have been true
and complete as of such particular date.
• There shall have been no material adverse
effect as of the Second Closing.
• MC Mining's ordinary shares shall have
continued to be quoted for trading on ASX.
Representations and MC Mining represents and warrants to KDG,
Warranties among other things, that the following statements
are true, correct, complete and not misleading:
39
• That MC Mining is the sole legal and
beneficial holder of all of the equity securities
in each of its subsidiaries, free and clear of
all encumbrances of any kind other than
those arising under applicable law.
• As of the Second Closing Date, KDG is
entitled to rely on the sale offer exemption
under section 708A(5) of the Corporations
Act in respect of the ordinary shares to which
the Cleansing Statement relates.
• The audited consolidated balance sheet and
income statements and cash flows for the
Company as of and for the twelve-months
ended 30 June 2023 and the unaudited
consolidated balance sheet (Balance Sheet)
and income statements and cash flows for
the Company as of and for the six-months
ended 31 December 2023 (Balance Date)
(a) have been prepared in accordance with
the books and records of the Company or the
relevant subsidiary, (b) fairly present in all
material respects the financial condition and
position of the Company as of the dates
indicated therein and the results of
operations and cash flows of the Company
for the periods indicated therein, except in
the case of unaudited financial statements
for the omission of notes thereto and normal
year-end audit adjustments that are not
expected to be material, and (c) were
prepared in accordance with the accounting
standards applied on a consistent basis
throughout the periods involved.
• Since the Balance Date, there has not been
any material adverse effect or any material
change in the way the Company or any of its
subsidiaries conducts its/their business.
• None of the Company nor any of its
subsidiaries has any liabilities of the type that
would be disclosed on a balance sheet in
accordance with the applicable accounting
standards, except for (i) liabilities set forth in
the Balance Sheet that have not been
satisfied since the Balance Date, and (ii)
current liabilities incurred since the Balance
Date in the ordinary course of Company's or
the relevant subsidiary's business consistent
with its past practices and which do not
exceed US$2 million in the aggregate.
40
• The Company and each of its operating
subsidiaries are operating in compliance in
all material respects with all applicable
environmental, health and safety laws,
except where the failure to do so would not
have a material adverse effect.
Escrow Subject to the terms of the Escrow Deed 40 (a copy
of which is attached to the ASIC Form 603 –
"Notice of initial substantial holder" that was given
to ASX by the Company on 30 August 2024), the
First Closing Shares are subject to a 12-month
period of voluntary escrow.
The Second Closing Shares will be subject to a
similar 12-month period of voluntary escrow with
the applicable restrictions set out in a separate
escrow deed (i.e. the Proposed Escrow Deed), the
form of which (save for the restrictions included in
the Escrow Deed as they relate to the below
mentioned buy-back) will be substantially the
same as the Escrow Deed.
Buy-Back The Second Closing must be completed within
270 days of the date of the Subscription
Agreement, failing which, KDG has the right, if the
Second Closing has not occurred other than as a
result of KDG's breach, to require the Company to
buy back the First Closing Shares in compliance
with all applicable laws (including the
Corporations Act – which will require the approval
of the Company's shareholders at a general
meeting).
Covenants The Company has given KDG various
undertakings including that it will:
• make an application for the Mining Rights to
be registered at the MPTRO by no later than
the date which is 3 months after the date of
the Subscription Agreement;
• obtain the authorisation of the Minister of
Mineral and Petroleum Resources in South
Africa for each of the Uitkomst Colliery, the
Vele Colliery, the Makhado Project and the
GSP Projects in relation to their late
commencement of mining operations by no
later than the date which is 6 months after the
date of the Subscription Agreement; and
40The restrictions in the Escrow Deed are subject to the requirements of the Listing Rules and all other
applicable rules and laws.
41
• (i) conduct its business (including the
business of each of its subsidiaries) in the
ordinary course consistent with past practice,
as a going concern and in compliance in all
material respects with all applicable laws and
all of its (and each of its subsidiaries')
contractual (and other) obligations, (ii) pay its
debts and taxes when due and payable, (iii)
maintain its (and its subsidiaries') assets in
condition comparable to their current
condition, (iv) use reasonable endeavours to
keep available the services of its current
officers and employees and (v) preserve its
(and its subsidiaries') relationship with
customers, suppliers and others having
business dealings with it (and its relevant
subsidiaries).
Unless otherwise permitted by KDG, the
Company has given KDG various undertakings
including that it will not:
• waive, release or assign any right or claim
which would reasonably be expected to
materially impair the value of the Company
or any of its subsidiaries or assets;
• sell, purchase, assign, lease, transfer,
pledge encumber or otherwise dispose of
any asset which would reasonable be
expected to materially impair the value of the
Company or of any of its subsidiaries or
assets;
• issue, sell, or grant any equity securities or
do anything to cause the Company to cease
to be admitted to the official list of ASX;
• incur any indebtedness with an aggregate
value of US$1 million or more; or
• enter into related party arrangement with an
aggregate value of US$1 million or more.
42
Schedule 2 - Summary of Proposed Escrow Deed
The principal terms of the Proposed Escrow Deed are set out below.
Date The Proposed Escrow Deed is expected to
become effective on the Second Closing Date.
Parties It is expected that Proposed Escrow Deed will be
between the Company, KDG and KCL.
Escrow Subject to various exceptions, it is expected that
the Proposed Escrow Deed will provide that
neither KDG or KCL will, amongst other things, be
able to sell, assign, transfer, encumber or
otherwise dispose of any of the Second Closing
Shares until the end of the Escrow Period. The
Proposed Escrow Deed will not, amongst other
things, prevent KDG or KCL as applicable from:
• receiving dividends or other distributions
declared and paid by the Company in relation
to the Second Closing Shares;
• casting any votes attaching to the Second
Closing Shares; or
• accepting a third-party takeover offer or
similar transaction in relation to the Second
Closing Shares.
Escrow Period The Escrow Period in respect of the Second
Closing Shares will begin on the Second Closing
Date and will end on the earlier of the date which
is 12 months after the Second Closing Date or the
date that is 270 days after the date of the
Subscription Agreement if the Second Closing has
not occur for any reason (other than a breach of
the Subscription Agreement by KDG) by that date.
Covenants The Company promises to KDG and KCL that it
will cause the release of the electronic holding
lock attaching to the Second Closing Shares:
• to the extent necessary to allow dealing that
is permitted by the Proposed Escrow Deed;
• as required by the Proposed Escrow Deed;
and
• at the conclusion of the Escrow Period.
KDG and KCL promise to the Company that they
will comply with the terms of the Proposed Escrow
Deed.
43
Schedule 3 - KDG Corporate Structure Diagram
44
Schedule 4 – Rights and liabilities attaching to Shares
The rights and liabilities attaching to the First Closing Shares and the Second Closing
Shares arise from a combination of the Company's constitution (Constitution), statute,
the ASX Listing Rules and the general law. A summary of the significant rights,
liabilities and obligations attaching to these Shares and a description of other material
provisions of the Constitution are set out below.
Powers generally
Except as otherwise required by the law, any other applicable law, the Listing Rules or
the Constitution, the Board:
• has the power to manage the business of the Company; and
• may exercise every right, power or capacity of the Company to the exclusion of
the Company in general meeting and the members.
Voting at a general meeting
At a general meeting of the Company, every Shareholder present in person or by
proxy, representative or attorney has one vote on a show of hands and, on a poll, one
vote for each fully paid Share held by the Shareholder.
Meetings of members
Each Shareholder is entitled to receive notice of, attend and vote at, meetings of the
Company and to receive all notices, accounts and other documents required to be sent
to Shareholders under the Constitution, the Corporations Act and the Listing Rules.
At least 28 days written notice of a meeting of members must be given individually to
each member (whether or not the member is entitled to vote at the meeting), each
Director and to the auditor.
Transfer of Shares
Subject to the Corporations Act, Shares may be transferred by a proper transfer
effected in accordance with the Listing Rules or the operating rules of ASX. The Board
may refuse to register a transfer of Shares in any of the permitted circumstances
described in the Listing Rules and/or the operating rules of ASX.
Issue of Shares
Subject to the Corporations Act and the Listing Rules, the Board may, on behalf of the
Company, issue, grant options over or otherwise dispose of unissued Shares to any
person on the terms, with the rights, and at the times that the Board decides.
Winding up
Subject to the terms of issue of Shares, the surplus assets of the Company remaining
after payment of its debts are divisible among the members in proportion to the number
of fully paid ordinary Shares held by them.
45
If the Company is wound up, the liquidator may, with the sanction of a special
resolution:
• divide the assets of the Company among the members in kind;
• for that purpose fix the value of assets and decide how the division is to be carried
out as between the members and different classes of members; and
• vest assets of the Company in trustees of any trusts for the benefit of the members
as the liquidator thinks appropriate.
Directors - appointment & rotation
The Board may decide the number of Directors (not counting alternates) but that
number must be at least:
• 3; or
• the number of Directors (not counting alternates) in office when the decision is
made,
(whichever is greater).
Directors are elected at general meetings of the Company. Retirement will occur on a
rotational basis so that no Director (excluding the managing Director) holds office
without re-election beyond the third annual general meeting following the meeting at
which the Director was last elected or 3 years, whichever is longer.
The Directors may also appoint a person qualified to be a Director to fill a casual
vacancy on the Board or in addition to the existing Directors, who will then hold office
until the next annual general meeting of the Company.
Majorities
A resolution of the Board must be passed by a majority of the votes cast by Directors
entitled to vote on the resolution. If an equal number of votes is cast for and against a
resolution:
• the chairman of the meeting has a second or casting vote unless only 2 Directors
are entitled to vote or the chairman of the meeting is not entitled to vote; and
• if the chairman does not have a second or casting vote the matter is decided in the
negative.
Remuneration
The Directors (other than an executive Director) are entitled to be paid, out of the funds
of the Company, an amount of remuneration which:
• does not:
o in any year exceed in aggregate of the amount last fixed by ordinary
resolution; or
46
o consist of a commission on or percentage of profits or operating revenue; and
• is allocated among them:
o on an equal basis having regard to the proportion of the relevant year for
which each Director held office; or
o as otherwise decided by the Board; and
• is provided in the manner the Board decides, which may include provision of non-
cash benefits.
If a Director, at the request of the Board and for the purposes of the Company, performs
extra services or makes special exertions (including going or living away from the
Director's usual residential address), the Company may pay that Director a fixed sum
set by the Board for doing so. Remuneration under this rule may be either in addition
to or in substitution for any remuneration to which that Director is otherwise entitled.
Indemnities
Subject to and so far as permitted by law:
• the Company must, to the extent the person is not otherwise indemnified, indemnify
every officer of the Company and its wholly owned subsidiaries and may indemnify
its auditor against a liability incurred as such an officer or auditor to a person (other
than the Company or a related body corporate) including a liability incurred as a
result of appointment or nomination by the Company or subsidiary as trustee or as
an officer of another corporation, unless the liability arises out of conduct involving
a lack of good faith; and
• the Company must make a payment (whether by way of advance, loan or
otherwise) in respect of legal costs incurred by an officer or employee or auditor in
defending an action for a liability incurred as such an officer, employee or auditor
or in resisting or responding to actions taken by a government agency or a
liquidator.
Insurance
Subject to the law, the Company may enter into, and pay premiums on, a contract of
insurance in respect of any person.
Further information
Further details of the rights and liabilities attaching to the Shares are set out in the
Constitution, a copy of which is available by emailing the Company Secretary at
bill.pavlovski@mcmining.co.za.
47
Annexures to the Explanatory Statement
A Proxy Form
B Independent Expert's Report
C ASX Release
MC Mining Limited
Independent Expert's Report
28 November 2024
Tel: +61 8 6382 4600 Level 9 Mia Yellagonga Tower 2
Fax: +61 8 6382 4601 5 Spring Street
www.bdo.com.au Perth, WA 6000
PO Box 700 West Perth WA 6872
Australia
FINANCIAL SERVICES GUIDE
Dated: 28 November 2024
This Financial Services Guide (FSG) helps you decide whether product advice in our report is provided by BDO Corporate
to use any of the financial services offered by BDO Corporate Finance and not by BDO or its related entities. BDO and its
Finance Australia Pty Ltd (BDO Corporate Finance, we, us, related entities provide services primarily in the areas of audit,
our). tax, consulting, and financial advisory services.
The FSG includes information about: We do not have any formal associations or relationships with
any entities that are issuers of financial products. However,
• Who we are and how we can be contacted you should note that we and BDO (and its related entities)
• The services we are authorised to provide under our might from time to time provide professional services to
Australian Financial Services Licence, Licence No: 247420 financial product issuers in the ordinary course of business.
• Remuneration that we and/or our staff and any associates
receive in connection with the financial services In May 2022, BDO Corporate Finance (WA) Pty Ltd was engaged
• Any relevant associations or relationships we have to prepare an independent expert's report for the proposed
• Our complaints handling procedures and how you may issue of up to 71,697,242 new shares in MC Mining to Senosi
access them. Group Investment Holdings Pty Ltd, which if approved, would
have increased SGIH's voting interest in MC Mining to 31.04%.
The fee received for our work was approximately $70,000
FINANCIAL SERVICES WE ARE LICENSED TO PROVIDE
(excluding GST).
We hold an Australian Financial Services Licence which
In January 2024, BDO Corporate Finance (WA) Pty Ltd was
authorises us to provide financial product advice to retail and
engaged to prepare an independent expert's report in relation
wholesale clients about securities and certain derivatives
to the off-market takeover offer from Goldway Capital
(limited to old law securities, options contracts, and warrants).
Investment Limited. The fee received for our work was
We can also arrange for customers to deal in securities, in
approximately $100,000 (excluding GST).
some circumstances. Whilst we are authorised to provide
personal and general advice to retail and wholesale clients, we BDO Corporate Finance Australia Pty Ltd has also provided
only provide general advice to retail clients. share-based payment valuation services to MC Mining over the
past two years for total fees of $9,500 (excluding GST).
Any general advice we provide is provided on our own behalf,
as a financial services licensee. COMPLAINTS RESOLUTION
GENERAL FINANCIAL PRODUCT ADVICE We are committed to meeting your needs and maintaining a
high level of client satisfaction. If you are unsatisfied with a
Our general advice is typically included in written reports. In
service we have provided you, we have avenues available to
those reports, we provide general financial product advice that
you for the investigation and resolution of any complaint you
is prepared without taking into account your personal
may have.
objectives, financial situation or needs. You should consider
the appropriateness of the general advice having regard to your To make a formal complaint, please use the Complaints Form.
own objectives, financial situation and needs before you act on For more on this, including the Complaints Form and contact
the advice. Where the advice relates to the acquisition or details, see the BDO Complaints Policy available on our
possible acquisition of a financial product, you should also website.
obtain a product disclosure statement relating to the product
and consider that statement before making any decision about BDO Corporate Finance is a member of AFCA (Member Number
whether to acquire the product. 11843). Where you are unsatisfied with the resolution reached
through our Internal Dispute Resolution process, you may
FEES, COMMISSIONS AND OTHER BENEFITS THAT WE MAY escalate this complaint to the Australian Financial Complaints
RECEIVE Authority (AFCA) using the below contact details:
We charge fees for providing reports. These fees are Australian Financial Complaints Authority
negotiated and agreed to with the person who engages us to GPO Box 3, Melbourne VIC 3001
provide the report. Fees will be agreed on an hourly basis or as Email: info@afca.org.au
a fixed amount depending on the terms of the agreement. In Phone: 1800 931 678
this instance, the Company has agreed to pay us $65,000 for Fax: (03) 9613 6399
preparing the Report. Interpreter service: 131 450
Website: http://www.afca.org.au
Except for the fees referred to above, neither BDO Corporate
Finance, nor any of its directors, employees, or related COMPENSATION ARRANGEMENTS
entities, receive any pecuniary benefit or other benefit,
directly or indirectly, for or in connection with the provision of BDO Corporate Finance and its related entities hold
general advice. Professional Indemnity insurance for the purpose of
compensating retail clients for loss or damage suffered because
All our employees receive a salary. Our employees are eligible of breaches of relevant obligations by BDO Corporate Finance
for bonuses based on overall company performance but not or its representatives under Chapter 7 of the Corporations Act
directly in connection with any engagement for the provision of 2001. These arrangements and the level of cover held by BDO
a report. Corporate Finance satisfy the requirements of section 912B of
the Corporations Act 2001.
REFERRALS
CONTACT DETAILS
We do not pay commissions or provide any other benefits to
any person for referring customers to us in connection with the You may provide us with instructions using the details set out
reports that we are licensed to provide. at the top of this FSG or by emailing - cf.ecp@bdo.com.au
ASSOCIATIONS AND RELATIONSHIPS
BDO Corporate Finance is a member firm of the BDO network in
Australia, a national association of separate entities (each of
which has appointed BDO (Australia) Limited ACN 050 110 275
to represent it in BDO International). The general financial
BDO Corporate Finance Australia Pty Ltd ABN 70 050 038 170 AFS Licence No. 247420 is a member of a national association of independent entities which are all members of
BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Corporate Finance (East Coast) Pty Ltd and BDO Australia Ltd are members of BDO
International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved
under Professional Standards Legislation.
Table of contents
1. Introduction 1
2. Summary and opinion 2
3. Scope of the Report 4
4. Outline of the Proposed Transaction 6
5. Profile of MC Mining 7
6. Profile of KDG 16
7. Economic analysis 18
8. Industry analysis 20
9. Valuation approach adopted 24
10. Valuation of MC Mining prior to the Proposed Transaction 28
11. Valuation of MC Mining following the Proposed Transaction 42
12. Is the Proposed Transaction fair? 47
13. Is the Proposed Transaction reasonable? 48
14. Sources of information 52
15. Independence 52
16. Qualifications 53
17. Disclaimers and consents 53
Appendix 1 – Glossary and copyright notice
Appendix 2 – Valuation Methodologies
Appendix 3 - Independent Specialist Report prepared by SRK
© 2024 BDO Corporate Finance Australia Pty Ltd
Tel: +61 8 6382 4600 Level 9 Mia Yellagonga Tower 2
Fax: +61 8 6382 4601 5 Spring Street
www.bdo.com.au Perth, WA 6000
PO Box 700 West Perth WA 6872
Australia
28 November 2024
The Independent Directors
MC Mining Limited
Suite 324, Level 3, 96 Elizabeth Street
Melbourne VIC 3000
Dear Independent Directors
INDEPENDENT EXPERT'S REPORT
1. Introduction
On 28 August 2024, MC Mining Limited ('MC Mining' or 'the Company') announced that it had entered into
a share subscription agreement ('SSA') with Kinetic Development Group Limited ('KDG'), whereby KDG,
through its wholly-owned subsidiary Kinetic Crest Limited ('KCL'), will subscribe for a total of 51% of the
Company's issued capital in two separate tranches, for total cash consideration of US$90 million. KDG is
an integrated coal mining group listed on the Hong Kong Stock Exchange ('HKSE').
Under the terms of the SSA, the first tranche involves KDG subscribing for an initial 13.04% of the
Company's issued capital, for cash consideration of US$12,970,588, utilising the Company's placement
capacity under Australian Securities Exchange ('ASX') Listing Rule 7.1 ('First Subscription'). On 30 August
2024, the Company announced that the First Subscription had completed, following the issue of
62,102,002 shares to KCL.
The second tranche involves KDG subscribing for an additional 38.17% of the Company's issued capital, for
cash consideration of US$77,029,412 ('Second Subscription') ('Proposed Transaction'). Following the
Proposed Transaction, KDG's interest in MC Mining will increase from 13.04% to 51%.
As the Second Subscription will result in KDG's voting power in MC Mining increasing from below 20% to
more than 20%, approval from MC Mining shareholders not associated with KDG ('Shareholders'), is
required under item 7 of section 611 ('item 7 s611') of the Corporations Act 2001 (Cth) ('Corporations
Act' or 'the Act') in order for the Proposed Transaction to proceed.
The independent directors of MC Mining have requested that BDO Corporate Finance Australia Pty Ltd
('BDO') prepare an independent expert's report ('our Report') to express an opinion as to whether the
Proposed Transaction is fair and reasonable to Shareholders.
Currencies in this report are quoted in Australian dollars ('A$' or '$'), United States Dollars ('US$' or
'USD') and South African Rand ('ZAR').
BDO Corporate Finance Australia Pty Ltd ABN 70 050 038 170 AFS Licence No 247420 is a member of a national association of independent entities which
are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Corporate Finance Australia Pty Ltd and
BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the internation al BDO network of
independent member firms. Liability limited by a scheme approved under Professional Standards Legislation.
2. Summary and opinion
2.1 Requirement for the report
The independent directors of MC Mining have requested that BDO prepare an independent expert's report
('our Report') to express an opinion as to whether the Proposed Transaction is fair and reasonable to
Shareholders.
Our Report is prepared pursuant to item 7 s611 of the Corporations Act, and is to be included in the Notice
of Meeting for MC Mining to assist Shareholders in their decision whether to approve the Proposed
Transaction.
2.2 Approach
Our Report has been prepared having regard to Australian Securities and Investments Commission ('ASIC')
Regulatory Guide 74 'Acquisitions approved by members' ('RG 74'), Regulatory Guide 111 'Content of
expert reports' ('RG 111'), Regulatory Guide 112 'Independence of experts' ('RG 112'), Regulatory Guide
170 'Prospective financial information' ('RG 170') and Information Sheet 214: Mining and resources:
Forward-looking statements ('IS 214').
In arriving at our opinion, we have assessed the terms of the Proposed Transaction as outlined in the body
of this report. We have considered:
• How the value of an MC Mining share prior to the Proposed Transaction (on a controlling interest basis)
compares to the value of an MC Mining share following the Proposed Transaction (on a minority
interest basis).
• The likelihood of an alternative offer being made to MC Mining.
• Other factors which we consider to be relevant to Shareholders in their assessment of the Proposed
Transaction.
• The position of Shareholders should the Proposed Transaction not proceed.
2.3 Opinion
We have considered the terms of the Proposed Transaction as outlined in the body of this Report and have
concluded that, in the absence of an alternative proposal, the Proposed Transaction is not fair but
reasonable to Shareholders.
2.4 Fairness
In Section 12, we compared the value of an MC Mining share prior to the Proposed Transaction (on a
controlling interest basis), to the value of an MC Mining share following the Proposed Transaction (on a
minority interest basis), as detailed below.
Ref Low Preferred High
$ $ $
Value of an MC Mining share prior to the Proposed Transaction
10 0.168 0.253 0.337
(controlling interest basis)
Value of an MC Mining share following the Proposed Transaction
11 0.171 0.214 0.261
(minority interest basis)
Source: BDO analysis
2
The above valuation ranges are graphically presented below:
Valuation Summary
Value of an MC Mining share prior to the Proposed
Transaction (controlling interest basis)
Value of an MC Mining share following the
Proposed Transaction (minority interest basis)
- 0.100 0.200 0.300 0.400
Value (A$)
The above pricing indicates that the Proposed Transaction is not fair for Shareholders. We consider the
Proposed Transaction to be not fair because the value of an MC Mining share following the Proposed
Transaction (on a minority interest basis) is lower than the value of an MC Mining share prior to the
Proposed Transaction (on a controlling interest basis) under the preferred and high end of our valuation
range.
2.5 Reasonableness
We have considered the analysis in Section 13 of this Report, in terms of the following:
• Advantages and disadvantages of the Proposed Transaction.
• Other considerations, including the position of Shareholders if the Proposed Transaction does not
proceed and the consequences of not approving the Transaction.
In our opinion, the position of Shareholders if the Proposed Transaction is approved is more advantageous
than the position if the Proposed Transaction is not approved. Accordingly, in the absence of any other
relevant information and/or an alternate proposal we consider that the Proposed Transaction is
reasonable for Shareholders.
The respective advantages and disadvantages considered are summarised below:
ADVANTAGES AND DISADVANTAGES
Section Advantages Section Disadvantages
13.1.1 Funds raised under the Second 13.2.1 Shareholders' interests in the Company will be
Subscription will allow the Company to diluted and Shareholders will have a reduced
advance its projects level of control over the Company
13.1.2 The Company will be able to leverage 13.2.2 Future takeover offers may be deterred
KDG's experience and expertise to
optimise the development of its projects
13.1.3 The Proposed Transaction will allow the
Company to continue as a going concern
and meet its working capital
requirements
3
Other key matters we have considered include:
Section Description
13.3 Alternative proposal
13.4 Practical level of control
13.5 Consequences of not approving the Proposed Transaction
13.6 Other considerations
3. Scope of the Report
3.1 Purpose of the Report
Section 606 of the Corporations Act ('Section 606') expressly prohibits the acquisition of further shares by
a party if the party acquiring the interest does so through a transaction and because of the transaction,
that party (or someone else's voting power in the company), increases from 20% or below to more than
20%.
Section 611 of the Corporations Act ('Section 611') provides exceptions to the Section 606 prohibition and
item 7 s611 permits such an acquisition if the shareholders of MC Mining have agreed to the acquisition.
This agreement must be by resolution passed at a general meeting at which no votes are cast in favour of
the resolution by the party to the acquisition or any party who is associated with the acquiring party.
The Company is seeking shareholder approval for the Proposed Transaction, which will result in KDG's
interest in the Company increasing from 13.04% to 51%.
Item 7 s611 states that shareholders of the company must be given all information that is material to the
decision on how to vote at the meeting.
RG 74 states that to satisfy the obligation to provide all material information on how to vote on the item 7
resolution, MC Mining can commission an Independent Expert's Report.
The independent directors of MC Mining have commissioned this Independent Expert's Report to satisfy this
obligation.
3.2 Regulatory guidance
Neither the ASX Listing Rules nor the Corporations Act defines the meaning of 'fair and reasonable'. In
determining whether the Proposed Transaction is fair and reasonable, we have had regard to the views
expressed by ASIC in RG 111. This regulatory guide provides guidance as to what matters an independent
expert should consider to assist security holders to make informed decisions about transactions.
This regulatory guide suggests that where the transaction is a control transaction, the expert should focus
on the substance of the control transaction rather than the legal mechanism used to effect it. RG 111
suggests that where a transaction is a control transaction, it should be analysed on a basis consistent with
a takeover bid.
In our opinion, the Proposed Transaction is a control transaction as defined by RG 111 and we have
therefore assessed the Proposed Transaction as a control transaction to consider whether, in our opinion,
it is fair and reasonable to Shareholders.
4
3.3 Adopted basis of evaluation
RG 111 states that a transaction is fair if the value of the offer price or consideration is equal to or
greater than the value of the securities subject of the offer. This comparison should be made assuming a
knowledgeable and willing, but not anxious, buyer and a knowledgeable and willing, but not anxious,
seller acting at arm's length. When considering the value of the securities subject of the offer in a control
transaction, it is inappropriate for the expert to apply a discount on the basis that the shares being
acquired represent a minority or portfolio interest, as such the expert should consider this value inclusive
of a control premium. Further to this, RG 111 states that a transaction is reasonable if it is fair. It might
also be reasonable if despite being 'not fair' the expert believes that there are sufficient reasons for
security holders to accept the offer in the absence of any higher bid.
Having regard to the above, BDO has completed this comparison in two parts:
• A comparison between the value of an MC Mining share prior to the Proposed Transaction (on a
controlling interest basis), and the value of an MC Mining share following the Proposed Transaction
(on a minority interest basis) (fairness – see Section 12 'Is the Proposed Transaction fair?').
• An investigation into other significant factors to which Shareholders might give consideration,
prior to approving the resolution, after reference to the value derived above (reasonableness – see
Section 13 'Is the Proposed Transaction reasonable?').
This assignment is a Valuation Engagement as defined by Accounting Professional & Ethical Standards
Board professional standard APES 225 'Valuation Services' ('APES 225').
A Valuation Engagement is defined by APES 225 as follows:
'an Engagement or Assignment to perform a Valuation and provide a Valuation Report where the Member
is free to employ the Valuation Approaches, Valuation Methods, and Valuation Procedures that a
reasonable and informed third party would perform taking into consideration all the specific facts and
circumstances of the Engagement or Assignment available to the Member at that time.'
This Valuation Engagement has been undertaken in accordance with the requirements set out in APES 225.
5
4. Outline of the Proposed Transaction
On 28 August 2024, MC Mining announced that it had entered into a SSA with KDG, whereby KDG, through
its wholly-owned subsidiary KCL, will subscribe for a total of 51% of the Company's issued capital in two
separate tranches, for total cash consideration of US$90 million. KDG is an integrated coal mining group
listed on the HKSE.
The First Subscription involves KDG subscribing for an initial 13.04 % of the Company's issued capital, for
cash consideration of US$12,970,588, utilising the Company's placement capacity under ASX Listing Rule
7.1. On 30 August 2024, the Company announced that the First Subscription had completed, following the
issue of 62,102,002 shares to KCL. In accordance with the SSA, following the completion of the First
Subscription, Mr. Huang Muhui was appointed to the Board of MC Mining, as nominated by KDG.
The Second Subscription involves KDG subscribing for an additional 37.96% of the Company's issued
capital, for cash consideration of US$77,029,412. Following the Proposed Transaction, KDG's interest in
MC Mining will increase from 13.04% to 51%. In addition, KDG is entitled (and is expected) to appoint
additional directors to the board of the Company, such that its nominee directors constitute a majority of
the Company's directors.
Under the SSA, if the Second Subscription is not completed within 270 days of the SSA (27 May 2025),
other than as a result of KDG's breach, then KDG can request the Company to buy-back the shares issued
under the First Subscription.
The funds raised under the SSA will be subject to a use of proceeds plan, which is summarised below:
• Maintenance, security and compliance costs related to all of the Company's projects including the
Makhado Project, Vele Colliery and GSP.
• Commissioning of a coal handling and preparation plant at the Makhado Project.
• Establishment of power and water infrastructure and civil works at the Makhado Project.
• Partial repayment of certain outstanding loans.
As the Second Subscription will result in KDG's voting power in MC Mining increasing from below 20% to
more than 20%, approval from Shareholders is required under item 7 s611 of the Corporations Act in order
for the Proposed Transaction to proceed.
The table below sets out the impact on Shareholders' interests in the Company following the completion
of the Proposed Transaction.
Existing
Description KDG Total
Shareholders
Number of shares on issue prior to the Proposed Transaction 414,013,349 62,102,002 476,115,351
% holdings prior to the Proposed Transaction 86.96% 13.04% 100.00%
Number of shares issued to KDG under the Second Subscription - 368,809,851 368,809,851
Number of shares on issue following the Proposed Transaction 414,013,349 430,911,853 844,925,202
% holdings following the Proposed Transaction 49.00% 51.00% 100.00%
Source: Notice of Meeting
Based on the above, following the Proposed Transaction, Shareholders' interests in the Company will be
diluted from 86.96% to 49.00%, with KDG's interest in the Company increasing from 13.04% to 51.00%.
Further details of the Proposed Transaction are set out in the Notice of Meeting.
6
5. Profile of MC Mining
5.1 History
MC Mining is a coal exploration, development and mining company, with metallurgical and thermal coal
assets located primarily in the Limpopo province of South Africa. The Company's flagship asset is its 67.3%
owned Makhado Project, located approximately 36 kilometres ('km') north of Louis Trichardt, and 80 km
southeast of the Company's 100% owned Vele Colliery ('Vele'). The Company also holds an 84% interest in
the Uitkomst Colliery ('Uitkomst'), and a 74% interest in the Greater Soutpansberg Project ('GSP').
The current directors of MC Mining are:
• Ontiretse Mathews Senosi – Non-Executive Interim Chairman
• Yi (Christine) He – Interim Managing Director and Chief Executive Officer
• Zhen (Brian) He – Non-Executive Director
• An Chee Sin – Non-Executive Director
• Muhui (Chris) Huang – Non-Executive Director
• Bill Pavlovski – Independent Non-Executive Director
• Dr Steele West – Independent Non-Executive Director.
The Company's primary listing is on the ASX, with a secondary listing on the Johannesburg Stock Exchange
('JSE'). The Company's head office is located in Mount Pleasant, Western Australia ('WA').
Over the period from 2 February 2024 to 22 April 2024, the Company was the subject of an off-market
takeover conducted by Goldway Capital Investment Ltd ('Goldway'), a consortium established by Senosi
Group Investment Holding Pty Ltd ('Senosi'), Dendocept Pty Ltd ('Dendocept') and a group of MC Mining
shareholders and associates ('Consortium') ('Goldway Takeover'). At the end of the offer period, the
Consortium held approximately 93.05% of the issued capital of the Company.
Muhui (Chris) Huang is a representative of KDG, having been appointed to the Board of MC Mining following
completion of the First Subscription, in accordance with the SSA. Following completion of the First
Subscription, MC Mining established an Independent Board Committee comprising directors not associated
with KDG. The Independent Board Committee has appointed us to prepare this IER for inclusion in the
Notice of Meeting.
5.2 Projects
Makhado Project (67.3% interest)
The Makhado Project is an undeveloped hard coking and thermal coal project located in the Soutpansberg
coalfield in the Limpopo province of South Africa. The Makhado Project spans an area of over 60 square
kilometres ('km2') across five farms, with MC Mining owning the relevant four properties that comprise
the planned mining area.
MC Mining initially acquired the Makhado Project in August 2006, following the execution of a binding
heads of agreement to merge the coal interests of MC Mining and Motjoli Resources Pty Ltd, resulting in
the Company acquiring a 50% interest in Makhado. The remaining 50% was acquired in December 2006
through the acquisition of Baobab Mining and Exploration Pty Ltd ('Baobab'), for consideration of £2.5
million in cash.
In June 2013, MC Mining completed a definitive feasibility study ('DFS'), which defined a 16 year life-of-
mine ('LOM') on the production of 12.6 million tonnes per annum ('Mtpa') of run-of-mine ('ROM') coal,
7
which was estimated to produce 2.3 Mtpa of hard coking coal and 3.2 Mtpa of thermal coal. The resource
was to be mined on an opencast basis, with the potential for further expansion underground.
The Company's initial development plan was separated in two phases, with phase 1 entailing opencast
mining in the West Pit, with processing at the existing Vele Colliery. Dependent on future funding and
favourable market conditions, phase 2 would entail the development of the East and Central pits, and the
construction of a new processing plant and associated infrastructure.
In 2015, MC Mining agreed to sell 20% of the Makhado Project to the Makhado Colliery Community
Development Trust, for the purposes of ensuring that project operations would benefit local and
surrounding communities. Further, the Company agreed to sell a 6.0% interest to a black industrialist,
whilst a 6.7% interest was acquired by the Industrial Development Corporation of South Africa Ltd ('IDC'),
under the terms of MC Mining's existing loan facility. As a result, the Company retains a 67.3% interest in
the Makhado Project.
In November 2018, MC Mining announced that it had secured the surface rights over the Lukin and Salaita
properties at the Makhado Project for consideration of ZAR 70 million, completing the suite of surface
rights for the fully permitted Makhado Project. In addition, in April 2019, MC Mining executed an offtake
agreement with ArcelorMittal South Africa Ltd ('AMSA'), resulting in the purchase of up to 0.45 Mtpa of
hard coking coal from the Makhado Project, with prices to be linked to a published international index.
In April 2022, MC Mining completed a bankable feasibility study ('BFS'), which highlighted 25.6 Mt of
saleable coal to be produced over a 22-year LOM under the proposed open pit mining and coal processing
methods. In August 2022, the Company updated the Makhado BFS to include the pre-feasibility study for
two alternative development scenarios. This update led to a reassessment of the Makhado Project
development strategy, resulting in a decision to no longer develop the colliery in two phases. Rather than
trucking crushed and screened coal to the Vele Colliery for processing, the new development strategy
included the construction of a bespoke coal handling and processing plant ('CHPP') at the Makhado
Project.
During the December quarter of 2022, the Company completed an optimisation study on the Makhado
CHPP, which resulted in the increase of the annual ROM feed capacity from 3.2 Mtpa to 4.0 Mtpa.
Subsequently, the Company appointed Erudite (Pty) Ltd ('Erudite') to complete the detailed designs for a
full process design for the Makhado CHPP, which completed during the first quarter of 2023. The detailed
execution plan incorporated the revised Makhado mine plan, and Erudite utilised the results of the CHPP
optimisation study in their CHPP and infrastructure design work.
In April 2023, the Company completed the five-year Makhado implementation plan ('Implementation
Plan'). The Implementation Plan improved the confidence levels for the first five years of the Makhado
BFS and previous feasibility studies, increasing the estimated accuracy from +70% to approximately +90%.
The Implementation Plan included a detailed execution plan for the construction of the East Pit and
related infrastructure, along with a detailed mine plan for the first five years of operations.
Subsequently, in June 2023, the Company announced the results of an updated LOM plan and Coal Reserve
estimate for the Makhado Project. Building upon the Implementation Plan, the updated LOM plan
incorporated the exploitation of all mineable portions of the East, Central and West Pits' coal deposits
using surface mining methods. The improved production metrics included a 27% increase in the LOM from
22 to 28 years, a 25% increase in the targeted rate of mining from 3.2 Mtpa to 4.0 Mtpa, a 100% increase in
CHPP capacity from 2.0 Mtpa to 4.0 Mtpa, and a 60% increase of total saleable coal products from 26 Mt to
41 Mt over the LOM.
8
Over the December 2023 quarter, the Company continued to progress critical early works, specifically the
construction of the main access road and earthworks for a bridge to cross the Mutamba river. In addition,
the Company advanced the detailed design of the CHPP and related infrastructure.
As a result of the Goldway Takeover and now the Proposed Transaction, limited activities have been
undertaken at the Makhado Project since the December 2023 quarter.
Based on discussions with management of MC Mining, capital expenditure for the development of the
Makhado Project recently commenced in October 2024, following the receipt of funds under the First
Subscription. Further, management has advised that the time from construction to first production is
expected to be 12 months.
Uitkomst Colliery (84% interest)
Uitkomst is an underground coal mine located in the Utrecht coalfields in the KwaZulu-Natal province of
South Africa. Uitkomst comprises established infrastructure, including a processing plant, and has pending
applications for the extension of its water license, which is currently being processed by the relevant
regulatory authority.
MC Mining acquired Uitkomst in April 2017 through the execution of a sale of shares and claims agreement
with Pan African Resources Plc, to acquire 100% of the shares in and claims against Pan African Resources
Coal Holdings Pty Ltd, which held a 91% interest in Uitkomst, for consideration of ZAR 275 million.
Uitkomst produces various products, including small zero-to-10 millimetre thermal or metallurgical coal,
pea sized product for the domestic energy generation market. In addition, the Company also sells a high
ash middlings product.
In the September quarter of 2018, the Company completed the sale of a 21% interest in Uitkomst on a
vendor financed basis to Black Economic Empowerment ('BEE') shareholders in order to meet the
requirements of the draft South African Mining Charter 3, reducing its ownership interest to 70%.
In July 2022, the Company entered a coal sales & marketing agreement with Overlooked Pty Ltd
('Overlooked'), facilitating the export of at least 20,000 t of API4 (6,000 k/cal) coal produced by
Uitkomst on a monthly basis, providing access to higher-priced internal thermal coal markets. In December
2022, MC Mining announced a six-month extension of the marketing agreement, which was originally due
to expire on 31 December 2022.
In the December quarter of 2022, MC Mining acquired a 14% interest in Uitkomst, increasing its interest to
84%, with the remaining stake held by two broad-based BEE trusts, comprising host communities and
employees, respectively.
During the year ended 30 June 2023, Uitkomst received approval from the Department of Mineral
Resources & Energy ('DMRE') for mining rights over the balance of its LOM, which were subsequently
legally executed in January 2024. In June 2023, MC Mining implemented a turnaround strategy titled
"Operation Phenduka", which allows for increased time spent underground per shift, leading to an
increase in ROM coal production and reduction in unit costs.
During the October 2023 quarter, due to the implementation of "Operation Phenduka", Uitkomst achieved
a 10% improvement in ROM coal production compared to the October 2022 quarter, despite the impact of
daily electricity blackouts. Due to lower API4 prices, the Company sold high-grade pea and duff sized coal
to domestic customers rather than export sales.
During the December 2023 quarter, subdued coal prices coupled with poor performance of the state utility
responsible for rail and port logistics resulted in coal being sold domestically rather than exported,
leading to a 43% decline in revenue per tonne from the previous quarter.
9
During the March 2024 quarter the Company signed an offtake term sheet with Paladar Resources
Proprietary Limited ('Paladar') following a reassessment of the Uitkomst marketing strategy. Under the
term sheet, Paladar had an exclusive right to purchase coal produced at Uitkomst over a three-month trial
period, at fixed sales prices with adjustments linked to the API4 price. During the trial period, all high-
grade coal inventories at Uitkomst were sold by the end of the quarter. The Company did not extend the
offtake period with Paladar, which concluded on 31 July 2024.
Historical coal production at Uitkomst is outlined below:
Production tonnages FY24 FY23 FY22 FY21 FY20 FY19
Uitkomst ROM (t) 498,589 444,984 470,597 490,100 431,354 472,647
Source: MC Mining's Annual Reports for the years ended 30 June 2024, 30 June 2022 and 30 June 2020
Vele Colliery (100% interest)
Vele is situated in the Tuli coalfield, in the Limpopo province of South Africa. Historically, Vele produced
thermal coal, however, it was placed in care and maintenance in August 2013, following a review of Vele's
cost structures and processing plant capabilities.
However, in December 2022, the Vele Colliery coal processing plant ('CPP') was recommissioned following
the execution of an exclusive, five-year contract mining agreement ('HOS Mining Agreement') with
Hlalethembeni Outsourcing Services (Pty) Ltd ('HOS'). HOS was tasked with recommissioning, upgrading
and operating the CPP, as well as outsourcing mining and processing operations. Under the HOS Mining
Agreement, HOS is responsible for all mining and processing costs, while the Company remains responsible
for regulatory compliance, rehabilitation guarantees, relationships with authorities and communities, as
well as the supply of electricity and water for the colliery.
This arrangement resulted in the production of 96,673t thermal coal in the second half of the financial
year ended 30 June 2023. However, due to operating challenges at Vele, HOS temporarily downscaled
operations in December 2023, under the terms of the HOS Mining Agreement, as it progressed the
development of a production optimisation strategy at the colliery. Operations at Vele currently remain
suspended. Project evaluation is expected to be completed in early FY2025.
Greater Soutpansberg Project (GSP) (74% interest)
Contiguous to the Makhado Project, the GSP is situated to the north of the Soutpansberg mountains. The
GSP comprises three early-stage hard coking, semi-soft coking and thermal coal exploration projects,
being the Mopane, Generaal and Chapudi projects, all expected to be mined on an opencast basis.
The GSP is jointly owned, with MC Mining holding a 74% interest, and its BEE partner, Rothe Investments
(Pty) Ltd, holding the remaining 26% stake.
In 2013, the Company applied for mining rights for the GSP locations. The Chapudi mining rights were
granted in December 2018, the Generaal mining rights were granted in November 2019, and the Mopane
mining rights were granted in February 2021. However, the granting of the mining rights was subsequently
appealed. During the December 2023 quarter, the Company executed the mining rights for the Mopane
and Generaal project areas, with the mining rights for the Chapudi project area executed in the June 2024
quarter. The Company expects to commence various studies required for the water and environmental
regulatory approvals following the construction of the Makhado Project.
Further information on the Makhado Project, Uitkomst, Vele and the GSP can be found in the independent
specialist report prepared by SRK Consulting (Australasia) Pty Ltd ('SRK') ('Independent Specialist
Report') in Appendix 3 of our Report.
10
5.3 Recent corporate events
Rights Issue
On 7 November 2022, the Company announced the conclusion of its fully underwritten renounceable rights
issue ('Rights Issue'). The Rights Issue involved the issue of 200,026,728 new fully paid ordinary shares at
an issue price of $0.20 per share, raising gross proceeds of $40 million. The new shares were issued to
investors in South Africa, Australia, and New Zealand. The net proceeds from the Rights Issue were used
by the Company to settle debt, provide funding to progress the development of the Makhado Project,
contribute the necessary capital for the recommissioning of the Vele Colliery and for general working
capital purposes.
Goldway Takeover
Over the period from 16 February 2024 to 22 April 2024, the Company was the subject of an off-market
takeover conducted by Goldway, a consortium established by Senosi, Dendocept and a group of MC Mining
shareholders and associates. At the end of the offer period, the Consortium held approximately 93.05% of
the issued capital of the Company.
In relation to the Goldway Takeover, pursuant to Rule 41 of the London Stock Exchange's ('LSE')
Alternative Investment Market ('AIM') Rules for Companies, the Company's ordinary shares were cancelled
from trading on the AIM, effective as of 19 June 2024.
On 22 May 2024, Goldway announced that it would commence a buy-out of the remaining ordinary shares
in MC Mining that it did not own in accordance with section 662B(1)(d) of the Corporations Act, on the
same terms as the Goldway Takeover.
Dendocept Facility
On 28 June 2024, the Company announced that it had entered into a ZAR 20 million (US$1.1 million)
unsecured loan facility agreement with Dendocept for working capital purposes ('Dendocept Facility').
Under the Dendocept Facility, MC Mining must repay the loan within 12 months from the first drawdown,
with interest payable monthly and calculated based on the Investec (South Africa) Prime interest rate plus
a margin of 3%. As at 30 June 2024, ZAR 4 million (US$0.22 million) had been drawn down under the
facility.
Eagle Canyon Facility
On 24 July 2024, the Company announced that it had entered into a A$1.0 million (US$0.7 million)
unsecured loan facility agreement with Eagle Canyon International Group Holding Limited ('Eagle
Canyon') ('Eagle Canyon Facility'), an entity controlled by Christine He, the Company's interim Managing
Director and Chief Executive Officer. The Eagle Canyon Facility is available until 30 June 2025, with
interest payable monthly and calculated based on the Reserve Bank of Australia's ('RBA') rate for medium
business, plus a margin of 3%.
11
5.4 Historical Consolidated Statements of Financial Position
Audited as at Audited as at Audited as at
Historical Consolidated Statements of 30-Jun-24 30-Jun-23 30-Jun-22
Financial Position
US$'000 US$'000 US$'000
CURRENT ASSETS
Inventories 643 4,088 4,445
Trade and other receivables 1,329 4,458 1,093
Cash and cash equivalents 234 7,499 2,993
TOTAL CURRENT ASSETS 2,206 16,045 8,531
NON-CURRENT ASSETS
Property, plant and equipment 33,745 34,621 23,475
Right-of-use assets 1,965 2,322 3,132
Development assets - - 17,739
Exploration and evaluation assets 70,545 65,682 67,839
Intangible assets 488 503 -
Other financial assets 6,667 5,239 4,599
Restricted cash 23 23 100
TOTAL NON-CURRENT ASSETS 113,433 108,390 116,884
TOTAL ASSETS 115,639 124,435 125,415
CURRENT LIABILITIES
Provisions 461 395 203
Trade and other payables 6,357 7,881 9,307
Current tax liabilities 257 276 362
Lease liabilities 733 573 885
Borrowings 17,509 16,296 21,656
Bank overdraft 1,291 - 1,529
TOTAL CURRENT LIABILITIES 26,608 25,421 33,942
NON-CURRENT LIABILITIES
Provisions 8,700 6,035 8,048
Deferred tax liability 3,349 3,648 4,232
Lease liabilities 1,539 1,932 2,057
Borrowings 36 48 -
TOTAL NON-CURRENT LIABILITIES 13,624 11,663 14,337
TOTAL LIABILITIES 40,232 37,084 48,279
NET ASSETS 75,407 87,351 77,136
EQUITY
Issued capital 1,071,127 1,069,871 1,045,395
Accumulated losses (944,995) (930,676) (926,245)
Reserves (49,489) (50,937) (41,190)
Non-controlling interests (1,236) (907) (824)
TOTAL EQUITY 75,407 87,351 77,136
Source: MC Mining's audited financial statements for the years ended 30 June 2024, 30 June 2023 and 30 June 2022
We note that the Company's auditor highlighted a material uncertainty that may cast significant doubt on
the Company's ability to continue as a going concern in its audit reports for the years ended 30 June 2024,
30 June 2023 and 30 June 2022. The Company's auditor outlined that the ability to continue as a going
12
concern is dependent on securing equity funding, positive cash flows from current operations and the
successful development of future projects.
Commentary on Historical Consolidated Statements of Financial Position
• The increase in cash and cash equivalents from 30 June 2022 to 30 June 2023 was primarily the
result of receipts from customers from coal sales of US$48.16 million, as well as net proceeds of
US$21.10 million from the Rights Issue. This was partially offset by payments to suppliers and
employees of US$51.49 million, and investment in exploration assets of US$6.16 million. The
decrease in cash and cash equivalents from 30 June 2023 to 30 June 2024 was primarily the result
of payments to suppliers of US$36.49 million, and investment in exploration asset of US$3.50
million, which was partially offset by receipts from customers from coal sales of US$33.54 million.
• Inventories decreased from US$4.09 million as at 30 June 2023 to US$0.64 million as at 30 June
2024. The decrease was primarily the result of the Company's offtake arrangement with Paladar,
whereby all high-grade coal inventories at Uitkomst were sold by the end of the June 2024
quarter.
• Other financial assets of US$6.67 million as at 30 June 2024 primarily comprised rehabilitation
guarantees of US$6.08 million and deposits of US$0.59 million. The rehabilitation guarantees are
invested in funds for the purpose of meeting the Company's rehabilitation obligations, Eskom
guarantees and infrastructure guarantees. Eskom is the electricity provider at the Vele and
Uitkomst Collieries.
• As at 30 June 2024, borrowings of US$17.26 million comprised the loan facility with IDC, the
Dendocept Loan Facility, and an ABSA instalment sale agreement.
• Non-current provisions of US$8.70 million as at 30 June 2024 related to a rehabilitation provision
of US$4.24 million, a water use license provision of US$2.25 million, and a biodiversity offset
provision of US$2.21 million. The Biodiversity Offset Agreement ('BOA') was signed by the
Department of Environmental Affairs ('DEA'), South African National Parks Board and the Company
to the value of US$3.4 million over a 25 year period. The recognition of a water use license
provision during the year ended 30 June 2024 related to the reclassification of expenditure
previously accrued for by the Company, of which the Company expects to incur within 13 months.
13
5.5 Historical Consolidated Statements of Profit or Loss and Other
Comprehensive Income
Audited for the Audited for the Audited for the
Historical Consolidated Statement of Profit or Loss and year ended year ended year ended
Other Comprehensive Income 30-Jun-24 30-Jun-23 30-Jun-22
US$'000 US$'000 US$'000
Continuing operations
Revenue 36,665 44,799 23,511
Cost of sales (36,542) (41,209) (20,999)
Gross profit 123 3,590 2,512
Other operating income 3,641 1,568 293
Reversal/(Expected) credit losses (1,525) 284 (331)
Administrative expenses (15,373) (8,918) (6,840)
Impairment expense (936) - (14,851)
Other operating gains /(losses) 221 752 63
Operating (loss) (13,849) (2,724) (19,154)
Finance income 321 393 147
Finance costs (1,538) (1,677) (1,712)
(Loss) before income tax (15,066) (4,008) (20,719)
Income tax expense 418 (390) (116)
(Loss) for the year from continuing operations (14,648) (4,398) (20,835)
Gains/(losses) on exchange differences on translation 1,725 (10,476) (12,346)
Total comprehensive (loss) for the period, net of tax (12,923) (14,874) (33,181)
Source: MC Mining's audited financial statements for the years ended 30 June 2024, 30 June 2023 and 30 June 2022
Commentary on Historical Consolidated Statements of Profit or Loss and Other
Comprehensive Income
• Revenue increased from US$23.51 million for the year ended 30 June 2022 to US$44.80 million for
the year ended 30 June 2023, as a result of the coal sales generated from Uitkomst and the
recommissioning of the Vele Colliery. Revenue decreased from US$44.80 million for the year
ended 30 June 2023 to US$36.67 million for the year ended 30 June 2024, as a result of low API4
thermal coal prices, combined with high logistics costs which resulted in the Company selling coal
from Uitkomst on the domestic market.
• Expected credit losses relate to a provisional credit loss allowance in relation to trade receivables.
This allowance is calculated based on historical credit loss experience, as well as consideration of
debtor-specific risk factors and general economic conditions.
• During the year ended 30 June 2022, the Company recorded an impairment expense of US$14.9
million. The impairment related to identified areas of the Vele Colliery and the GSP as a result of
the uncertainty surrounding their development in the foreseeable future. During the year ended
30 June 2024, the Company recorded a further impairment expense of US$0.94 million relating to
the Vele Colliery, as a result of operations being suspended from 31 December 2023 to the end of
the financial year. The impairment expense was allocated to mining property, plant and
equipment (US$0.88 million), and exploration and evaluation assets (US$0.05 million).
14
5.6 Capital structure
The share structure of MC Mining as at 30 October 2024 is outlined below:
Number
Total ordinary shares on issue 476,115,351
Top 20 shareholders 458,704,013
Top 20 shareholders - % of shares on issue 96.34%
Source: MC Mining's share registry, provided by Management
The range of shares held in MC Mining as at 30 October 2024 is as follows:
No. of No. of Percentage
Range of shares held ordinary ordinary of issued
shareholders shares shares (%)
1 - 1,000 770 108,959 0.02%
1,001 - 5,000 101 242,633 0.05%
5,001 - 10,000 41 311,543 0.07%
10,001 - 100,000 78 2,462,640 0.52%
100,001 - and over 33 472,989,576 99.34%
TOTAL 1,023 476,115,351 100.00%
Source: MC Mining's share registry, provided by Management
The ordinary shares held by the most significant shareholders as at 30 October 2024 are detailed below:
Percentage of issued
Name No. of ordinary shares
shares (%)
Goldway Capital Investment Limited 125,386,172 26.34%
Senosi Group Investment Holdings Pty Ltd 95,357,455 20.03%
Kinetic Crest Limited 62,102,002 13.04%
Shining Capital GP Ltd 35,000,000 7.35%
Dendocept Pty Ltd 28,265,593 5.94%
Jun Liu & Huan Qu as trustees for the Golden Eagle Trust 26,499,345 5.57%
Pacific Goal Investment Ltd 24,927,757 5.24%
Subtotal 397,538,324 83.50%
Others 78,577,027 16.50%
Total ordinary shares on Issue 476,115,351 100.00%
Source: MC Mining's share registry, provided by Management
As outlined in Section 5.3 of our Report, the Consortium held approximately 93.05% of the issued capital
of the Company at the end of the Goldway Takeover offer period. From the table above, we note that
Goldway, Senosi, Shining Capital GP Ltd ('Shining Capital'), Dendocept, Jun Liu & Huan Qu as trustees for
the Golden Eagle Trust, and Pacific Goal Investment Ltd are all members of the Consortium.
15
6. Profile of KDG
KDG is an integrated coal mining and trading group listed on the HKSE. KDG operates across the entire coal
value chain including mining, processing, logistics, marketing and trading. KDG has been listed on the
HKSE since March 2012. As at 7 November 2024, KDG's market capitalisation was US$1.70 billion.
KDG's key project is the Dafanpu underground thermal coal mine located in the Chinese autonomous
region of Inner Mongolia, occupying a concession area of approximately 9.6 km 2. As at 31 December 2023,
the Dafanpu Coal Mine had coal resources of approximately 368 Mt, comprising 151 Mt of Measured coal
resources, 199 Mt of Indicated coal resources and 18 Mt of Inferred coal resources. In addition, the
Dafanpu Coal Mine had coal reserves of approximately 166 Mt, comprising 79 Mt of Proven coal reserves
and 86 Mt of Probable coal reserves.
KDG is also the operator of the Yongan and Weiyi underground coal mines located in the Chinese
autonomous region of Ningxia. KDG expects the Yongan and Weiyi Coal Mines to commence production in
the second half of 2024, reaching full production capacities of 1.2 Mtpa and 0.9 Mtpa respectively, by
2026. As at 31 December 2023, the Yongan Coal Mine had coal resources of approximately 224 Mt,
comprising 63 Mt of Indicated coal resources and 161 Mt of Inferred coal resources, with coal reserves of
33 Mt (Probable). As at 31 December 2023, the Weiyi Coal Mine had coal resources of approximately 119
Mt, comprising 38 Mt of Indicated coal resources and 81 Mt of Inferred coal resources, with coal reserves
of 15 Mt (Probable).
KDG currently holds a relevant interest of 13.04% in MC Mining following the completion of the First
Subscription on 30 August 2024. Following the completion of the Second Subscription, KDG intends to be
involved in the Company's operations, including advancing the development of its projects.
The consolidated statement of financial position for KDG for the last audited period is presented below:
Audited as at Translated as at
Consolidated Statement of Financial Position 31-Dec-23 31-Dec-23*
RMB'000 US$'000
CURRENT ASSETS
Cash at bank and on hand 734,143 103,074
Inventories 115,274 16,184
Trade and other receivables 194,053 27,245
Pledged and restricted deposits 727,784 102,181
Financial assets at fair value through profit or loss 220,592 30,971
Current portion of other non-current assets 165,341 23,214
TOTAL CURRENT ASSETS 2,157,187 302,869
NON-CURRENT ASSETS
Property, plant and equipment 2,483,678 348,708
Right-of-use assets 88,049 12,362
Intangible assets 3,233,648 454,004
Interest in associates 79,833 11,209
Goodwill 250,673 35,194
Deferred tax assets 26,726 3,752
Prepayments for proposed acquisitions 2,449,881 343,963
Other non-current assets 168,239 23,621
TOTAL NON-CURRENT ASSETS 8,780,727 1,232,814
TOTAL ASSETS 10,937,914 1,535,683
16
Audited as at Translated as at
Consolidated Statement of Financial Position 31-Dec-23 31-Dec-23*
RMB'000 US$'000
CURRENT LIABILITIES
Trade and other payables 1,066,741 149,770
Contract liabilities 68,351 9,596
Bank loans 1,033,000 145,033
Lease liabilities 1,898 266
Income tax payable 402,086 56,453
TOTAL CURRENT LIABILITIES 2,572,076 361,119
NON-CURRENT LIABILITIES
Bank loans 269,800 37,880
Lease liabilities 6,989 981
Long-term payables 583,936 81,985
Deferred tax liabilities 41,841 5,874
Accrual for reclamation costs 43,073 6,047
TOTAL NON-CURRENT LIABILITIES 945,639 132,768
TOTAL LIABILITIES 3,517,715 493,887
NET ASSETS 7,420,199 1,041,796
EQUITY
Share capital 54,293 7,623
Reserves 7,313,557 1,026,823
Non-controlling interests 52,349 7,350
TOTAL EQUITY 7,420,199 1,041,796
*Translated from Chinese Yuan to USD at an exchange rate of RMB/USD = 0.1404 as at 31 December 2023
Source: KDG 's audited financial statements for the year ended 31 December 2023
As set out above, as at 31 December 2023, KDG had a cash balance of US$103.07 million and a net assets
position of US$1.04 billion.
In addition, based on KDG's unaudited financial statements as at 30 June 2024, KDG had a cash balance of
RMB 345.44 million (US$48.12 million) and a net assets position of RMB 8.76 billion (US$1.22 billion), which
have been translated from Chinese Yuan to USD to an exchange rate of RMB/USD of 0.1393 as at 7
November 2024.
17
7. Economic analysis
MC Mining is primarily exposed to the risks and opportunities of the South African market through its coal
operations at the Makhado Project, Uitkomst, the Vele Colliery and the GSP. Accordingly, we have
presented an economic analysis on South Africa.
7.1 South Africa
Overview
In a statement released on 19 September 2024, the South African Reserve Bank's ('SARB') Monetary Policy
Committee ('MPC') outlined that the South African economy is forecast to grow 0.6% over the next two
quarters of 2024, based on a quarter-on-quarter measure. In addition, year-on-year economic growth is
forecast to be 1.4% and 1.7% over the next two quarters, respectively. This growth reflects increasing
confidence following a more stable electricity supply, and an increase in spending in domestic
consumption due to the Two-Pot retirement system coming into effect from 1 September 2024, allowing
for partial withdrawals prior to retirement.
Due to the lower than expected impact of load shedding over the medium-term, growth projections for
this period have slightly increased, but still remain below longer-run averages of 2.0%. This increase is
seen to be a result of more efficient network systems and momentum in the country's broader reform.
However, this growth is restricted by the lack of sustained investment in the economy, which has
contracted for four consecutive quarters.
South African Bank, Nedbank, forecasts gross domestic product ('GDP') growth to rise to 0.9% over 2024,
before increasing to 1.5% and 1.6% over 2025 and 2026, respectively. This recovery is expected due to the
easing of structural constraints, as well as growing support from global and domestic economic cycles.
On 14 June 2024, the African National Congress ('ANC') and its largest political rival, the Democratic
Alliance, agreed to form South Africa's new government of national unity. This resulted in Cyril
Ramaphosa being re-elected as South African president, and follows the ANC being in government for the
past 30 years, since the end of apartheid in South Africa in 1994.
Economic indicators
South Africa has the highest unemployment rate in the world. South Africa's unemployment rate increased
to 33.5% in the June 2024 quarter, up from 32.9% in the March 2024 quarter. The nation's high
unemployment rate is a result of several constraints, including strict labour laws, stagnant productivity,
bureaucratic hurdles, and high levels of unskilled unemployment. Unemployment is expected to remain
elevated as labour intensive sectors, such as construction and tourism, remain constrained and domestic
growth moderates.
South Africa's inflation rate declined to a three-year low of 4.4% in August 2024, returning to the midpoint
of the country's target inflation range of 3% to 6%. In the short-term, a strong exchange rate and declining
oil prices are expected to result in a further decline in inflation. In the long-term, inflation is forecast to
maintain a rate below 4.5% until the end of 2026. A slower of housing inflation in the June 2024 quarter is
also expected to contribute to services inflation declining to around the midpoint for early 2025. On the
contrary, this decline is to be partly offset by increasing electricity prices.
In its September 2024 Statement of the Monetary Policy, the MPC decided to reduce the repurchase rate
('Repo Rate') by 25 basis points to 8% per annum. The MPC stated that the reduction in the Repo Rate
level was consistent with the medium term forecast of sustainably lower inflation. This forecast sees the
rate stabilising around 7% next year, as it moves to a more neutral position.
18
Currency movements
As a result of uncertainties around the global economic environment, and the South Africa-specific factors
outlined above, specifically falling commodity export prices, the South African Rand ('ZAR') depreciated
by approximately 12% against the USD over 2023, making the ZAR one of the worst performing emerging
market currencies.
Recently however, the ZAR strengthened to its highest level against the USD since January 2023. The MPC
set an implied starting point of USD/ZAR 18.04 in September 2024, representing a 2% appreciation relative
to the USD when compared to their July assumption of USD/ZAR 18.35. This appreciation was primarily a
result of the easing of US monetary policy during the year, as well as a positive sentiment being directed
towards South Africa following the recent elections.
Nedbank forecasts the ZAR to continue to strengthen to approximately USD/ZAR 18.10 in 2025, before
weakening to approximately USD/ZAR 18.39 in 2026.
The chart below outlines the fluctuations in the USD/ZAR exchange rate over the past 10 years.
USD/ZAR Exchange Rate
22
20
18
16
USD/ZAR
14
12
10
8
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Source: Bloomberg
Mining
Companies carrying out mining activities in South Africa are regulated by the Mineral and Petroleum
Resources Development Act ('MPRDA'), which is the primary legislation that governs mining in South
Africa. Obtaining mining rights in South Africa involves several key requirements, including an assessment
of the mineral resources and reserves in the proposed mining area, an environmental impact assessment,
social and labour plans, and financial provisioning for environmental rehabilitation upon the closure of a
mine.
South Africa hosts the largest known reserves and is the leading producer of platinum-group metals. The
country also hosts considerable reserves of manganese, chromium, and gold. In 2023, South Africa's
mining industry contributed approximately US$11.18 billion to the economy, representing approximately
6.2% of the country's GDP. However, mining activity in South Africa has been consistently on the decline
since the 1990s. This can be largely attributed to social and political unrest in South Africa, combined with
a decline in international competitiveness due to a lack of investment relative to other countries towards
developing mining techniques.
Source: Statement of the Monetary Policy Committee 19 September 2024, South African Government Quarterly Labour Force Survey
Q2:2024, Nedbank Guide to the Economy 31 July 2024 and Bloomberg.
19
8. Industry analysis
MC Mining is a coal exploration and development company with operations in South Africa. As such, we
have presented an overview of the global coal industry and an analysis of the coal industry in South Africa.
Overview
Coal is a combustible sedimentary rock found below the earth's surface and comprises mostly carbon
(50%-98%), hydrogen (3%-13%), oxygen, and small amounts of other elements, including nitrogen and
sulphur. When burnt, coal releases energy as heat, which can be utilised in a variety of processes,
including energy generation. The quality of a coal deposit is determined by the temperature and pressure
at which the deposit is formed, in addition to the length of time in formation, commonly known as its
'organic maturity'. There are two methods generally used to mine coal, being opencast mining and
underground mining, with the choice of extraction method largely determined by the geology of the coal
deposit.
The rank of coal refers to the physical and chemical properties that coals of different maturities possess.
Lower rank brown coals such as Lignite generally possess a much lower organic maturity, have a soft
texture, a dull earthy appearance and are characterised by high moisture levels and low energy (carbon)
content. Higher ranked black coals such as Anthracite, which is the highest quality and scarcest type of
coal, are harder, stronger, contain less moisture, and produce more energy. Black coal can be categorised
into two main types, metallurgical (coking) coal and thermal (steaming) coal.
Due to its high carbon content and coking ability, metallurgical coal is used in the production of both iron
and steel, and to a lesser extent, for the smelting and casting of base metals. Of the different types of
metallurgical coal, hard coal is the most valuable as it has the lowest ash and moisture content and
produces the highest quality coke and most energy. Semi-soft coking coal and pulverised coal injection are
used more in blending with hard coking coal to be used as an auxiliary fuel source to increase the
effectiveness of blast furnaces.
Thermal coal generally contains less carbon than metallurgical coal and consequently cannot be used in
the production of steel. Its primary use is therefore as an energy source for coal-fired power plants where
it is pulverised and burnt to heat steam generating boilers. Globally, the major producers of thermal coal
are China, the United States of America ('US') and India, with the largest importers being China, India,
Japan and South Korea.
South African Coal Industry
Black coal deposits are found all over the world, with South Africa being one of the top ten largest coal
producers globally. South Africa's coal-mining industry has evolved due to its ability to exploit deposits at
favourable costs. South Africa is the fourth largest exporter of coal globally, with 32.5% of total domestic
coal production in 2021 being exported, primarily through the Richards Bay Coal Terminal. South Africa is
also highly reliant on coal. In 2024, 85% of its total electricity generation was derived from coal, compared
to the global average of approximately 35%. International recognition of South Africa's high carbonisation
has led to the country securing US$8.4 billion in funding from a deal announced in November 2021 to assist
in reducing the country's coal usage.
South Africa's coal deposits are primarily located in the northeast of the country, with a relatively even
proportion of South African coal mines being underground or opencast. The coal resources are generally
found in shallow, un-faulted and lightly inclined areas, making extraction suitable for opencast mines.
20
Coking coal
Coking coal is used primarily in the production of steel. Coking coal has different quality grades, including
hard coking coal, semi-hard coking-coal, semi-soft coking coal and pulverised coal for injection, which are
all used in steel production. Coking coal typically contains more carbon, less ash and less moisture than
thermal coal. It takes approximately 770 kg of coal to make one tonne of steel. The challenge in steel
production is producing steel to generate growth whilst simultaneously reducing emissions in the process.
The coking coal market has approximately a third of the volume of the global thermal coal market, as
such, South Africa produces no high-quality coking coal in comparison, and therefore primarily imports the
commodity.
Coking coal prices plummeted prior to 2016, in line with weaker steel production activity in major export
destinations such as China. However, coking coal prices rebounded in 2016 and 2017, largely due to
industrial policy changes in China. In April 2016, the Chinese Government announced it would restrict the
number of production days per year at Chinese coal mines from 330 to 276. In July 2016, torrential rain in
the major coal-producing province of Shanxi in northern China also caused a coking coal supply disruption.
This disruption benefited South African and international producers, as the loss of Chinese supply
significantly increased prices of coking coal globally.
The outbreak of COVID-19 led to a significant reduction in economic activity, ultimately leading to lower
demand for energy and steel, which are products derived from coal. Coking coal prices declined over the
course of 2020, but increased in 2021, with strong steel demand from China contributing to the price rises.
Coking coal prices experienced limited volatility following the Russia-Ukraine conflict in 2021, in which
coking coal prices remained relatively stable amid substantial price spikes amongst other commodities.
The International Energy Agency estimates global coal demand to enter a trend reversal in 2025 following
four years of growth. The reversal is expected to be driven by China's first decline in coal demand since
2016, combined with ongoing declines in the European Union, the US, Japan and Korea, which is
anticipated to outweigh the continuous growth in India and the Association of Southeast Asian Nations.
Thermal coal
Thermal coal, or steaming coal, is used to generate electricity in many parts of the world, but due to its
high carbon and sulphur content, it is a major emissions contributor. For over five decades, thermal coal
has been the dominant fuel source used in power generation, representing almost 40% of the global
market. Owing to its low cost and availability, coal's role as a major fuel source for power generation is
expected to persist into the future, although its share is expected to decline due to the rise of
renewables.
While South Africa demands a significantly higher portion of thermal coal compared to the rest of the
world, this will decline over time as renewable energy sources increasingly contribute to South Africa's
total electricity generation. As a result of decarbonisation trends, many of the large coal mining
companies in South Africa have indicated they plan to exit the industry to focus on more sustainable
energy practices. However, it is unlikely this will affect the quantity of coal produced, as these companies
intend to sell off assets to smaller industry players rather than shutting them down completely.
In July 2023, annual growth in global coal trade was projected at 7%, which would surpass the record
levels obtained during 2019. However, thermal coal exports are expected to decline by approximately 12%
by 2026. This decline is attributed to the rise in domestic production in coal-intensive economies such as
China and India, as well as coal phase-out initiatives in regions such as Europe.
Despite experts citing a mass global substitution for alternative energy sources, coal is forecast to
generate 31% of global power generation through to 2030, compared to 35% in 2024.
21
Coal prices
The price of coking coal (TSI Hard Coking Coal Australia Export FOB East Coast) and thermal coal (RB Coal
Terminal in South Africa) over the previous nine years, together with coking and thermal coal forecasts
from Consensus Economics, are depicted in the graph below.
Coal Spot and Forecast Price
700
600
500
US$/tonne
400
300
200
100
0
Thermal Thermal Coking Coking
Historical Forecast Historical Forecast
Source: Bloomberg, S&P Capital IQ Pro, Consensus Economics and BDO analysis
Coking coal prices increased sharply over 2016 and 2017, driven by supply side disruptions in China
resulting from restrictions to coal production and torrential rain in a major coal-producing province. In
2019, coal prices began to trend downward but stabilised at the beginning of 2020. However, prices then
resumed a downwards trajectory due to subdued global energy demand and steelmaking activity as a
result of the COVID-19 pandemic.
The price of coal has been volatile over the past few years, with subdued global energy demand due to
the COVID-19 pandemic weighing on prices in 2020. In 2021, thermal and coking coal prices increased from
approximately US$83/t and US$107/t in February, to US$220/t and US$335/t in October, respectively.
This was driven by demand pressure from China and other emerging Asian markets, which account for over
70% of global coal demand, as well as coal shortages in China. China's coal shortages stemmed from its
inability to fully replace the volumes normally imported from Australia following an unofficial ban of
Australian coal in December 2020.
Prior to 2022, it was expected that prices would fall due to no long-term supply issues, as the main
producing countries had not curtailed their production or export capacities. However, the conflict
between Russia and Ukraine, as well as the switch to coal-fired generation amidst high gas prices, sent the
prices of thermal coal skyrocketing. Russia's war against Ukraine and the subsequent international
sanctions against it led to a reshuffling of coal supply chains and a further shift of exports from land-based
to seaborne transport. This resulted in thermal coal prices more than doubling to US$460/t in early March
2022, before falling back to approximately US$300/t in May 2022, which is still an elevated position
compared to recent pricing.
In the latter half of 2022, coal prices experienced downward pressure, with limited trade forcing domestic
production and causing an increase in the global supply of raw materials. This led to coking coal prices
falling to US$169.70/t in late July 2022, and thermal coal prices falling to US$183.85/t in early November
2022.
22
In 2023, as gas prices weakened and global supply of coal increased, the coal market recovered. In
October 2023, thermal coal fell to US$124.60/t, although coking coal reached US$276/t. However, by
February 2024, both thermal and coking coal prices declined to approximately US$91/t and US$260/t,
respectively.
By early-September 2024, thermal coal prices increased to approximately US$115/t while coking coal
prices decreased to approximately US$173/t. The increase in thermal coal prices can be attributed to an
economic recovery in Asia and higher natural gas prices leading to a heavier reliance on coal for power
generation. The decrease in coking coal prices is due to reduced demand, particularly from Chinese
steelmakers, and increasing competition from alternative energy sources. Despite the focus on
decarbonisation, which is expected to cause global coal demand to decline, forecasts predict limited
volatility and for prices to remain consistent with current trends through to 2029.
Consensus Economics forecasts thermal coal prices to increase to US$138/t by the end of 2024, then to
gradually decrease to US$105/t by 2027, with a long-term forecast (from 2029 to 2033) of
US$119/t. Further, Consensus Economics forecasts coking coal prices to exhibit a declining trend over the
period to 2027, from which point they are expected to stabilise over the longer term. According to
Consensus Economics, the medium-term forecast coking coal price from 2026 to 2028 is expected to range
between US$219/t to US$240/t, with the long-term forecast (from 2029 to 2033) of approximately
US$213/t.
Community concerns over fossil fuels
Global carbon emissions have increased significantly over the past 150 years, with the largest driver being
the rise in global energy consumption. Fossil fuels, which have been the major source of carbon emissions,
have also been the largest contributor to global energy supply.
In a global effort to reduce carbon emissions, governments have set emissions targets to reduce the
impacts of global warming. The impact of net-zero emissions targets on global fossil fuel exports is
uncertain as the policies to achieve them have not been fully articulated. Despite coal being a key global
export, growing pressures from shareholders and climate activists have influenced global banks, insurers,
and other industries to reduce their support for coal mining projects. This movement has had a noticeable
impact on coal companies' ability to obtain insurance and secure adequate access to finance. As support
for fossil fuels slows, future demand will be shaped by the speed of transition towards renewable energy
sources, technological advancement, and economic growth. However, South Africa, along with several
other governments, is expected to miss its 2030 carbon emissions targets under the 2015 Paris Climate
Agreement, as it plans to operate coal-fired power plants for longer than initially anticipated.
Donald Trump's recent victory in the US presidential election and his pro-fossil fuels agenda are likely to
introduce uncertainty in global markets. This stems from the potential deregulation of fossil fuel
industries and the likelihood of import tariffs being imposed on US imports from China.
Sources: IBIS World, IEA, Bloomberg Intelligence, Capital IQ Pro, Mining, Mining Technology Africa, Worldometer and Consensus
Economics.
23
9. Valuation approach adopted
There are a number of methodologies which can be used to value a business or the shares in a company.
The principal methodologies which can be used are as follows:
• Capitalisation of future maintainable earnings ('FME')
• Discounted cash flow ('DCF')
• Quoted market price basis ('QMP')
• Net asset value ('NAV')
• Market based assessment, such as a Resource Multiple.
A summary of each of these methodologies is outlined in Appendix 2 of our Report.
Different methodologies are appropriate in valuing particular companies, based on the individual
circumstances of that company and available information.
It is possible for a combination of different methodologies to be used together to determine an overall
value, where separate assets and liabilities are valued using different methodologies. When such a
combination of methodologies is used, it is referred to as a 'sum-of-parts' valuation ('Sum-of-Parts').
The approach using Sum-of-Parts involves separately valuing each asset and liability of the company. The
value of each asset may be determined using different methodologies as described above. The component
parts are then valued using the NAV methodology, which involves aggregating the estimated fair market
value of each component part.
9.1 Valuation of an MC Mining share prior to the Proposed Transaction
In our assessment of the value of an MC Mining share prior to the Proposed Transaction, we have chosen to
employ the following methodologies:
• Sum-of-Parts as our primary methodology, which estimates the fair market value of a company by
assessing the realisable value of each of its component parts. The value of each component part may
be determined using different methodologies and the component parts are then aggregated using the
NAV methodology. The value derived from this methodology reflects a control value.
• QMP as our secondary methodology, utilising quoted market prices of MC Mining shares prior to the
announcement of the Proposed Transaction. The QMP of MC Mining shares represents the value that a
Shareholder may receive for an MC Mining share if it were sold on market prior to the announcement
of the Proposed Transaction. The value derived from this methodology reflects a minority interest
value. Given our valuation assessment of an MC Mining share prior to the Proposed Transaction is on a
controlling interest basis, we have applied a premium for control to the value derived from this
methodology.
We considered employing the DCF methodology to value the Makhado Project and Uitkomst, based on the
forecast cash flow models provided to us by the Company ('Models'). We reviewed the Models to assess
their integrity and mathematical accuracy, and the reasonableness of the economic assumptions
underpinning the Models. In addition, we instructed SRK, an independent technical specialist, to review
the Models and assess the reasonableness of the technical assumptions underpinning the Models.
We made the following adjustments to the Models:
• Adjusted coal prices to reflect BDO's assessed forecast coal pricing, based on consensus forecasts
from Consensus Economics, and forecast USD/ZAR exchange rates, based on consensus forecasts
from Consensus Economics and Bloomberg.
24
• Converted cash flows from a real basis to a nominal basis, using BDO's assessed forecast inflation
rates over the respective life of mines, based on consensus forecasts from Bloomberg and BDO
analysis.
• Adjusted the discount rate.
• Adjusted the technical assumptions underpinning the Models to reflect SRK's recommendations.
Following the above adjustments to the Models, we arrived at an adjusted model for each of the Makhado
Project and Uitkomst ('Adjusted Models').
Based on our analysis and current economic assumptions, the Adjusted Models indicate that operating the
projects does not represent the highest and best use of these assets. This was largely driven by the
following:
• SRK's recommendations relating to the technical assumptions in the Models, which included
increases to mining costs, capital expenditure, and rehabilitation costs at both the Makhado
Project and Uitkomst.
• BDO's assessed economic inputs in the Models, which included current consensus forecast coal
prices, inflation rates and our assessed discount rate over the respective life of mines.
In addition, the net present values of the cash flows derived from the Adjusted Models were substantially
lower than the values ascribed by SRK for the Makhado Project and Uitkomst (comprising the Mineral
Resources), which was performed using alternative valuation methodologies, as contained in the
Independent Specialist Report in Appendix 3. Therefore, the highest and best use values of both the
Makhado Project and Uitkomst are derived from employing a market-based valuation, which represents
the value that could be obtained in the market by selling the projects as a resource with associated
infrastructure.
It is not uncommon for a market-based valuation approach, such as comparable transaction multiples, to
result in a valuation higher than the net present value of cash flows derived under a DCF approach. This is
largely because a DCF valuation represents forecast cash flows using forecast inputs as at the valuation
date. In the context of an IER, the expert must have reasonable grounds in accordance with RG 170 and IS
214 for the assumptions underpinning a DCF valuation.
Therefore, whilst we have considered the DCF approach, we have not relied on it to inform our view of
the value of the Makhado Project and Uitkomst. Our preferred approach is to rely on the valuations
performed by SRK in valuing the Makhado Project and Uitkomst, with the various valuation approaches
detailed in the Independent Specialist Report in Appendix 3.
We have employed the Sum-of-Parts methodology in estimating the fair market value of an MC Mining
share prior to the Proposed Transaction, by aggregating the fair market values of its underlying assets and
liabilities. We have considered the following component parts in our valuation of MC Mining prior to the
Proposed Transactions:
• The value of MC Mining's 67.3% interest in the Makhado Project, having reliance on the valuation
performed by SRK.
• The value of MC Mining's 84% interest in Uitkomst, having reliance on the valuation performed by SRK.
• The value of the Vele Colliery, having reliance on the valuation performed by SRK.
• The value of MC Mining's 74% interest in the GSP, having reliance on the valuation performed by SRK.
• The value of other assets and liabilities, using the cost approach under the NAV valuation
methodology.
25
We have chosen these methodologies for the following reasons:
• The core value of MC Mining lies in the future cash flows to be generated from its mineral assets. As
discussed above, we considered employing the DCF methodology to value the Makhado Project and
Uitkomst. However, based on the Adjusted Models, the highest and best use values of both the
Makhado Project and Uitkomst are derived from employing a market-based valuation based on the
Mineral Resource of each project, which was performed by SRK using various valuation approaches
detailed in its Independent Specialist Report in Appendix 3. Based on discussions with SRK and in
accordance with RG 170 and IS 214, we do not consider there to be sufficient reasonable grounds to
estimate the future cash flows to be generated from the Vele Colliery and the GSP. The reasons for
SRK's advice to not use an income approach for these assets is set out in its Independent Specialist
Report in Appendix 3. Therefore, based on SRK's advice and application of RG 170 and IS 214, we do
not consider the application of a DCF approach to be appropriate for the valuation of these mineral
assets. However, there are certain other assets and liabilities of MC Mining that are not suited to the
valuation approach used to value MC Mining's mineral assets. Where different approaches are used to
value different component parts of a business, a Sum-of-Parts approach is the most appropriate
valuation methodology to employ.
• We have adopted QMP as our secondary approach. The QMP basis is a relevant methodology to
consider because the shares of MC Mining are listed on the ASX, therefore reflecting the value that a
Shareholder will receive for a share sold on the market. This means there is a regulated and
observable market where the shares of MC Mining can be traded. However, in order for the QMP
methodology to be considered appropriate, the listed shares should be liquid, and the market should
be fully informed of the Company's activities. We have analysed the liquidity of MC Mining shares in
assessing whether application of the QMP methodology is appropriate. We note that the shares of MC
Mining are also listed on the JSE. Therefore, we have analysed the QMP of MC Mining shares traded on
the JSE for comparative purposes. However, given that the Company's primary listing is on the ASX,
our assessment of the QMP value of an MC Mining share is based on the QMP and trading of MC Mining
shares on the ASX.
• Given that lack of liquidity of MC Mining shares as assessed in Section 10.2 of our Report, we have also
considered the offer price in connection with the Goldway Takeover. We consider the offer price to
be a relevant indicator of the market value of an MC Mining share prior to the Proposed Transaction,
as the Goldway Takeover represents an arm's length transaction between a willing buyer and many
willing sellers. We note that the offer price in connection with the Goldway Takeover represents a
controlling interest value.
• The FME methodology is most commonly applicable to profitable businesses with steady growth
histories and forecasts. Further, the FME methodology is not considered appropriate for valuing finite
life assets, such as mining assets. Therefore, we do not consider the application of the FME approach
to be appropriate.
Independent Technical Expert
In performing our valuation of an MC Mining share prior to, and following, the Proposed Transaction, we
have relied on the Independent Specialist Report prepared by SRK, which includes an assessment of the
market value of MC Mining's mineral assets, including the Makhado Project, Uitkomst, the Vele Colliery,
and the GSP.
SRK's Independent Specialist Report has been prepared in accordance with the Australasian Code for
Public Reporting of Technical Assessments and Valuation of Mineral Assets (2015 Edition) ('VALMIN Code')
26
and the JORC Code. We are satisfied with the valuation methodologies adopted by SRK, which we believe
are in accordance with industry practices and are compliant with the requirements of the VALMIN Code.
The specific valuation methodologies used by SRK are referred to in the respective sections of our Report
and further detailed in the Independent Specialist Report contained in Appendix 3.
9.2 Valuation of an MC Mining share following the Proposed Transaction
In our assessment of the value of an MC Mining share following the Proposed Transaction, we have chosen
to employ the following methodologies:
• Sum-of-Parts as our primary methodology. The value derived from this methodology reflects a control
value. Given our assessment of the value of an MC Mining share following the Proposed Transaction is
on a minority interest basis, we have applied a minority interest discount to our Sum-of-Parts value.
• QMP as our secondary methodology, utilising quoted market prices of MC Mining shares following the
announcement of the Proposed Transaction. The value derived from this methodology reflects a
minority interest value.
We have employed the Sum-of-Parts methodology in estimating the fair market value of an MC Mining
share following the Proposed Transaction, by aggregating the fair market values of its underlying assets
and liabilities. We have considered the following component parts in our valuation of MC Mining following
the Proposed Transaction:
• The value of MC Mining's 67.3% interest in the Makhado Project, having reliance on the valuation
performed by SRK.
• The value of MC Mining's 84% interest in Uitkomst, having reliance on the valuation performed by SRK.
• The value of the Vele Colliery, having reliance on the valuation performed by SRK.
• The value of MC Mining's 74% interest in the GSP, having reliance on the valuation performed by SRK.
• The cash raised from the Second Subscription, and the resulting shares issued to KDG.
• The value of other assets and liabilities, using the cost approach under the NAV valuation
methodology.
The reasons for choosing these methodologies are the same as those detailed in Section 9.1 of our Report.
The difference between our valuation of an MC Mining share prior to, and following the Proposed
Transaction is the increase in cash from the Second Subscription and the resulting increase in MC Mining
shares on issue.
Post-announcement pricing of MC Mining
We have considered the QMP of MC Mining shares as our secondary methodology, utilising QMPs of MC
Mining shares following the announcement of the Proposed Transaction. The QMPs of MC Mining shares in
the period following the announcement of the Proposed Transaction is considered to be an indicator of the
value of an MC Mining share following the Proposed Transaction, because market participants are fully
informed as to the terms of the Proposed Transaction, with the price of MC Mining shares reflecting the
market's view of value. This value includes the funds to be raised under the Second Subscription and the
resulting shares issued to KDG.
27
10. Valuation of MC Mining prior to the Proposed Transaction
10.1 Sum-of-Parts valuation
We have employed the Sum-of-Parts methodology in estimating the fair market value of an MC Mining
share prior to the Proposed Transaction (on a controlling interest basis), by aggregating the estimated fair
market value of its underlying assets and liabilities, having consideration to the following:
• The value of MC Mining's 67.3% interest in the Makhado Project
• The value of MC Mining's 84% interest in Uitkomst
• The value of the Vele Colliery
• The value of MC Mining's 74% interest in the GSP
• The value of other assets and liabilities not included in the other components of the Sum-of-Parts
valuation.
Our Sum-of-Parts valuation of MC Mining prior to the Proposed Transaction is set out in the table below:
Low Preferred High
Valuation of MC Mining prior to the Proposed Transaction Ref
ZAR m ZAR m ZAR m
Value of MC Mining's interest in the Makhado Project 10.1.1 438.04 620.37 802.71
Value of MC Mining's interest in the Uitkomst Colliery 10.1.2 31.27 44.29 57.31
Value of the Vele Colliery 10.1.3 382.95 542.35 701.75
Value of MC Mining's interest in the GSP 10.1.4 262.91 382.48 502.05
Value of other assets and liabilities 10.1.5 (176.24) (176.24) (176.24)
Total value of MC Mining prior to the Proposed
938.93 1,413.25 1,887.58
Transaction (control) (ZAR m)
Number of MC Mining shares on issue prior to the Proposed
10.1.6 476,115,351 476,115,351 476,115,351
Transaction
Value per MC Mining share prior to the Proposed
1.972 2.968 3.965
Transaction (control) (ZAR/share)
AUD/ZAR exchange rate assumed 11.75 11.75 11.75
Value per MC Mining share prior to the Proposed
0.168 0.253 0.337
Transaction (control) (A$/share)
Source: BDO analysis
We have assumed the following exchange rates for all currency conversions throughout our valuation,
based on a 30-day historical average to 7 November 2024:
• AUD/ZAR exchange rate of 11.75
• USD/ZAR exchange rate of 17.55.
Based on the above, we have assessed the value of an MC Mining share prior to the Proposed Transaction
(on a controlling interest basis) to be in the range of $0.168 to $0.337, with a preferred value of $0.253.
28
10.1.1 Valuation of MC Mining's 67.3% interest in the Makhado Project
In performing our valuation of MC Mining's interest in the Makhado Project, we have relied on the
Independent Specialist Report prepared by SRK. We instructed SRK to provide an independent market
valuation of the Makhado Project, which includes the Mineral Resource and the exploration potential of
the Makhado Project. SRK considered various valuation methodologies when valuing the Makhado Project,
including the comparable market transactions approach (including the implied multiple from the offer
from the Consortium) as the primary valuation methodology and the yardstick approach as the secondary
valuation methodology.
SRK determined the fair market value of MC Mining's interest in the Makhado Project to be within the
range of ZAR 438.04 million to ZAR 802.71 million, with a preferred value of ZAR 620.37 million. We note
that SRK's valuation was conducted on an attributable basis, and as such, the values reflect MC Mining's
ownership interest in the Makhado Project.
For further information on SRK's approach and conclusions, refer to the Independent Specialist Report,
which is included as Appendix 3 of our Report.
10.1.2 Valuation of MC Mining's 84% interest in Uitkomst
In performing our valuation of MC Mining's interest in Uitkomst, we have relied on the Independent
Specialist Report prepared by SRK. We instructed SRK to provide an independent market valuation of
Uitkomst, which includes the Mineral Resource and the exploration potential of Uitkomst. SRK considered
various valuation methodologies when valuing Uitkomst, including the comparable market transactions
approach (including the implied multiple from the offer from the Consortium) as the primary valuation
methodology and the yardstick approach as the secondary valuation methodology.
SRK determined the fair market value of MC Mining's interest in Uitkomst to be within the range of ZAR
31.27 million to ZAR 57.31 million, with a preferred value of ZAR 44.29 million. We note that SRK's
valuation was conducted on an attributable basis, and as such, the values reflect MC Mining's ownership
interest in Uitkomst.
10.1.3 Valuation of the Vele Colliery
In performing our valuation of the Vele Colliery, we have relied on the Independent Specialist Report
prepared by SRK. Based on advice from SRK in relation to the uncertainties surrounding the future
operating parameters of Vele Colliery, it was concluded that the DCF approach is not appropriate and as
such, we instructed SRK to provide an independent valuation of MC Mining's interest in the Vele Colliery.
SRK considered various valuation methodologies when valuing the Vele Colliery, including the comparable
market transactions approach (including the implied multiple from the offer from the Consortium) as the
primary valuation methodology and the yardstick approach as the secondary valuation methodology.
SRK determined the fair market value of MC Mining's interest in the Vele Colliery to be within the range of
ZAR 382.95 million to ZAR 701.75 million, with a preferred value of ZAR 542.35 million.
10.1.4 Valuation of MC Mining's 74% interest in GSP
In performing our valuation of MC Mining's interest in the GSP, we have relied on the Independent
Specialist Report prepared by SRK. We instructed SRK to provide an independent market valuation of the
GSP, which comprises the Mopane, Generaal and Chapudi projects. SRK considered various valuation
methodologies when valuing the GSP, including the comparable market transactions approach (including
the implied multiple from the offer from the Consortium) as the primary valuation methodology and the
yardstick approach as the secondary valuation methodology. As discussed in the Independent Specialist
29
Report, SRK has elected to adopt the assessed values implied by the comparable transactions analysis
(including the implied multiple from the offer from the Consortium) to form its valuation range.
SRK determined the fair market value of MC Mining's interest the GSP to be within the range of ZAR
262.91 million to ZAR 502.05 million, with a preferred value of ZAR 382.48 million. We note that SRK's
valuation was conducted on an attributable basis, and as such, the values reflect MC Mining's ownership
interest in the GSP.
The range of values for MC Mining's interest in the projects comprising the GSP as determined by SRK is
set out below:
Low Preferred High
Value of MC Mining's interest in the GSP
ZAR m ZAR m ZAR m
Mopane 130.99 185.57 240.15
Generaal 7.89 11.78 15.67
Chapudi 124.03 185.13 246.23
Total value of the GSP (ZAR m) 262.91 382.48 502.05
Source: Independent Specialist Report prepared by SRK
10.1.5 Valuation of MC Mining's other assets and liabilities
The other assets and liabilities of MC Mining represent the assets and liabilities that have not been
specifically addressed elsewhere in our Sum-of-Parts valuation. From our discussions with management of
MC Mining and our analysis of the other assets and liabilities outlined in the table below, we do not
consider there to be a material difference between book value and fair value, unless an adjustment has
been noted below.
The table below represents a summary of the assets and liabilities identified:
Audited as at
Adjusted
NAV Notes 30-Jun-24
US$'000 US$'000
CURRENT ASSETS
Inventories 643 643
Trade and other receivables a) 1,329 1,323
Cash and cash equivalents b) 234 10,772
TOTAL CURRENT ASSETS 2,206 12,738
NON-CURRENT ASSETS
Property, plant and equipment c) 33,745 -
Right-of-use assets 1,965 1,965
Exploration and evaluation assets d) 70,545 -
Intangible assets 488 488
Other financial assets a) 6,667 6,613
Restricted cash 23 23
TOTAL NON-CURRENT ASSETS 113,433 9,089
TOTAL ASSETS 115,639 21,827
CURRENT LIABILITIES
Provisions a) 461 459
Trade and other payables a) 6,357 6,286
30
Audited as at
Adjusted
NAV Notes 30-Jun-24
US$'000 US$'000
Current tax liabilities a) 257 172
Lease liabilities 733 733
Borrowings e) 17,509 18,004
Bank overdraft 1,291 1,291
TOTAL CURRENT LIABILITIES 26,608 26,945
NON-CURRENT LIABILITIES
Provisions f) 8,700 -
Deferred tax liability 3,349 3,349
Lease liabilities 1,539 1,539
Borrowings 36 36
TOTAL NON-CURRENT LIABILITIES 13,624 4,924
TOTAL LIABILITIES 40,232 31,869
NET ASSETS (US$'000) 75,407 (10,042)
USD/ZAR exchange rate assumed g) 17.55
NET ASSETS (ZAR'000) (176,243)
Source: MC Mining's audited financial statements for the year ended 30 June 2024 and BDO analysis
We have been advised that there have not been any significant changes to the net assets of MC Mining
since 30 June 2024 and that the above assets and liabilities represent their fair market values apart from
the adjustments detailed below. Where the above balances differ materially from the audited position at
30 June 2024, we have obtained supporting documentation to validate the adjusted values used.
We note the following in relation to the above valuation of MC Mining's other assets and liabilities:
Note a) Non-controlling interest
MC Mining has non-controlling interests of US$1.24 million as at 30 June 2024, which relates to non-
controlling interests in various subsidiaries that MC Mining does not wholly own. As such, the audited
position of MC Mining's net assets at 30 June 2024 reflects a 100% interest in the controlled entities.
Therefore, we have adjusted the Company's relevant assets and liabilities balances to reflect the amounts
owned by MC Mining.
Note b) Cash and cash equivalents
We have adjusted the book value of cash and cash equivalents of US$0.23 million as at 30 June 2024 to
reflect the Company's cash and cash equivalents based on the Company's 30 September 2024 quarterly
cash flow report, being US$10.77 million. We note that this balance includes the cash consideration of
US$12.97 million received under the First Subscription, which completed on 30 August 2024.
Note c) Property, plant and equipment
The book value of property, plant and equipment ('PP&E') of US$33.75 million as at 30 June 2024
predominantly comprised PP&E used for mining-related activities, which is accounted for separately in
SRK's valuations of MC Mining's interests in the Makhado Project and Uitkomst, which have been valued
separately in Sections 10.1.1 and 10.1.2 of our Report, respectively. Therefore, we have adjusted the
book value of PP&E as at 30 June 2024 to nil.
31
Note d) Exploration and evaluation assets
We have adjusted the book value of development, exploration and evaluation assets of US$70.55 million
as at 30 June 2024 to nil, as it is reflected in SRK's valuations of MC Mining's interests in the Makhado
Project, Uitkomst, the Vele Colliery and the GSP, which have been valued separately in Sections 10.1.1,
10.1.2, 10.1.3 and 10.1.4 of our Report, respectively.
Note e) Current borrowings
We have adjusted the book value of current borrowings of US$17.51 million as at 30 June 2024 for the NCI
adjustment as discussed above, and the drawdown of US$1.70 million during the 30 September 2024
quarter. Our adjustments to the 30 June 2024 current borrowings balance are shown in the table below:
Current borrowings US$'000
Current borrowings as at 30 June 2024 17,509
NCI adjustment (1,208)
Drawdown 1,703
Current borrowings as at 30 September 2024 18,004
Source: MC Mining's audited financial statements for the year ended 30 June 2024, MC Mining's quarterly cash flow report for the
quarter ended 30 September 2024, and BDO analysis
Note f) Non-current provisions
The book value of non-current provisions of US$8.70 million as at 30 June 2024 comprised rehabilitation
and biodiversity offset provisions, which are accounted for separately in SRK's valuations of MC Mining's
interests in the Makhado Project and Uitkomst, which have been valued separately in Sections 10.1.1 and
10.1.2 of our Report, respectively. Therefore, we have adjusted the book value of non-current provisions
as at 30 June 2024 to nil.
Note g) USD/ZAR exchange rate assumed
We have converted MC Mining's adjusted net liabilities balance as at 30 June 2024 using the 30-day
average of the USD/ZAR exchange rate to 7 November 2024 sourced from Bloomberg, being 17.55.
10.1.6 Number of MC Mining shares on issue prior to the Proposed
Transaction
As detailed in Section 4 of our Report, the number of MC Mining shares on issue as at the date of our
Report is 476,115,351, which we have used in our Sum-of-Parts valuation. The number of MC Mining shares
on issue prior to the Proposed Transaction includes the 62,102,002 shares issued to KDG under the First
Subscription.
32
10.2 QMP valuation
To provide a comparison to the valuation of an MC Mining share prior to the Proposed Transaction in
Section 10.1, we have also assessed the QMP of an MC Mining share utilising quoted market prices of MC
Mining shares prior to the announcement of the Proposed Transaction.
The quoted market value of a company's shares is reflective of a minority interest. A minority interest is
an interest in a company that is not significant enough for the holder to have an individual influence in the
operations and value of that company.
RG 111.43 suggests that when considering the value of a company's shares for the purposes of a control
transaction the expert should consider a premium for control. An acquirer could be expected to pay a
premium for control due to the advantages they will receive should they obtain 100% control of another
company. These advantages include the following:
• Control over decision making and strategic direction
• Access to underlying cash flows
• Control over dividend policies
• Access to potential tax losses.
Whilst KDG will not be obtaining 100% of the shares in MC Mining, RG 111 states that the expert should
calculate the value of a target's shares as if 100% control were being obtained. The expert can then
consider an acquirer's practical level of control when considering reasonableness. Reasonableness has
been considered in Section 13.
Therefore, our calculation of the QMP of an MC Mining share including a premium for control has been
prepared in two parts. The first part is to calculate the QMP of an MC Mining share on a minority interest
basis. The second part is to add a premium for control to the minority interest value to arrive at a QMP
value that includes a premium for control.
Minority interest value
Our analysis of the QMP of an MC Mining share is based on the pricing prior to the announcement of the
Proposed Transaction. This is because the value of an MC Mining share after the announcement may
include the effects of any change in value as a result of the Proposed Transaction. However, we have
considered the value of an MC Mining share following the announcement when we have considered
reasonableness in Section 13.
Information on the Proposed Transaction was announced to the market on 28 August 2024. Leading up to
the announcement of the Proposed Transaction, the shares of MC Mining were placed into a trading halt,
occurring from 23 August 2024 to 28 August 2024. Therefore, we have assessed the QMP of an MC Mining
share over the 12-month period from 23 August 2023 to 23 August 2024. The following chart provides a
summary of the closing share price movements and trading volume over this period.
33
MC Mining share price and trading volume history
0.250 1.2
0.200 1
Volume (millions)
Closing price ($)
0.8
0.150
0.6
0.100
0.4
0.050 0.2
0.000 0
Volume Closing price
Source: Bloomberg and BDO analysis
The daily price of an MC Mining share over the period from 23 August 2023 to 23 August 2024 ranged from
a low of $0.037 on 23 August 2024 to a high of $0.195 on 6 November 2023. The largest single day of
trading over the assessed period was 23 August 2024, when 989,122 shares were traded.
During this period a number of announcements were made to the market. The key announcements are set
out below:
Closing Share Price Closing Share Price
Following Three Days After
Date Announcement Announcement Announcement
$ (movement) $ (movement)
16/08/2024 Employee Options Extension 0.105 25.0% 0.054 48.6%
01/07/2024 Loan Facility Agreement 0.135 10.0% 0.135 0.0%
26/06/2024 Managing Director Appointment Update 0.150 0.0% 0.135 10.0%
30/04/2024 MCM Receipt of Shareholder Notice 0.160 0.0% 0.130 18.8%
30/04/2024 MCM Appendix 5B Quarterly Cash Flow Report 0.160 0.0% 0.130 18.8%
30/04/2024 MCM Quarterly Activities Report 0.160 0.0% 0.130 18.8%
26/04/2024 MCM Resignation of Independent Non-executive 0.160 0.0% 0.145 9.4%
Chairman
02/04/2024 Change in substantial holding 0.145 12.1% 0.150 3.4%
11/03/2024 MCM Non-Binding Indicative Offer from Vulcan 0.160 10.3% 0.140 12.5%
Resources
07/11/2023 Application for quotation of securities - MCM 0.170 12.8% 0.165 2.9%
03/11/2023 MCM Receipt of Notice of Intention to make a 0.190 46.2% 0.170 10.5%
Takeover
31/10/2023 MCM Annual Report to shareholders 0.130 0.0% 0.190 46.2%
31/10/2023 MCM Quarterly Activities Report 0.130 0.0% 0.190 46.2%
05/10/2023 MCM Annual General Meeting Details 0.150 0.0% 0.093 38.0%
22/09/2023 MCM FY2023 Financial Results Announcement 0.165 2.9% 0.150 9.1%
Source: Bloomberg and BDO analysis
34
On 1 July 2024, MC Mining announced that it had entered into the Dendocept Facility. On the date of the
announcement the share price decreased by 10.0% to close at $0.135, before remaining unchanged over
the subsequent three-day period to close at $0.135.
On 30 April 2024, MC Mining released its quarterly activities report and cash flow report for the March
2024 quarter, which highlighted that ROM coal production at Uitkomst over the quarter was 14% higher
than in the March 2023 quarter, with a total of 75,590t of coal being sold during the quarter. In addition,
the Company highlighted the recent off-market takeover offer from Goldway. On the date of the
announcement, the share price remained unchanged and closed at $0.160, before decreasing by 18.8%
over the subsequent three-day period to close at $0.130.
On 11 March 2024, MC Mining announced the receipt of a non-binding indicative offer from Vulcan
Resources Limited ('Vulcan') outlining Vulcan's proposal to make an off-market cash takeover offer for all
the shares in the Company at an indicative price of between $0.17 and $0.20 per share. On the date of the
announcement, the share price increased by 10.3% to close at $0.160, before decreasing by 12.5% over the
subsequent three-day period to close at $0.140.
On 3 November 2023, MC Mining announced the receipt of a notice of intention to make a takeover offer
from Senosi and Dendocept, sent on behalf of shareholders and associates stated to represent in aggregate
64.5% of the issued capital in the Company at the time. The announcement outlined the indicative details
of the proposal including an indicative cash consideration offer range of $0.20 to $0.23 per share. On the
date of the announcement the share price increased by 46.2% to close at $0.190, before decreasing by
10.5% over the subsequent three-day period to close at $0.170.
To provide further analysis of the QMP of an MC Mining share, we have also considered the VWAP for 10-,
30-, 60- and 90-day periods to 23 August 2024.
Share price per unit 23-Aug-24 10 days 30 days 60 days 90 days
Closing price $0.037
Volume weighted average price (VWAP) $0.056 $0.056 $0.088 $0.098
Source: Bloomberg and BDO analysis
The above VWAPs are prior to the date of the announcement of the Proposed Transaction, to avoid the
influence of any movements in the price of MC Mining shares that have occurred since the Proposed
Transaction was announced.
An analysis of the volume of trading in MC Mining shares over the period from 23 August 2023 to 23 August
2024 set out below:
Trading days Share price Share price Cumulative volume As a % of
low high traded issued capital
1 day $0.037 $0.042 989,122 0.21%
10 days $0.037 $0.140 2,279,617 0.48%
30 days $0.037 $0.140 2,279,617 0.48%
60 days $0.037 $0.160 3,385,964 0.71%
90 days $0.037 $0.170 4,045,157 0.85%
180 days $0.037 $0.170 6,703,639 1.41%
1 year $0.037 $0.215 8,269,536 1.74%
Source: Bloomberg and BDO analysis
35
This table indicates that MC Mining's shares display a low level of liquidity, with 1.74% of the Company's
issued capital being traded in a twelve month period. RG 111.86 states that for the quoted market price
methodology to be an appropriate methodology there needs to be a 'liquid and active' market in the
shares and allowing for the fact that the quoted price may not reflect their value should 100% of the
securities not be available for sale. We consider the following characteristics to be representative of a
liquid and active market:
• Regular trading in a company's securities.
• Approximately 1% of a company's securities are traded on a weekly basis.
• The spread of a company's shares must not be so great that a single minority trade can significantly
affect the market capitalisation of a company.
• There are no significant but unexplained movements in share price.
A company's shares should meet all of the above criteria to be considered 'liquid and active', however,
failure of a company's securities to exhibit all of the above characteristics does not necessarily mean that
the value of its shares cannot be considered relevant.
In the case of MC Mining, we consider the market for MC Mining's shares to be neither liquid, nor active,
with less than 1% of the Company's issued capital being traded on a weekly basis over the assessed twelve
month period. Furthermore, there were 139 trading days over the assessed period where there was no
trading in MC Mining shares.
Notwithstanding the low levels of liquidity, our assessment is that a range of values for an MC Mining share
based on market pricing, after disregarding post-announcement pricing, is between $0.035 and $0.060.
QMP of an MC Mining share on the JSE
Despite MC Mining's primary listing being on the ASX, we have also considered the QMP of MC Mining's
shares traded on the JSE for comparative purposes. The following chart provides a summary of the closing
share price movements and trading volume over this period.
MC Mining share price and trading volume history
2.500 0.8
0.7
2.000
0.6
Closing price (ZAR)
0.5 Volume (millions)
1.500
0.4
1.000 0.3
0.2
0.500
0.1
0.000 0
Volume Closing price
Source: Bloomberg and BDO analysis
The daily price of an MC Mining share over the period from 23 August 2023 to 23 August 2024 ranged from
a low of ZAR 1.50 on 1 February 2024 to a high of ZAR 2.23 on 20 September 2023. The largest single day
of trading over the assessed period was 9 April 2024, when 688,520 shares were traded.
36
To provide further analysis of the QMP of an MC Mining share, we have also considered the VWAP for 10-,
30-, 60- and 90-day periods to 23 August 2024.
Share price per unit 23-Aug-24 10 days 30 days 60 days 90 days
Closing price ZAR 1.60
Volume weighted average price (VWAP) ZAR 1.68 ZAR 1.72 ZAR 1.83 ZAR 1.85
Source: Bloomberg and BDO analysis
The above VWAPs are prior to the date of the announcement of the Proposed Transaction, to avoid the
influence of any movements in the price of MC Mining shares that have occurred since the Transaction was
announced.
An analysis of the volume of trading in MC Mining shares over the period from 23 August 2023 to 23 August
2024 set out below:
Trading days Share price Share price Cumulative volume As a % of
low high traded issued capital
1 day ZAR 1.60 ZAR 1.60 57,500 0.01%
10 days ZAR 1.60 ZAR 1.90 116,749 0.02%
30 days ZAR 1.60 ZAR 1.90 152,821 0.03%
60 days ZAR 1.52 ZAR 1.94 513,259 0.11%
90 days ZAR 1.52 ZAR 2.05 1,977,028 0.42%
180 days ZAR 1.45 ZAR 2.10 10,902,727 2.29%
1 year ZAR 1.45 ZAR 2.28 15,518,964 3.26%
Source: Bloomberg and BDO analysis
This table indicates that MC Mining's shares display a low level of liquidity, with 3.26% of the Company's
issued capital being traded in a twelve month period. However, we note that there is an observable
difference in the cumulative volume traded on the ASX and the JSE, with the cumulative volume traded on
the JSE being approximately 88% greater than the cumulative volume traded on the ASX over the same
assessed period.
Based on the above, we consider the market for MC Mining's shares on the JSE to be neither liquid, nor
active, with less than 1% of the Company's issued capital being traded on a weekly basis over the assessed
period. Furthermore, there were 75 trading days over the assessed period where there was no trading in
MC Mining shares.
Given the lack of liquidity on the ASX and the LSE, we have assessed the value range based on trading on
the ASX, which is the Company's primary exchange.
Control premium
We have reviewed the control premiums on completed transactions, paid by acquirers of ASX-listed coal
mining companies, ASX-listed energy companies, and all ASX-listed companies over the ten-year period
from January 2014 to August 2024.
In assessing the appropriate sample of transactions from which to determine an appropriate control
premium, we have excluded transactions where an acquirer obtained a controlling interest (20% and
above) at a discount (i.e., less than a 0% premium) and at a premium in excess of 100%. We have
summarised our findings below:
37
ASX-listed coal mining companies
Average Deal Value Average Control Premium
Year Number of Transactions
($m) (%)
2024 - - -
2023 - - -
2022 - - -
2021 - - -
2020 2 85.36 29.39
2019 1 13.32 7.04
2018 1 226.41 73.41
2017 1 147.78 97.80
2016 1 0.21 37.34
2015 4 19.73 29.65
2014 1 15.19 38.34
Source: Bloomberg and BDO analysis
ASX-listed energy companies
Average Deal Value Average Control Premium
Year Number of Transactions
($m) (%)
2024 - - -
2023 4 225.42 11.61
2022 2 1,875.97 8.14
2021 1 12,692.96 9.84
2020 4 403.46 23.39
2019 2 13.32 18.64
2018 4 231.55 34.79
2017 2 79.32 67.87
2016 2 169.96 29.33
2015 8 65.56 22.12
2014 4 684.22 64.78
Source: Bloomberg and BDO analysis
All ASX-listed companies
Average Deal Value Average Control Premium
Year Number of Transactions
($m) (%)
2024 21 717.14 25.05
2023 35 421.28 27.41
2022 39 3,199.03 23.39
2021 28 1,095.24 35.17
2020 16 367.97 40.43
2019 29 4,165.55 32.83
2018 26 1,571.79 30.07
2017 24 1,168.71 36.75
38
Average Deal Value Average Control Premium
Year Number of Transactions
($m) (%)
2016 28 490.46 38.53
2015 28 948.39 33.53
2014 35 394.93 38.31
Source: Bloomberg and BDO analysis
The mean and median of the entire data sets comprising control transactions from 2014 onwards for ASX-
listed energy companies, ASX-listed coal companies and all ASX-listed companies are set out below:
ASX-listed coal companies ASX-listed energy companies All ASX listed companies
Entire Data Set Control Control Control
Metrics Deal Value Deal Value Deal Value
Premium Premium Premium
($m) ($m) ($m)
(%) (%) (%)
Mean 59.32 39.21 717.37 29.49 1,396.10 32.37
Median 15.19 37.34 54.79 21.32 134.96 28.36
Source: Bloomberg and BDO analysis
In arriving at an appropriate control premium to apply, we note that observed control premiums can vary
due to the:
• Nature and magnitude of non-operating assets
• Nature and magnitude of discretionary expenses
• Perceived quality of existing management
• Nature and magnitude of business opportunities not currently being exploited
• Ability to integrate the acquiree into the acquirer's business
• Level of pre-announcement speculation of the transaction
• Level of liquidity in the trade of the acquiree's securities.
When performing our control premium analysis, we consider completed transactions where the acquirer
held a controlling interest, defined at 20% or above, pre-transaction or proceed to hold a controlling
interest post-transaction in the target company.
We have removed transactions for which the announced premium was in excess of 100%. We have removed
these transactions because we consider it likely that the acquirer in these transactions would be paying
for special value and/or synergies in excess of the standard premium for control. Whereas the purpose of
this analysis is to assess the premium that is likely to be paid for control, not specific value to the
acquirer.
The table above indicates that the long-term average control premium by acquirers of ASX-listed coal
mining companies, ASX-listed energy companies and all ASX-listed companies is approximately 39.21%,
29.49%, and 32.37% respectively. However, in assessing the transactions included in the table above, we
noted that control premiums appeared to be positively skewed.
In population where the data is skewed, the median often represents a superior measure of central
tendency compared to the mean. We note that the median announced control premium over the assessed
period was approximately 37.34% for ASX-listed coal mining companies, 21.32% for ASX-listed energy
companies, and 28.36% for all ASX-listed companies.
Based on the above, we consider an appropriate premium for control to be between 25% and 35%.
39
QMP including control premium
Applying a control premium to MC Mining's QMP results in the following QMP value including a premium for
control:
Low High
QMP valuation of an MC Mining share
$ $
QMP $0.035 $0.060
Control premium 25% 35%
QMP valuation including a premium for control $0.044 $0.081
Source: BDO analysis
Therefore, our valuation of an MC Mining share based on the QMP methodology and including a premium
for control is between $0.044 and $0.081, with our preferred QMP value of an MC Mining share being a
rounded midpoint value of $0.062. We have selected a midpoint between the low and high values as the
preferred value, as there is no reason for us to select a value on either end of the above assessed range.
10.3 Goldway Takeover Offer Price
Given the low level of liquidity of MC Mining shares as assessed in Section 10.2, we have also considered
the offer price in connection with the Goldway Takeover. As detailed in Section 5, over the period from 2
February 2024 to 22 April 2024, the Company was the subject of an off-market takeover conducted by
Goldway, a consortium established by Senosi, Dendocept, and a group of MC Mining shareholders and
associates.
Prior to the offer, the Consortium held 64.3% of the issued capital of the Company. At the end of the offer
period, the Consortium held approximately 93.1% of the issued capital of the Company, representing an
acquisition of 28.8% of the issued capital of the Company.
We consider the offer price to be a relevant indicator of the market value of an MC Mining share prior to
the Proposed Transaction, as the Goldway Takeover represents an arm's length transaction between a
willing buyer and many willing sellers. The offer price under the Goldway Takeover was $0.16 for every
MC Mining share accepted into the offer.
The Goldway Takeover was made over the remaining ordinary shares on issue in the Company which were
not currently held by the Consortium. Therefore, the offer price represents a controlling interest value.
40
10.4 Assessment of the value of an MC Mining share prior to the Proposed
Transaction
The results of the valuations performed are summarised in the table below:
Low Preferred High
Value of an MC Mining share prior to the Proposed Transaction Ref
A$ A$ A$
Sum-of-Parts (controlling interest basis) 10.1 0.168 0.253 0.337
QMP (controlling interest basis) 10.2 0.044 0.062 0.081
Goldway Takeover offer price (controlling interest basis) 10.3 0.160 0.160 0.160
Source: BDO analysis
We consider the Sum-of-Parts approach to be the most appropriate valuation methodology to value MC
Mining, as the core value of the Company lies in its interest in the Makhado Project, Uitkomst, Vele and
the GSP, which have all been independently valued by SRK, an independent technical specialist, in
accordance with the VALMIN Code and ASIC's Regulatory Guides. Further, the QMP approach is only
appropriate where there is a liquid and active market for the Company's shares. Given that our liquidity
analysis in Section 10.2 indicates that MC Mining's shares display a low level of liquidity, we do not
consider it appropriate to consider the QMP methodology in our valuation assessment of an MC Mining
share prior to the Proposed Transaction. As a result, our valuation range has been solely informed by the
values derived under the Sum-of-Parts approach. Further, we consider the offer price under the Goldway
Takeover to be relevant for the purposes of a broad cross-check to our valuation under the Sum-of-Parts
approach. We note that the offer price under the Goldway Takeover broadly supports the low value under
our Sum-of-Parts approach.
The difference in the valuation results under these valuation approaches are explained by the following:
• As determined by our liquidity analysis in Section 10.2, MC Mining's shares display a low level of
liquidity. This is likely attributable to the free float of the Company's shares being at a relatively
low level, due to the existence of several substantial shareholders of the Company over the
assessed period, namely Goldway, Senosi, Shining Capital GP Ltd and Dendocept. Therefore, the
market price of MC Mining's shares may not reflect the underlying value of the Company.
• The assumptions made by SRK in assessing the value of MC Mining's mineral assets may be more
optimistic than those made by the market.
• The market price may be influenced by the negative sentiment surrounding coal companies,
whereas the SRK valuation is based on comparable asset transactions at the project level, which
may not reflect equivalent levels of negative sentiment compared to listed coal companies.
Based on the above assessment, we consider the value of an MC Mining share prior to the Proposed
Transaction (on a controlling interest basis) to be in the range of $0.168 to $0.337, with a preferred value
of $0.253.
41
11. Valuation of MC Mining following the Proposed Transaction
11.1 Sum-of-Parts valuation
We have employed the Sum-of-Parts methodology in estimating the fair market value of an MC Mining
share following the Proposed Transaction (on a minority interest basis), by aggregating the estimated fair
market values of the underlying assets and liabilities, having considerations to the following:
• The value of MC Mining prior to the Proposed Transaction, as assessed in Section 10 of our Report
• The cash raised from the Second Subscription, and the resulting shares issued to KDG.
The summary of our Sum-of-Parts valuation is set out in the table below:
Low Preferred High
Valuation of MC Mining following the Proposed Transaction Ref
ZAR m ZAR m ZAR m
Value of MC Mining's interest in the Makhado Project 10.1.1 438.04 620.37 802.71
Value of MC Mining's interest in the Uitkomst Colliery 10.1.2 31.27 44.29 57.31
Value of the Vele Colliery 10.1.3 382.95 542.35 701.75
Value of MC Mining's interest in the GSP 10.1.4 262.91 382.48 502.05
Value of MC Mining's other assets and liabilities 10.1.5 (176.24) (176.24) (176.24)
Cash raised from the Second Subscription 11.1.1 1,351.87 1,351.87 1,351.87
Total value of MC Mining following the Proposed
2,290.80 2,765.12 3,239.45
Transaction (control) (ZAR m)
Number of MC Mining shares on issue following the
11.1.2 844,925,202 844,925,202 844,925,202
Proposed Transaction
Value per MC Mining share following the Proposed
2.711 3.273 3.834
Transaction (control) (ZAR/share)
Minority interest discount 11.1.3 26% 23% 20%
Value per MC Mining share following the Proposed
2.006 2.520 3.067
Transaction (minority) (ZAR/share)
AUD/ZAR exchange rate assumed* 11.75 11.75 11.75
Value per MC Mining share following the Proposed
0.171 0.214 0.261
Transaction (minority) (A$/share)
*Based on the 30-day average of the AUD/ZAR exchange rate to 7 November 2024
Source: BDO analysis
Based on the above, we have assessed the value of an MC Mining share (on a minority interest basis) to be
in the range of $0.171 to $0.261, with a preferred value of $0.214.
11.1.1 Cash raised from the Second Subscription
As outlined in Section 4, under the Proposed Transaction, KDG will subscribe for 368,809,851 shares in MC
Mining for cash consideration of US$77,029,412. Therefore, we have included the cash proceeds to be
received from KDG under the Second Subscription in our Sum-of-Parts valuation. The cash to be raised
from the Second Subscription translates to ZAR 1,351.87 million, as set out in the table below.
Cash raised from the Second Subscription
Proceeds from the Second Subscription (US$) 77,029,412
USD/ZAR exchange rate assumed* 17.55
Cash raised from the Second Subscription (ZAR m) 1,351.87
*Based on the 30-day average of the USD/ZAR exchange rate to 7 November 2024
42
11.1.2 Number of MC Mining shares on issue following the Proposed
Transaction
The total number of MC Mining shares on issue following the Proposed Transaction is set out below:
Shares on issue following the Proposed Transaction
Shares on issue prior to the Proposed Transaction 476,115,351
Number of shares to be issued to KDG under the Second Subscription 368,809,851
Total number of MC Mining shares on issue following the Proposed Transaction 844,925,202
11.1.3 Minority interest discount
As outlined in Section 9 of our Report, in assessing fairness we have compared the value of an MC Mining
share prior to the Proposed Transaction on a controlling interest basis to the value of an MC Mining share
following the Proposed Transaction on a minority interest basis, in accordance with RG 111.
The value of an MC Mining share following the Proposed Transaction derived under the Sum-of-Parts
approach is reflective of a controlling interest. Therefore, we have adjusted our valuation of an MC Mining
share following the Proposed Transaction to reflect a minority interest holding. A minority interest
discount is the inverse of a premium for control and is calculated using the formula 1-(1/(1 + control
premium)).
Based on our analysis in Section 10.2, we consider an appropriate control premium to be in the range of
25% to 35%, which gives rise to a rounded minority interest discount in the range of 20% to 26%.
11.2 QMP valuation
To provide a comparison to the valuation of an MC Mining share following the Proposed Transaction in
Section 11.1, we have also assessed the QMP of an MC Mining share utilising QMPs of MC Mining shares
following the announcement of the Proposed Transaction.
The QMPs of MC Mining shares in the period following the announcement of the Proposed Transaction is
considered to be an indicator of the value of an MC Mining share following the Proposed Transaction,
because market participants are fully informed as to the terms of the Proposed Transaction, with the
price of MC Mining shares reflecting the market's view of value. This value includes the funds to be raised
under the Second Subscription and the resulting shares issued to KDG.
We have analysed the movements of MC Mining's share price since the Proposed Transaction was
announced. A graph of MC Mining's share price and trading volume leading up to, and following the
announcement of the Proposed Transaction is set out below.
43
Post-announcement pricing of MC Mining
0.250 7
6
0.200
5
Volume (millions)
Closing price ($)
0.150 Announcement of 4
the Proposed
Transaction 3
0.100
2
0.050
1
0.000 0
Volume Closing Price
Source: Bloomberg and BDO analysis
The Proposed Transaction was announced on 28 August 2024. On the first trading day following the
announcement, the share price closed at $0.125, up from the closing price of $0.037 on the previous
trading day. On that day, 6,492,000 shares were traded, representing approximately 1.6% of MC Mining's
issued capital. Following the announcement of the Proposed Transaction, the share price of MC Mining has
fluctuated from a low of $0.125 on 29 August 2024, to a high of $0.235 on 2 September 2024.
To provide further analysis of the QMP of an MC Mining share following the announcement of the Proposed
Transaction, we have also considered the VWAP for the below periods following the announcement up to 6
November 2024.
From announcement
Share price per unit 06-Nov-24 5 days 10 days 15 days
to 6-Nov-24
Closing price $0.165
VWAP $0.151 $0.140 $0.136 $0.161
Source: Bloomberg and BDO analysis
In accordance with the guidance in RG 111, we also consider it appropriate to assess the liquidity of MC
Mining's shares before utilising the QMP methodology to value an MC Mining share following the Proposed
Transaction. An analysis of the volume of trading in MC Mining shares over the period from 28 August 2024
to 6 November 2024 is set out below:
Trading days following the Share price Share price Cumulative volume As a % of
announcement of the Proposed
Transaction low high traded issued capital
1 day $0.060 $0.170 6,492,000 1.36%
5 days $0.060 $0.260 13,796,917 2.90%
10 days $0.060 $0.260 14,562,414 3.06%
15 days $0.060 $0.260 15,952,205 3.35%
20 days $0.060 $0.260 16,353,017 3.43%
25 days $0.060 $0.260 16,609,953 3.49%
30 days $0.060 $0.260 16,630,848 3.49%
To 6 November 2024 (50 days) $0.060 $0.260 17,406,159 3.66%
Source: Bloomberg and BDO analysis
44
The table above indicates that MC Mining's shares display a low level of liquidity over the assessed period
following the announcement of the Proposed Transaction, with 3.66% of MC Mining's current issued capital
being traded over the assessed period following the announcement of the Proposed Transaction (50
trading days to 6 November 2024).
As detailed in our QMP valuation of an MC Mining share prior to the Proposed Transaction in Section 10.1,
RG 111.86 states that for the quoted market price methodology to be an appropriate methodology there
needs to be a 'liquid and active' market in the shares and allowing for the fact that the quoted price may
not reflect their value should 100% of the securities not be available for sale. We consider the following
characteristics to be representative of a liquid and active market:
• Regular trading in a company's securities.
• Approximately 1% of a company's securities are traded on a weekly basis.
• The spread of a company's shares must not be so great that a single minority trade can significantly
affect the market capitalisation of a company.
• There are no significant but unexplained movements in share price.
Over the assessed period following the Proposed Transaction, we consider the market for MC Mining's
shares to be neither liquid, nor active, with less than 1% of the Company's issued capital being traded on a
weekly basis over the assessed period. Furthermore, there were five trading days over the assessed 50-day
period where there was no trading in MC Mining shares.
Based on the above analysis, we do not consider there to be sufficient liquidity in MC Mining's shares
following the announcement of the Proposed Transaction in order to utilise the post-announcement pricing
as an approach to assessing the value of an MC Mining share following the Proposed Transaction. We also
note that there are other market factors which may influence the MC Mining share price following the
announcement on 28 August 2024, such as industry changes, commodity prices, significant corporate
actions and other market factors.
Notwithstanding the low levels of liquidity, our assessment is that a range of values for an MC Mining share
based on post-announcement market pricing, is between $0.135 and $0.165.
45
11.3 Assessment of the value of an MC Mining share following the Proposed
Transaction
The results of the valuations performed are summarised in the table below:
Low Preferred High
Value of an MC Mining share following the Proposed Transaction Ref
A$ A$ A$
Sum-of-Parts (minority interest basis) 11.1 0.171 0.214 0.261
QMP (minority interest basis) 11.2 0.135 0.150 0.165
Source: BDO analysis
Similar to the reasons as detailed in Section 10.3 of our Report, we consider the Sum-of-Parts approach to
be the most appropriate valuation methodology to value MC Mining, as the core value of the Company lies
in its interest in the Makhado Project, Uitkomst, Vele and the GSP, which have all been independently
valued by SRK, an independent technical specialist, in accordance with the VALMIN Code and ASIC's
Regulatory Guides. Further, the QMP approach is only appropriate where there is a liquid and active
market for the Company's shares. Given that our liquidity analysis in Section 11.2 indicates that MC
Mining's shares display a low level of liquidity, we do not consider it appropriate to consider the QMP
methodology in our valuation assessment of an MC Mining share following the Proposed Transaction. As a
result, our valuation range has been informed by the values derived under the Sum-of-Parts approach.
Notwithstanding the above, we consider the QMP approach to be relevant for the purposes of a broad
cross-check to our valuation under the Sum-of-Parts approach.
Based on the above assessment, we consider the value of an MC Mining share following the Proposed
Transaction (on a controlling interest basis) to be in the range of $0.171 to $0.261, with a preferred value
of $0.214.
46
12. Is the Proposed Transaction fair?
The value of an MC Mining share prior to the Proposed Transaction (on a controlling basis), and the value
of an MC Mining share following the Proposed Transaction (on a minority interest basis) is compared
below:
Ref Low Preferred High
$ $ $
Value of an MC Mining share prior to the Proposed Transaction
10 0.168 0.253 0.337
(controlling interest basis)
Value of an MC Mining share following the Proposed Transaction
11 0.171 0.214 0.261
(minority interest basis)
Source: BDO analysis
The above valuation ranges are graphically presented below:
Valuation Summary
Value of an MC Mining share prior to the Proposed
Transaction (controlling interest basis)
Value of an MC Mining share following the
Proposed Transaction (minority interest basis)
- 0.100 0.200 0.300 0.400
Value (A$)
The above pricing indicates that the Proposed Transaction is not fair for Shareholders. We consider the
Proposed Transaction to be not fair because the value of an MC Mining share following the Proposed
Transaction (on a minority interest basis) is lower than the value of an MC Mining share prior to the
Proposed Transaction (on a controlling interest basis) under the preferred and high end of our valuation
range.
47
13. Is the Proposed Transaction reasonable?
We have considered the analysis below, in terms of the following:
• Advantages and disadvantages of the Proposed Transaction.
• Other considerations, including the position of Shareholders if the Proposed Transaction does not
proceed and the consequences of not approving the Transaction.
In our opinion, the position of Shareholders if the Proposed Transaction is approved is more advantageous
than the position if the Proposed Transaction is not approved. Accordingly, in the absence of any other
relevant information and/or an alternate proposal we consider that the Proposed Transaction is
reasonable for Shareholders.
13.1 Advantages of approving the Proposed Transaction
We have considered the following advantages in our assessment of whether the Proposed Transaction is
reasonable.
13.1.1. Funds raised under the Second Subscription will allow the
Company to advance its projects
As detailed in Section 10.1.5 of our Report, MC Mining currently has cash and cash equivalents of
approximately US$13 million. Following the Proposed Transaction, the Company will receive US$77.03
million, which will be used to advance the Makhado Project to production as well as to accelerate the
development of the Company's other mineral assets, specifically the Vele Colliery and the GSP.
13.1.2. The Company will be able to leverage KDG's experience and
expertise to optimise the development of its projects
If Shareholders approve the Proposed Transaction, KDG intends to be involved in the Company's
operations, including advancing the development of its projects. In addition, KDG will be entitled (and is
expected) to appoint additional directors to the board of the Company, such that its nominee directors
constitute a majority of the Company's directors.
KDG is an integrated coal mining and trading group with extensive operational experience and expertise
across the entire coal industry supply chain. In particular, KDG developed the Dafanpu Coal Mine since its
establishment into a coal producing asset. As a result, the Company will be able to leverage KDG's
expertise as an integrated coal enterprise to minimise project implementation risk and optimise
operational efficiency across the Company's projects.
13.1.3. The Proposed Transaction will allow the Company to continue as a
going concern and meet its working capital requirements
As outlined in Section 4 of our Report, the Company's auditor highlighted a material uncertainty over the
Company's ability to continue as a going concern in its audit reports for the years ended 30 June 2022, 30
June 2023 and 30 June 2024.
Specifically, the Company's auditor outlined that the ability to continue as a going concern is dependent
on future debt and equity funding at a level satisfactory to enable ongoing operations and future
developments to be completed.
If Shareholders approve the Proposed Transaction, this will provide the Company with US$77.03 million,
which will allow the Company to continue as a going concern and meet its working capital requirements.
48
As detailed in Section 4 of our Report, the Company intends to use the proceeds raised from the Second
Subscription for the following purposes:
• Maintenance, security and compliance costs related to the Makhado Project, the Vele Colliery and
the GSP
• Commissioning of a coal handing and preparation plant at the Makhado Project
• Establishment of power and water infrastructure and civil works at the Makhado Project
• Partial repayment of certain outstanding loans.
13.2 Disadvantages of approving the Proposed Transaction
We have considered the following disadvantages in our assessment of whether the Proposed Transaction is
reasonable.
13.1.1. Shareholders' interests in the Company will be diluted and they
will have a reduced level of control over the Company
If Shareholders approve the Proposed Transaction, KDG's interest in the Company will increase from
13.04% to 51%. As a result, existing Shareholders' interests in the Company will be diluted from 86.96% to
49.00% following the Proposed Transaction. Therefore, Shareholders' ability to participate in the potential
upside of the Company's projects will be reduced following the Proposed Transaction.
Following the Proposed Transaction, KDG's control of MC Mining will be significant when compared to all
other shareholders. Specifically, KDG will be able to pass and block general resolutions, and block special
resolutions.
However, as detailed in Section 13.5 below, alternative sources of funding may be less advantageous to
the Company and/or more dilutive to Shareholders compared to the terms of the SSA.
13.1.2. Future takeover offers may be deterred
If Shareholders approve the Proposed Transaction, there will be several substantial shareholders in the
Company. Specifically, there will be a single shareholder (KDG) that will hold a 51% interest in the
Company that will be able to prevent Shareholders receiving a takeover premium. In addition, the top five
substantial shareholders will hold an aggregate 85% interest in the Company.
The existence of large substantial shareholders with the ability to pass and block general resolutions, and
block special resolutions may deter future takeover offers, reducing the likelihood of Shareholders
receiving a takeover premium in the future.
13.3 Alternative proposal
We are unaware of any alternative proposal that might offer Shareholders a premium over the value
resulting from the Proposed Transaction. Management of MC Mining have assessed alternative funding
options and deemed the Proposed Transaction to be most beneficial to the Company and its shareholders.
13.4 Practical level of control
When shareholders are required to approve a matter that relates to a company, there are two types of
approval levels. These are general resolutions and special resolutions. A general resolution requires 50% of
shares to be voted in favour to approve a matter, and a special resolution requires 75% of shares on issue
to be voted in favour to approve a matter. If the Proposed Transaction is approved, then KDG will hold an
49
interest of 51% in MC Mining. As a result, KDG will be able to pass and block general resolutions, and block
special resolutions.
MC Mining's Board currently comprises seven directors. Following the Proposed Transaction, KDG is
entitled (and is expected) to appoint additional directors to the board of the Company, such that its
nominee directors constitute a majority of the Company's directors.
Based on the above, KDG's control of MC Mining following the Proposed Transaction will be significant
when compared to all other shareholders.
13.5 Consequences of not approving the Proposed Transaction
The Company will not receive the funds to be raised under the Second Subscription
If Shareholders do not approve the Proposed Transaction, then the Company will not receive the funds to
be raised under the Second Subscription of US$77.03 million.
As set out in the Notice of Meeting, the funds raised will be used to advance the Makhado Project to
production, accelerate the development of the Company's other mineral assets, and for general working
capital purposes. Therefore, if Shareholders do not approve the Proposed Transaction, the Company will
likely need to pursue alternative funding options. As detailed in Section 13.3, management of MC Mining
have assessed alternative funding options and deemed the Proposed Transaction to be most beneficial to
the Company and its shareholders.
In the absence of the Proposed Transaction, the Company may face difficulties raising equity at more
favourable terms than under the Proposed Transaction. Therefore, any alternative equity raisings are
likely to be at a price lower than the Second Subscription Price of $0.32 per share, therefore diluting
existing Shareholders' interests in the Company by a larger magnitude than under the Proposed
Transaction.
In addition, given the current stage of the Company's assets, it is unlikely that the Company will be able
to obtain debt funding of the same magnitude as the funds to be raised under the Second Subscription.
Therefore, based on the above, alternative sources of funding may be less advantageous to the Company
and/or more dilutive to Shareholders compared to the terms of the SSA.
KDG has the right to request MC Mining to buy-back the shares issued under the First Subscription
As outlined in Section 4, if the Second Subscription is not completed within 270 days of the SSA (27 May
2025), other than as a result of KDG's breach, then KDG can request the Company to buy-back the shares
issued under the First Subscription.
Based on the Company's 30 September 2024 quarterly cash flow report, the Company had cash and cash
equivalents of US$10.8 million, being less than the US$13.0 million funds raised under the First
Subscription. Therefore, if Shareholders do not approve the Proposed Transaction and KDG exercises this
right, the Company in effect will return the funds initially raised under the First Subscription. As a result,
the Company will need to pursue alternative funding options, which may be less advantageous to the
Company and/or more dilutive to Shareholders compared to the terms of the SSA.
Shareholders will retain their existing ownership of the Company
If Shareholders do not approve the Proposed Transaction, then the Company will not issue the shares
under the Second Subscription. Therefore, Shareholders will retain their existing 86.96% ownership of the
Company in the first instance and then if KDG exercises its right to request the Company to buy back the
shares issued under the First Subscription, KDG will no longer have an interest in MC Mining.
50
Potential impact on share price
We have analysed movements in MC Mining's share price since the announcement of the Proposed
Transaction. A graph of MC Mining's share price and trading volume leading up to, and following the
announcement of the Proposed Transaction is set out below.
Post-announcement pricing of MC Mining
0.250 7
6
0.200
5
Volume (millions)
Closing price ($)
0.150 Announcement of 4
the Proposed
Transaction 3
0.100
2
0.050
1
0.000 0
Volume Closing Price
Source: Bloomberg and BDO analysis
The Proposed Transaction was announced on 28 August 2024. On the first trading day following the
announcement, the share price closed at $0.125, up from the closing price of $0.037 on the previous
trading day. On that day, 6,492,000 shares were traded, representing approximately 1.6% of MC Mining's
issued capital at the time. Following the announcement of the Proposed Transaction, the share price of
MC Mining has fluctuated from a low of $0.125 on 29 August 2024, to a high of $0.235 on 2 September
2024.
Given the above analysis it is likely that if the Proposed Transaction is not approved then MC Mining's
share price may decline to pre-announcement levels.
13.6 Other considerations
The Proposed Transaction is value accretive on a like-for-like basis
In our assessment of whether the Proposed Transaction is fair, we have assessed the value of an MC Mining
share prior to the Proposed Transaction on a controlling interest basis, to the value of an MC Mining share
following the Proposed Transaction on a minority interest basis. However, we note that on a like-for-like
basis, where the value of an MC Mining share is measured on a controlling interest basis both prior to, and
following the Proposed Transaction, the Proposed Transaction is value accretive under our assessed low
and preferred valuations, as outlined below:
Low Preferred High
A$ A$ A$
Value of an MC Mining share prior to the Proposed Transaction
$0.168 $0.253 $0.337
(controlling interest basis)
Value of an MC Mining share following the Proposed Transaction
$0.231 $0.279 $0.326
(controlling interest basis)
Source: BDO analysis
51
This analysis also indicates that whilst KDG is paying a premium for control, it is not the full control
premium that we have assessed an acquirer should pay. This assessment is detailed in Section 10.2 and is
based on historical premiums paid by ASX-listed companies as well as Company specific factors.
14. Sources of information
This report has been based on the following information:
• Draft Notice of Extraordinary Meeting on or about the date of this report
• Audited financial statements of MC Mining for the years ended 30 June 2022, 30 June 2023 and 30
June 2024
• Independent Specialist Report of MC Mining's mineral assets dated 27 November 2024 performed by
SRK Consulting (Australasia) Pty Ltd
• Share Subscription Agreement
• The Makhado Model, provided by MC Mining
• The Uitkomst Model, provided by MC Mining
• MC Mining's internal analysis of funding options for the Makhado Project, including indicative terms of
funding
• Share registry information
• S&P Capital IQ
• Bloomberg
• Consensus Economics
• Information in the public domain
• Discussions with the Independent Directors and Management of MC Mining.
15. Independence
BDO Corporate Finance Australia Pty Ltd is entitled to receive a fee of $65,000 (excluding GST and
reimbursement of out of pocket expenses). The fee is not contingent on the conclusion, content or future
use of this Report. Except for this fee, BDO Corporate Finance Australia Pty Ltd has not received and will
not receive any pecuniary or other benefit whether direct or indirect in connection with the preparation
of this report.
BDO Corporate Finance Australia Pty Ltd has been indemnified by MC Mining in respect of any claim arising
from BDO Corporate Finance Australia Pty Ltd's reliance on information provided by MC Mining, including
the non-provision of material information, in relation to the preparation of this report.
Prior to accepting this engagement BDO Corporate Finance Australia Pty Ltd has considered its
independence with respect to MC Mining, KDG, and any of their respective associates with reference to
ASIC Regulatory Guide 112 'Independence of Experts'. In BDO Corporate Finance Australia Pty Ltd's
opinion it is independent of MC Mining, KDG, and their respective associates.
A draft of this report was provided to MC Mining and its advisors for confirmation of the factual accuracy
of its contents. No significant changes were made to this report as a result of this review.
BDO is the brand name for the BDO International network and for each of the BDO Member firms.
BDO (Australia) Ltd, an Australian company limited by guarantee, is a member of BDO International
Limited, a UK company limited by guarantee, and forms part of the international BDO network of
52
Independent Member Firms. BDO in Australia, is a national association of separate entities (each of which
has appointed BDO (Australia) Limited ACN 050 110 275 to represent it in BDO International).
16. Qualifications
BDO Corporate Finance Australia Pty Ltd has extensive experience in the provision of corporate finance
advice, particularly in respect of takeovers, mergers and acquisitions.
BDO Corporate Finance Australia Pty Ltd holds an Australian Financial Services Licence issued by the
Australian Securities and Investments Commission for giving expert reports pursuant to the Listing rules of
the ASX and the Corporations Act.
The persons specifically involved in preparing and reviewing this report were Sherif Andrawes and Ashton
Lombardo of BDO Corporate Finance Australia Pty Ltd. They have significant experience in the preparation
of independent expert reports, valuations and mergers and acquisitions advice across a wide range of
industries in Australia and were supported by other BDO staff.
Sherif Andrawes is a Fellow of the Institute of Chartered Accountants in England & Wales and a Fellow of
Chartered Accountants Australia & New Zealand. He has over 35 years' experience working in the audit
and corporate finance fields with BDO and its predecessor firms in London and Perth. He has been
responsible for over 700 public company independent expert's reports under the Corporations Act or ASX
Listing Rules and is a CA BV Specialist. These expert's reports cover a wide range of industries in Australia
with a focus on companies in the natural resources sector. Sherif Andrawes is the Corporate Finance
Practice Group Leader of BDO in Western Australia, the Global Head of Natural Resources for BDO and a
former Chairman of BDO in Western Australia.
Ashton Lombardo is a member of the Australian Institute of Chartered Accountants, is a CA BV Specialist
and is member of the committee established to develop and maintain the VALMIN Code. Ashton has over
thirteen years of experience in Corporate Finance and has facilitated the preparation of numerous
independent expert's reports and valuations. Ashton has a Bachelor of Economics and a Bachelor of
Commerce from the University of Western Australia and has completed a Graduate Diploma of Applied
Corporate Governance with the Governance Institute of Australia.
17. Disclaimers and consents
This report has been prepared at the request of MC Mining for inclusion in the Notice of Meeting which will
be sent to all MC Mining shareholders. MC Mining engaged BDO Corporate Finance Australia Pty Ltd to
prepare an independent expert's report to consider the proposed issue of shares to KDG, which will result
in KDG's interest in MC Mining increasing from 13.04% to 51%.
BDO Corporate Finance Australia Pty Ltd hereby consents to this report accompanying the above Notice of
Meeting. Apart from such use, neither the whole nor any part of this report, nor any reference thereto
may be included in or with, or attached to any document, circular resolution, statement, or letter without
the prior written consent of BDO Corporate Finance Australia Pty Ltd.
BDO Corporate Finance Australia Pty Ltd takes no responsibility for the contents of the Notice of Meeting
other than this report.
We have no reason to believe that any of the information or explanations supplied to us are false or that
material information has been withheld. It is not the role of BDO Corporate Finance Australia Pty Ltd
acting as an independent expert to perform any due diligence procedures on behalf of the Company. The
Directors of the Company are responsible for conducting appropriate due diligence in relation to KDG. BDO
53
Corporate Finance Australia Pty Ltd provides no warranty as to the adequacy, effectiveness, or
completeness of the due diligence process.
The opinion of BDO Corporate Finance Australia Pty Ltd is based on the market, economic and other
conditions prevailing at the date of this report. Such conditions can change significantly over short periods
of time.
The forecasts provided to BDO Corporate Finance Australia Pty Ltd by MC Mining and its advisers are based
upon assumptions about events and circumstances that have not yet occurred. Accordingly, BDO Corporate
Finance Australia Pty Ltd cannot provide any assurance that the forecasts will be representative of results
that will actually be achieved.
With respect to taxation implications it is recommended that individual Shareholders obtain their own
taxation advice, in respect of the Proposed Transaction, tailored to their own particular circumstances.
Furthermore, the advice provided in this report does not constitute legal or taxation advice to the
shareholders of MC Mining, or any other party.
BDO Corporate Finance Australia Pty Ltd has also considered and relied upon independent valuations for
mineral assets held by MC Mining. The valuer engaged for the mineral asset valuation, SRK, possess the
appropriate qualifications and experience in the industry to make such assessments. The approaches
adopted and assumptions made in arriving at their valuation are appropriate for this report. We have
received consent from the valuer for the use of their valuation report in the preparation of this report and
to append a copy of their report to this report.
The statements and opinions included in this report are given in good faith and in the belief that they are
not false, misleading or incomplete.
The terms of this engagement are such that BDO Corporate Finance Australia Pty Ltd is required to provide
a supplementary report if we become aware of a significant change affecting the information in this
report arising between the date of this report and prior to the date of the meeting.
Yours faithfully
BDO CORPORATE FINANCE AUSTRALIA PTY LTD
Sherif Andrawes Ashton Lombardo
Director Director
54
Appendix 1 – Glossary of Terms
Reference Definition
A$ or $ Australian Dollars
The Act The Corporations Act 2001 (Cth)
The Models for the Makhado Project and Uitkomst adjusted for BDO's assessed economic
Adjusted Models
inputs and SRK's recommendations on the technical assumptions.
AFCA Australian Financial Complaints Authority
AIM Alternative Investment Market
AMSA ArcelorMittal South Africa Limited
ANC African National Congress
Accounting Professional & Ethical Standards Board professional standard APES 225
APES 225
'Valuation Services'
ASIC Australian Securities and Investments Commission
ASX Australian Securities Exchange
Baobab Baobab Mining and Exploration Pty Ltd
BDO BDO Corporate Finance Australia Pty Ltd
BEE Black Economic Empowerment
BFS Bankable feasibility study
BOA Biodiversity offset agreement
CHPP Coal handling and processing plant
The Company MC Mining Limited
Consortium A consortium established by Senosi, Dendocept and a group of MC Mining shareholders
and associates
Corporations Act The Corporations Act 2001 (Cth)
CPP Coal Processing Plant
55
Reference Definition
DCF Discounted Future Cash Flows
DEA Department of Environmental Affairs
Dendocept Dendocept Pty Ltd
Dendocept Facility Unsecured loan facility agreement with Dendocept
DFS Definitive feasibility study
DMRE Department of Mineral Resources & Energy
Eagle Canyon Eagle Canyon International Group Holding Limited
Eagle Canyon Facility Unsecured loan facility agreement with Eagle Canyon
EBIT Earnings before interest and tax
EBITDA Earnings before interest, tax, depreciation and amortisation
Erudite Erudite Pty Ltd
First Subscription First tranche involving KDG's first subscription of 13.04% of the Company's issued capital
for cash consideration of US$12,970,588
FME Future Maintainable Earnings
FSG Financial Services Guide
GDP Gross Domestic Product
Goldway Goldway Capital Investment Limited
Goldway Takeover Goldway's takeover of the Company
GSP Greater Soutpansberg Project
HKSE Hong Kong Stock Exchange
HOS Hlalethembeni Outsourcing Services Pty Ltd
HOS Mining Agreement A five-year contract mining agreement between MC Mining and HOS executed to
facilitate the recommissioning of the Vele Colliery CPP
IDC Industrial Development Corporation of South Africa Ltd
56
Reference Definition
Implementation Plan The five-year Makhado implementation plan, which improved the confidence levels for
the first five years of the Makhado BFS and previous feasibility studies, increasing the
estimated accuracy from +70% to approximately +90%
Independent Specialist Independent specialist report prepared by SRK
Report
IS 214 Mining and resources: Forward-looking statements (March 2011)
Item 7 s611 Item 7 of Section 611 of the Corporations Act 2001 (Cth)
JSE Johannesburg Stock Exchange
KCL Kinetic Crest Limited
KDG Kinetic Development Group Limited
Km Kilometres
Km2 Square kilometres
LOM Life-of-mine
LSE London Stock Exchange
MC Mining MC Mining Limited
Models Forecasted cash flow models provided to us by the Company
MPC The SARB's Monetary Policy Committee
MPRDA Mineral and Petroleum Resources Development Act
Mtpa Million tonnes per annum
NAV Net Asset Value
our Report This Independent Expert's Report prepared by BDO
Our BDO Corporate Finance Australia Pty Ltd
Overlooked Overlooked Pty Ltd
Paladar Paladar Resources Proprietary Limited
PP&E Property, plant and equipment
57
Reference Definition
Proposed Transaction The proposed transaction between MC Mining and KDG whereby KDG will increase its
interest in the Company to 51%
QMP Quoted market price
RBA The Reserve Bank of Australia
Repo Rate Repurchase rate
RG 74 Acquisitions approved by members (March 2011)
RG 111 Content of expert reports (March 2011)
RG 112 Independence of experts (March 2011)
RG 170 Prospective financial information (March 2011)
RG 9 Takeover bids (March 2011)
Rights Issue The Company's fully underwritten renounceable rights issue
ROM Run-of-mine
SARB The South African Reserve Bank
Second Subscription Second tranche involving KDG's second subscription for an additional 37.96% of the
Company's issued capital for cash consideration of US$77,029,412
Section 606 Section 606 of the Corporations Act 2001 Cth
Section 611 Section 611 of the Corporations Act 2001 Cth
Senosi Senosi Group Investment Holding Pty Ltd
Shareholders Shareholders of MC Mining not associated with KDG
SRK SRK Consulting (Australasia) Pty Ltd
SSA Share subscription agreement
Sum-of-Parts Sum-of-Parts valuation
Uitkomst Uitkomst Colliery
Us BDO Corporate Finance Australia Pty Ltd
58
Reference Definition
US United States of America
US$ or USD United States Dollars
VALMIN Code Australasian Code for Public Reporting of Technical Assessments and Valuation of
Mineral Assets (2015)
Vele The Vele Colliery
Vulcan Vulcan Resources Limited
WA Western Australia
We BDO Corporate Finance Australia Pty Ltd
ZAR South African Rand
Copyright © 2024 BDO Corporate Finance Australia Pty Ltd
All rights reserved. No part of this publication may be reproduced, published, distributed, displayed,
copied or stored for public or private use in any information retrieval system, or transmitted in any form
by any mechanical, photographic or electronic process, including electronically or digitally on the Internet
or World Wide Web, or over any network, or local area network, without written permission of the author.
No part of this publication may be modified, changed or exploited in any way used for derivative work or
offered for sale without the express written permission of the author.
For permission requests, write to BDO Corporate Finance Australia Pty Ltd, at the address below:
The Directors
BDO Corporate Finance Australia Pty Ltd
Level 9, Mia Yellagonga Tower 2
5 Spring Street
Perth, WA 6000
Australia
59
Appendix 2 – Valuation Methodologies
Methodologies commonly used for valuing assets and businesses are as follows:
1 Net asset value
Asset based methods estimate the market value of an entity's securities based on the realisable value of
its identifiable net assets. Asset based methods include:
Orderly realisation of assets method
Liquidation of assets method
Net assets on a going concern method
The orderly realisation of assets method estimates fair market value by determining the amount that
would be distributed to entity holders, after payment of all liabilities including realisation costs and
taxation charges that arise, assuming the entity is wound up in an orderly manner.
The liquidation method is similar to the orderly realisation of assets method except the liquidation
method assumes the assets are sold in a shorter time frame. Since wind up or liquidation of the entity may
not be contemplated, these methods in their strictest form may not be appropriate. The net assets on a
going concern method estimates the market values of the net assets of an entity but does not take into
account any realisation costs.
Net assets on a going concern basis are usually appropriate where the majority of assets consist of cash,
passive investments or projects with a limited life. All assets and liabilities of the entity are valued at
market value under this alternative and this combined market value forms the basis for the entity's
valuation.
Often the FME and DCF methodologies are used in valuing assets forming part of the overall Net assets on
a going concern basis. This is particularly so for exploration and mining companies where investments are
in finite life producing assets or prospective exploration areas.
These asset based methods ignore the possibility that the entity's value could exceed the realisable value
of its assets as they do not recognise the value of intangible assets such as management, intellectual
property and goodwill. Asset based methods are appropriate when an entity is not making an adequate
return on its assets, a significant proportion of the entity's assets are liquid or for asset holding
companies.
2 Quoted market price basis
A valuation approach that can be used in conjunction with (or as a replacement for) other valuation
methods is the quoted market price of listed securities. Where there is a ready market for securities such
as the ASX, through which shares are traded, recent prices at which shares are bought and sold can be
taken as the market value per share. Such market value includes all factors and influences that impact
upon the ASX. The use of ASX pricing is more relevant where a security displays regular high volume
trading, creating a liquid and active market in that security.
60
3 Capitalisation of future maintainable earnings
This method places a value on the business by estimating the likely FME, capitalised at an appropriate rate
which reflects business outlook, business risk, investor expectations, future growth prospects and other
entity specific factors. This approach relies on the availability and analysis of comparable market data.
The FME approach is the most commonly applied valuation technique and is particularly applicable to
profitable businesses with relatively steady growth histories and forecasts, regular capital expenditure
requirements and non-finite lives.
The FME used in the valuation can be based on net profit after tax or alternatives to this such as earnings
before interest and tax or earnings before interest, tax, depreciation and amortisation. The capitalisation
rate or 'earnings multiple' is adjusted to reflect which base is being used for FME.
4 Discounted future cash flows
The DCF methodology is based on the generally accepted theory that the value of an asset or business
depends on its future net cash flows, discounted to their present value at an appropriate discount rate
(often called the weighted average cost of capital). This discount rate represents an opportunity cost of
capital reflecting the expected rate of return which investors can obtain from investments having
equivalent risks.
Considerable judgement is required to estimate the future cash flows which must be able to be reliably
estimated for a sufficiently long period to make this valuation methodology appropriate.
A terminal value for the asset or business is calculated at the end of the future cash flow period and this is
also discounted to its present value using the appropriate discount rate.
DCF valuations are particularly applicable to businesses with limited lives, experiencing growth, that are
in a start-up phase, or experience irregular cash flows.
5 Market-based assessment
The market based approach seeks to arrive at a value for a business by reference to comparable
transactions involving the sale of similar businesses. This is based on the premise that companies with
similar characteristics, such as operating in similar industries, command similar values. In performing this
analysis it is important to acknowledge the differences between the comparable companies being analysed
and the company that is being valued and then to reflect these differences in the valuation.
The resource multiple is a market based approach which seeks to arrive at a value for a company by
reference to its total reported resources and to the enterprise value per tonne/lb/oz of the reported
resources of comparable listed companies. The resource multiple represents the value placed on the
resources of comparable companies by a liquid market.
61
Appendix 3 – Independent Specialist
Report
62
Cover Page
FINAL
Independent Specialist Report on the
Mineral Assets of MC Mining Limited
Uitkomst Colliery, Kwazulu Natal, South Africa
Vele Colliery, Limpopo, South Africa
Makhado Project, Limpopo, South Africa
Greater Soutpansberg Project, Limpopo, South Africa
Prepared for BDO Corporate Finance Australia Pty Ltd
SRK Consulting (Australasia) Pty Ltd BDO037 27 November 2024
Inside Cover Page
FINAL
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Kwazulu Natal and Limpopo provinces, South Africa
Prepared for:
BDO Corporate Finance Australia Pty Ltd
Level 9, Mia Yellagonga Tower 2, 5 Spring Street
Perth, WA, 6000
Australia
+61 8 6382 4600
www.bdo.com.au
Prepared by:
SRK Consulting (Australasia) Pty Ltd
Level 3, 18–32 Parliament Place
West Perth, WA, 6005
Australia
+61 8 9288 2000
www.srk.com
ABN. 56 074 271 720
Lead Author: Shaun Barry Initials: SB
Reviewer: Gerard McCaughan Initials: GMcC
File Name:
BDO037_MC Mining - ITVR_Rev4.docx
Suggested Citation:
SRK Consulting (Australasia) Pty Ltd. 2024. Independent Specialist Report on the Mineral Assets of
MC Mining Limited. FINAL. Prepared for Prepared for BDO Corporate Finance Australia Pty Ltd: Perth,
WA. Project number: BDO037. Issued 27 November 2024.
Copyright © 2024
SRK Consulting (Australasia) Pty Ltd BDO037 27 November 2024
Acknowledgments
The following consultants have contributed to the preparation of this report.
Role Name Professional designation
Contributing Author Shaun Barry BSc (Hons), MSc Eng, MAusIMM (CP), MRICS
Contributing Author Ian de Klerk BSc (Hons), MSc (Expl. Geol),GDip Eng (Mining Engineering), MAusIMM
BEng (Mechanical), BEng (Hons) (Mining), MBA, GDip (Mine Ventilation),
Contributing Author Jack Steenekamp
FAusIMM(CP), RPEQ
Contributing Author Richard Klecha City and Guilds 040 and 051 Coal Preparation Technology, MAusIMM
Contributing Author Ludovic Rollin BSc, MSc Eng, EUR ING (CP), MAusIMM
Peer Review Gerry McCaughan PhD (Geology), BA Nat Sci Hons (Geology), MAusIMM, MAIG
Releasing Authority Jeames McKibben BSc (Hons), MBA, FAusIMM(CP), MAIG, SME, MRICS
Disclaimer and Notices
Disclaimer: The opinions expressed in this Report have been based on the information supplied to SRK Consulting (Australasia)
Pty Ltd (SRK) by MC Mining Limited (MCM). The opinions in this Report are provided in response to a specific request from BDO
Corporate Finance Australia Pty Ltd (BDO) to do so. SRK has exercised all due care in reviewing the supplied information. While
SRK has compared key supplied data with expected values, the accuracy of the results and conclusions from the review are
entirely reliant on the accuracy and completeness of the supplied data. SRK does not accept responsibility for any errors or
omissions in the supplied information and does not accept any consequential liability arising from commercial decisions or actions
resulting from them. Opinions presented in this Report apply to the site conditions and features as they existed at the time of
SRK's investigations, and those reasonably foreseeable. These opinions do not necessarily apply to conditions and features that
may arise after the date of this Report, about which SRK had no prior knowledge nor had the opportunity to evaluate.
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Contents FINAL
Contents
Useful definitions ......................................................................................................................................................... ix
Executive summary ................................................................................................................................................... xiv
1 Introduction ......................................................................................................................................................... 1
1.1 Terms of reference and purpose of the Report .................................................................................................. 1
1.2 Reporting compliance, reporting standard and reliance ..................................................................................... 2
1.2.1 Scope of work ..................................................................................................................................... 2
1.2.2 Reporting standard .............................................................................................................................. 3
1.2.3 Work program ..................................................................................................................................... 3
1.2.4 Legal matters ...................................................................................................................................... 3
1.2.5 Effective Date ...................................................................................................................................... 3
1.3 Project team ....................................................................................................................................................... 4
1.4 Limitations, reliance on information, declaration and consent ........................................................................... 5
1.4.1 Limitations ........................................................................................................................................... 5
1.4.2 Statement of SRK independence ........................................................................................................ 5
1.4.3 Indemnities .......................................................................................................................................... 5
1.4.4 Consent ............................................................................................................................................... 5
1.4.5 Practitioner consent ............................................................................................................................ 6
1.4.6 Consulting fees ................................................................................................................................... 6
1.4.7 Units of measure and currency ........................................................................................................... 6
2 Overview of MC Mining ...................................................................................................................................... 7
2.1 Company background ........................................................................................................................................ 7
3 Uitkomst Colliery ................................................................................................................................................. 8
3.1 Overview ............................................................................................................................................................. 8
3.2 History................................................................................................................................................................. 9
3.3 Local geology ...................................................................................................................................................10
3.4 Exploration potential .........................................................................................................................................12
3.5 Coal Resources and Coal Reserves ................................................................................................................12
3.5.1 Coal Resources .................................................................................................................................12
3.5.2 Coal Reserves ...................................................................................................................................13
3.6 Mining ...............................................................................................................................................................14
3.7 Geotechnical .....................................................................................................................................................17
3.8 Processing ........................................................................................................................................................18
3.9 Infrastructure and services ...............................................................................................................................18
3.10 Environmental and social aspects ....................................................................................................................19
3.10.1 Mining rights and land access rights .................................................................................................19
3.10.2 Environmental approvals...................................................................................................................20
3.10.3 Social and Labour Plan .....................................................................................................................20
3.10.4 Environmental and social management ............................................................................................20
3.10.5 Mine closure provisions.....................................................................................................................21
3.11 Risks and opportunities ....................................................................................................................................24
4 Vele Aluwani Colliery ........................................................................................................................................26
4.1 Overview ...........................................................................................................................................................26
4.2 History...............................................................................................................................................................27
4.3 Local geology ...................................................................................................................................................27
4.4 Exploration potential .........................................................................................................................................33
4.5 Coal Resources and Coal Reserves ................................................................................................................33
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC iv
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Contents FINAL
4.5.1 Coal Resources .................................................................................................................................33
4.5.2 Coal Reserves ...................................................................................................................................36
4.6 Mining ...............................................................................................................................................................36
4.7 Geotechnical .....................................................................................................................................................37
4.8 Processing ........................................................................................................................................................38
4.9 Infrastructure and services ...............................................................................................................................40
4.10 Environmental and social aspects ....................................................................................................................41
4.10.1 Mining right and land access rights ...................................................................................................41
4.10.2 Environmental approvals...................................................................................................................43
4.10.3 Social and Labour Plan .....................................................................................................................44
4.10.4 Environmental and social management ............................................................................................44
4.10.5 Mine closure provisions.....................................................................................................................45
4.11 Risks and opportunities ....................................................................................................................................47
5 Makhado Project ...............................................................................................................................................48
5.1 Overview ...........................................................................................................................................................48
5.2 History...............................................................................................................................................................49
5.3 Local geology ...................................................................................................................................................49
5.4 Exploration potential .........................................................................................................................................52
5.5 Coal Resources and Coal Reserves ................................................................................................................52
5.5.1 Coal Resources .................................................................................................................................52
5.5.2 Coal Reserves ...................................................................................................................................54
5.6 Mining ...............................................................................................................................................................54
5.7 Geotechnical .....................................................................................................................................................57
5.7.1 Design studies ...................................................................................................................................57
5.7.2 Geotechnical conditions ....................................................................................................................57
5.7.3 Geotechnical data and analyses .......................................................................................................57
5.7.4 Recommended design – pit slopes ...................................................................................................58
5.7.5 Stockpiles ..........................................................................................................................................59
5.7.6 Recommendations for further work ...................................................................................................59
5.8 Processing ........................................................................................................................................................60
5.9 Infrastructure and services ...............................................................................................................................62
5.10 Environmental and social aspects ....................................................................................................................64
5.10.1 Mining rights and land access rights .................................................................................................64
5.10.2 Environmental approvals...................................................................................................................64
5.10.3 Social and Labour Plan .....................................................................................................................65
5.10.4 Environmental and social management ............................................................................................66
5.10.5 Mine closure provisions.....................................................................................................................67
5.11 Risks and opportunities ....................................................................................................................................68
6 Greater Soutpansberg Project ..........................................................................................................................70
6.1 Overview ...........................................................................................................................................................70
6.2 History...............................................................................................................................................................71
6.2.1 Mopane Project .................................................................................................................................71
6.2.2 Generaal Project ...............................................................................................................................72
6.2.3 Chapudi Project .................................................................................................................................73
6.3 Local geology ...................................................................................................................................................74
6.3.1 Mopane Project .................................................................................................................................75
6.3.2 Generaal Project ...............................................................................................................................79
6.3.3 Chapudi Project .................................................................................................................................82
6.4 Exploration potential .........................................................................................................................................87
6.5 Coal Resources ................................................................................................................................................87
6.5.1 Coal Resources .................................................................................................................................87
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC v
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Contents FINAL
6.6 Environmental and social aspects ....................................................................................................................88
6.6.1 Mining rights and land access rights .................................................................................................88
6.6.2 Environmental approvals...................................................................................................................90
6.6.3 Social and Labour Plan .....................................................................................................................90
6.6.4 Environmental and social management ............................................................................................90
6.6.5 Environmental liabilities and closure provisions ...............................................................................91
6.7 Risks and opportunities ....................................................................................................................................91
7 Other considerations ........................................................................................................................................92
7.1 Coal market ......................................................................................................................................................92
8 Valuation ...........................................................................................................................................................93
8.1 Valuation methodology .....................................................................................................................................93
8.2 Basis of valuation .............................................................................................................................................95
8.3 Previous valuations ..........................................................................................................................................95
8.4 Valuation of the Coal Resource ........................................................................................................................96
8.4.1 Summary of Coal Resource estimates .............................................................................................96
8.4.2 Actual transaction ..............................................................................................................................96
8.4.3 Comparable transactions ..................................................................................................................97
8.4.4 Peer group analysis ........................................................................................................................101
8.4.5 Yardstick .........................................................................................................................................102
8.5 Exploration potential value .............................................................................................................................105
9 Valuation summary .........................................................................................................................................106
9.1 Discussion on valuation ranges ......................................................................................................................109
References................................................................................................................................................................111
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC vi
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Contents FINAL
Tables
Table 1.1: Details of the qualifications and experience of the project team .............................................................. 4
Table 3.1: Historical exploration for the Uitkomst Colliery ........................................................................................ 9
Table 3.2: Uitkomst Coal Resources (as declared at 30 June 2023) ......................................................................13
Table 3.3: Uitkomst Coal Resources (as at 30 June 2024 – undisclosed) .............................................................13
Table 3.4: Uitkomst Coal Reserves as at 30 June 2023 (in 100% terms) ..............................................................14
Table 3.5: Uitkomst Coal Reserves as at 30 June 2024 – undisclosed (in 100% terms) .......................................14
Table 3.6: Uitkomst Colliery mining right .................................................................................................................19
Table 3.7: Uitkomst Colliery's total closure cost estimations – as at 7 August 2023 ..............................................24
Table 4.1: Vele seam thicknesses...........................................................................................................................32
Table 4.2: Vele Coal Resources – as at 30 June 2024 ...........................................................................................34
Table 4.3: Vele Coal Resources – mining right only ...............................................................................................35
Table 4.4: Vele Coal Resources – prospecting right only .......................................................................................35
Table 4.5: Vele Coal Reserves (100% attributable basis) ......................................................................................36
Table 4.6: Summary of Vele Colliery mining rights and surface rights ...................................................................42
Table 4.7: Vele Colliery's total closure cost estimations– as at June 2024 ............................................................46
Table 5.1: Makhado – modelled seam thicknesses ................................................................................................52
Table 5.2: Makhado Coal Resources (as declared at 30 June 2024) .....................................................................53
Table 5.3: Makhado Coal Reserves as at June 2024 in 100% terms .....................................................................54
Table 5.4: Makhado Colliery mining right ................................................................................................................64
Table 6.1: Greater Soutpansberg Coal Resource estimate (30 June 2024) ...........................................................88
Table 6.2: SRK reviewed list of Greater Soutpansberg Project mining rights ........................................................89
Table 8.1: Suggested valuation approaches according to development status ......................................................94
Table 8.2: Gross in situ Coal Resources (100% basis) ..........................................................................................96
Table 8.3: Actual transaction details as at 22 April 2024 ........................................................................................97
Table 8.4: Comparable market transaction statistics ..............................................................................................98
Table 8.5: Comparable market transaction valuation ...........................................................................................100
Table 8.6: Peer group analysis..............................................................................................................................101
Table 8.7: Peer group valuation ............................................................................................................................101
Table 8.8: Market transaction in situ values versus spot prices ............................................................................103
Table 8.9: Yardstick multiples ...............................................................................................................................103
Table 8.10: Yardstick valuation of Coal Resources ................................................................................................104
Table 9.1: Valuation summary of Coal Resources ................................................................................................107
Figures
Figure 2.1: Location of operations and projects ......................................................................................................... 7
Figure 3.1: Location of the Uitkomst Colliery .............................................................................................................. 8
Figure 3.2: Coalfields of South Africa .......................................................................................................................10
Figure 3.3: General stratigraphy of the coal zone in the Utrecht Coalfield ..............................................................11
Figure 3.4: Uitkomst Colliery overburden depth to the Gus Seam ...........................................................................15
Figure 3.5: Uitkomst Colliery mining panel layout ....................................................................................................16
Figure 4.1: Location of Vele Colliery ........................................................................................................................26
Figure 4.2: Vele and Makhado – general stratigraphy .............................................................................................28
Figure 4.3: Vele project seam stratigraphy ...............................................................................................................29
Figure 4.4: Vele East Pit, looking northeast .............................................................................................................30
Figure 4.5: Surface geology of the Vele area ...........................................................................................................31
Figure 4.6: Top Lower Seam depth illustrating different blocks due to faulting .......................................................32
Figure 4.7: Vele wash plant ......................................................................................................................................40
Figure 4.8: Summary of Vale Colliery mining rights and surface rights ...................................................................43
Figure 5.1: Location of Makhado Project ..................................................................................................................48
Figure 5.2: Makhado – diagrammatic cross section .................................................................................................50
Figure 5.3: Makhado – surface geology, aeromagnetic data and stratigraphy ........................................................51
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC vii
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Contents FINAL
Figure 5.4: Makhado proposed open pits .................................................................................................................55
Figure 5.5: Cross section of the coal seams ............................................................................................................56
Figure 5.6: Makhado CHPP block flowsheet ............................................................................................................61
Figure 6.1: Location of Greater Soutpansberg Project .............................................................................................70
Figure 6.2: Shareholding of Greater Soutpansberg Project .....................................................................................71
Figure 6.3: Projects comprising the Greater Soutpansberg Project .........................................................................75
Figure 6.4: Voorburg Section – surface geology and typical stratigraphy ................................................................76
Figure 6.5: Voorburg Section – seam thicknesses in metres ...................................................................................77
Figure 6.6: Voorburg Section – seam depths in metres ...........................................................................................77
Figure 6.7: Voorburg Section – theoretical product yield at RD 1.40 .......................................................................78
Figure 6.8: Jutland Section – surface geology and typical stratigraphy ...................................................................79
Figure 6.9: Mount Stuart Section – surface geology and typical stratigraphy ..........................................................80
Figure 6.10: Mount Stuart Section – seam thickness in metres .................................................................................81
Figure 6.11: Mount Stuart Section – seam depths in metres .....................................................................................81
Figure 6.12: Generaal Section – surface geology and typical stratigraphy ................................................................82
Figure 6.13: Chapudi Section – surface geology and typical stratigraphy .................................................................83
Figure 6.14: Chapudi Section – Seam 6 ....................................................................................................................84
Figure 6.15: Chapudi Section – Seam 6 ....................................................................................................................85
Figure 6.16: Wildebeesthoek Section – surface geology and typical stratigraphy .....................................................86
Figure 7.1: Richards Bay thermal coal price ............................................................................................................92
Figure 8.1: South African coal transactions classified ..............................................................................................98
Figure 8.2: In situ values versus spot prices, selected metals and minerals .........................................................102
Appendices
Appendix A Comparable market transactions
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC viii
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Useful definitions FINAL
Useful definitions
This list contains definitions of symbols, units, abbreviations, and terminology that may be unfamiliar to the reader.
°C degrees Celsius
% per cent, percentage
A$ Australian dollars
A&C A&C Mining Investments Pty Ltd
AD or ADB air dried basis
AIG Australian Institute of Geoscientists
AMSL above mean sea level
AMSA ArcelorMittal South Africa Limited
ash ash content
ASIC Australian Securities and Investment Commission
ASX Australian Securities Exchange
AusIMM Australasian Institute of Mining and Metallurgy
bcm bank cubic metres
BDO BDO Corporate Finance Australia Pty Ltd
BEE Black Economic Empowerment
BFA bench face angle
BFS bankable feasibility study
Blue Falcon Blue Falcon 232 Trading (Pty) Ltd
Brandywine Brandywine Valley Investments (Pty) Ltd
BTU/lb International Steam Table British thermal unit per pound (BTU(IT)/lb)
CHPP coal handling and preparation plant
CoAL Coal of Africa Ltd
Coal Resource a concentration or occurrence of solid material of economic interest in or on the Earth's
crust in such form, grade (or quality), and quantity that there are reasonable prospects for
eventual economic extraction. The location, quantity, grade (or quality), continuity and other
geological characteristics of a Coal Resource are known, estimated or interpreted from
specific geological evidence and knowledge, including sampling. Coal Resources are sub-
divided, in order of increasing geological confidence, into Inferred, Indicated and Measured
categories.
COPs Codes of Practice
Cove Cove Mining Pty Ltd
CPR Competent Persons Report
CV calorific value
CY calendar year
DAC design acceptance criteria
DAF dry, ash free
DAFF Department of Agriculture, Forestry and Fisheries
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC ix
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Useful definitions FINAL
DCF discounted cash flow
DFFE Department of Forestry, Fisheries and the Environment (previously known as DAFF)
DMC dense medium cyclone
DMR South African Department of Mineral Resources
DMRE Department of Mineral Resources and Energy (formerly Department of Mineral Resources)
DMS dense media separation
dmt dry metric tonnes
DWS Department of Water and Sanitation
EA Environmental Authorisation
EIA environmental impact assessment
EMC Environmental Management Committee
EMPR Environmental Management Programme Report
EMS Environmental Management System
ESG environmental, social and governance
Eskom Eskom Holdings SOC Ltd (the state-owned electricity utility)
EV Enterprise Value
Exploration Result Data and information generated by mineral exploration programs that might be of use to
investors, but which do not form part of a declaration of Mineral Resources or Ore
Reserves.
Exploration Target A statement or estimate of the exploration potential of a mineral deposit in a defined
geological setting where the statement or estimate, quoted as a range of tonnes and a
range of grade (or quality), relates to mineralisation for which there has been insufficient
exploration to estimate a Mineral Resource.
FC fixed carbon
FEL front-end loader
FS feasibility study. A feasibility study is a comprehensive technical and economic study of the
selected development option for a mineral project that includes appropriately detailed
assessments of applicable Modifying Factors together with any other relevant operational
factors and detailed financial analysis that are necessary to demonstrate at the time of
reporting that extraction is reasonably justified (economically mineable). The results of the
study may reasonably serve as the basis for a final decision by a proponent or financial
institution to proceed with, or finance, the development of the project. The confidence level
of the study will be higher than that of a pre-feasibility study.
FoS factor of safety
FY financial year
GAR gross as received
g/cm3 grams per cubic centimetre
Goldway Goldway Capital Investment Ltd
gross in situ gross in situ Coal Resource before geological lose
GSP Greater Soutpansberg Project
GTIS gross tonnes in situ
GVM GVM Metals Limited
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC x
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Useful definitions FINAL
ha hectares
HCC hard coking coal
HOS Hlalethembeni Outsourcing Services (Pty) Ltd
IER Independent Expert Report
Ikwezi Ikwezi Mining Ltd
IM inherent moisture
Indicated Resource that part of a Mineral/Coal Resource for which quantity, grade (or quality), densities, shape
and physical characteristics are estimated with sufficient confidence to allow the application
of Modifying Factors in sufficient detail to support mine planning and evaluation of the
economic viability of the deposit.
Inferred Resource that part of a Mineral/Coal Resource for which quantity and grade (or quality) are estimated
on the basis of limited geological evidence and sampling. Geological evidence is sufficient
to imply but not verify geological and grade (or quality) continuity. It is based on exploration,
sampling and testing information gathered through appropriate techniques from locations
such as outcrops, trenches, pits, workings and drill holes.
IRA inter-ramp angle
Iscor The South African Iron and Steel Industrial Corporation
ISR or Report Independent Specialist Report
IVSC International Valuation Standards Council
IWUL Integrated Water Use Licence
IWWMP Integrated Water and Waste Management Plan
JORC Joint Ore Reserves Committee
JORC Code 2012 edition of the Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves
JSE Johannesburg Securities Exchange
kcal/kg kilocalorie per kilogram
kg kilograms
kL/day kilolitres per day
km kilometres
km2 square kilometres
koz thousand ounces
kW kilowatts
kt/min kilotonnes per minute
kWh kilowatt hours
L litres
LiDAR light detection and ranging
Limpopo Coal Limpopo Coal Company (Pty) Ltd
LOM life-of-mine
M million
m metres
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC xi
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Useful definitions FINAL
Makhado Makhado Project
MCM MC Mining Limited
Mbcm million bank cubic metres
Measured Resource that part of a Mineral/Coal Resource for which quantity, grade (or quality), densities, shape,
and physical characteristics are estimated with confidence sufficient to allow the application
of Modifying Factors to support detailed mine planning and final evaluation of the economic
viability of the deposit.
MEE multiples of exploration expenditure
MJ megajoules
MJ/kg megajoules per kilogram
mm millimetres
MPRDA Minerals and Petroleum Resources Development Act (Act No. 28 of 2002)
Mt million tonnes
MTIS mineable tonnes in situ
Mt/a million tonnes per annum
NAR net as received
NEMA National Environmental Management Act (Act No. 107 of 1998)
NSR net smelter return
NST Northern Star Limited
NWA National Water Act (Act No. 36 of 1998)
Coal Reserve the economically mineable part of a Measured and/or Indicated Coal Resource. It includes
diluting materials and allowances for losses, which may occur when the material is mined
or extracted and is defined by studies at pre-feasibility or feasibility level as appropriate that
include application of Modifying Factors. Such studies demonstrate that, at the time of
reporting, extraction could reasonably be justified.
PCD Pollution Control Dam
PCI pulverised coal injection
PFS preliminary feasibility study (pre-feasibility study). A PFS is a comprehensive study of a
range of options for the technical and economic viability of a mineral project that has
advanced to a stage where a preferred mining method, in the case of underground mining,
or the pit configuration, in the case of an open pit, is established and an effective method of
mineral processing is determined. It includes a financial analysis based on reasonable
assumptions on the Modifying Factors and the evaluation of any other relevant factors
which are sufficient for a Competent Person, acting reasonably, to determine if all or part of
the Mineral Resources may be converted to an Ore Reserve at the time of reporting. A PFS
is at a lower confidence level than a feasibility study.
PM10 particulate matter (PM). PM10 describes inhalable particles, with diameters that are
generally 10 µm and smaller
Probable Reserve the economically mineable part of an Indicated, and in some circumstances, a Measured
Mineral Resource. The confidence in the Modifying Factors applying to a Probable Ore
Reserve is lower than that applying to a Proved Ore Reserve.
Proved Reserve the economically mineable part of a Measured Mineral Resource. A Proved Ore Reserve
implies a high degree of confidence in the Modifying Factors.
RBCT Richards Bay Coal Terminal
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC xii
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Useful definitions FINAL
RC reverse circulation
RD relative density
RG Regulatory Guide
RICS Royal Institution of Chartered Surveyors
ROM run-of-mine
ROMt run-of-mine tonnes
RPEEE reasonable prospects for eventual economic extraction
SAIMM Southern African Institute of Mining and Metallurgy
SAMREC Code South African Code for the Reporting of Exploration Results, Mineral Resources and
Mineral Reserves as prepared by the South African Resource Committee under the
auspices of the South African Institute of Mining and Metallurgy
SANS10320 Edition 1 (2004) of the South African National Standard 10320 (SANS10320)
SSCC semi-soft coking coal
SLP Social and Labour Plan
SOP Standard Operating Procedure
SRK SRK Consulting (Australasia) Pty Ltd
TEPs technical and economic parameters
TTIS total tonnes in situ
t tonnes
Terrecom Terrecom Resources Ltd
t/h tonnes per hour
TS total sulfur content
UCPL Uitkomst Colliery (Pty) Ltd
Uitkomst Uitkomst Colliery
US$ United States dollars
VALMIN The 2015 edition of the Australasian Code for Public Reporting of Technical Assessments
and Valuations of Mineral Assets (or the VALMIN Code)
Vele Vele Aluwani Colliery
VM volatile matter
VRM Valuation & Resource Management
WA Western Australia
WUL Water Use Licence
ZAR South African Rands
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC xiii
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Executive summary FINAL
Executive summary
Background
BDO Corporate Finance Australia Pty Ltd (BDO) has been engaged by MC Mining Limited (MCM
or the Company) to prepare an Independent Expert Report (IER) in relation to a potential
transaction involving Kinetic Development Group Limited increasing its interest in MCM to 51%.
MCM has coal assets located in the Kwazulu Natal and Limpopo provinces of South Africa.
BDO has subsequently engaged SRK Consulting (Australasia) Pty Ltd (SRK) to prepare an
Independent Specialist Report (ISR or Report) in relation to matters on which BDO is not an expert.
The scope of the work to be completed by SRK was determined by BDO. SRK's ISR will form part
of BDO's IER, which is to be provided to MCM shareholders and comment on the 'fairness and
reasonableness' of the proposed transaction. SRK's Report does not comment on the 'fairness and
reasonableness' of any transaction between MCM and any other parties.
The key mineral assets to be considered in this Report are collectively known as the Mineral
Assets and comprise:
- an 84% interest in the Uitkomst Colliery (pulverised coal injection (PCI) metallurgical and
thermal coal)
- a 100% interest in the Vele Colliery (semi-soft coking and thermal coal)
- a 67% interest in the Makhado Project (hard coking coal and thermal coal byproduct)
- a 74% effective interest in tenements comprising the Greater Soutpansberg Project (GSP)
(coking and thermal coal).
This ISR presents the following key technical information as at the Effective Date (27 November
2024):
- a review of the geological setting and coal seams present in association with the Mineral
Assets
- Coal Resource and Reserve statements (for Uitkomst, Vele, Makhado and GSP) reported in
accordance with the terms and definitions of the JORC Code (as defined below) and used as
the basis for the economic analysis
- the associated life-of-mine (LOM) plans and associated technical and economic parameters
(TEPs) included in the LOM plans
- a techno-economic assessment of the Uitkomst and Makhado Mineral Assets
- commentary on MCM's exploration and project growth plans.
Requirement and reporting standard
SRK's ISR has been prepared in accordance with the guidelines outlined in the Australasian Code
for Public Reporting of Technical Assessments and Valuations of Mineral Assets (VALMIN Code,
2015), which incorporates the Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves (JORC Code, 2012).
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC xiv
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Executive summary FINAL
As defined in the VALMIN Code (2015), Mineral Assets comprise all property including (but not
limited to) tangible property, intellectual property, mining and exploration tenure and other rights
held or acquired in relation to the exploration, development of, and production from, those tenures.
This may include plant, equipment and infrastructure owned or acquired for the development,
extraction and processing of minerals relating to that tenure.
Techno-economic assumptions and valuation
As mandated in its scope of work, SRK has reviewed the technical assumptions and provided an
assessment on the reasonableness of the techno-economic assumptions in the supplied Uitkomst,
and Makhado cashflow models (the Models). These Models consider the LOM plans as developed
by MCM, including the Coal Resource and Coal Reserve estimates, the mining physicals, the
processing assumptions, the operating costs, the capital expenditure and the environmental and
permitting provisions. SRK has considered the assumptions and advised BDO to not value the
Coal Resource using an Income Approach.
SRK has excluded commentary related to the marketing, exchange rate, inflation rates and
discount rate assumptions adopted in the Models, on the understanding that these are to be
considered by BDO.
Value of Coal Resources
SRK has provided an opinion regarding the Market Value of the Coal Resources and the
exploration potential at Uitkomst, Vele, Makhado and GSP.
In forming its overall opinion regarding the Market Value for each of MCM's coal assets, SRK has
adopted the market valuation approach using comparable market transactions and an actual
transaction supported by peer analysis and yardstick methods as secondary guides.
Based on its technical review, SRK has not attributed any additional value to the exploration
potential of the broader tenure as, in its view, this value is encapsulated within the value assigned
to the Coal Resources, given the valuation approach and methodologies adopted.
On this basis, SRK considers the current market is likely to pay between ZAR1,115 M and
ZAR2,064 M, with a preferred value of ZAR1,589 M for the attributable Coal Resources held by
MCM.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC xv
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Introduction FINAL
1 Introduction
BDO has been engaged by MCM to prepare an IER in relation to a potential transaction involving
Kinetic Development Group Limited increasing its interest in MCM to 51%. MCM has coal assets
located in the Kwazulu Natal and Limpopo provinces of South Africa.
BDO has subsequently instructed SRK to prepare an ISR incorporating a technical assessment and
valuation of MCM's coal assets. The scope of the work to be completed by SRK was established by
BDO. SRK's ISR will form part of the BDO IER and will be provided to MCM shareholders. SRK's
Report does not comment on the 'fairness and reasonableness' of any transaction between MCM
and any other parties.
The key mineral assets to be considered in this Report are collectively known as the Mineral Assets
and comprise:
- an 84% interest in the Uitkomst Colliery (metallurgical and thermal coal)
- a 100% interest in the Vele Colliery (semi-soft coking and thermal coal), which is currently on
care and maintenance
- a 67% interest in the Makhado Project (hard coking coal and thermal coal)
- a 74% effective interest in the tenements comprising the GSP (coking and thermal coal).
1.1 Terms of reference and purpose of the Report
SRK understands that this Report is to be used in relation to a potential transaction involving the coal
assets of MCM. It is understood that this Report will be included in BDO's IER.
The quality of information, conclusions, and estimates contained herein is consistent with the level of
effort involved in SRK's services, based on: i) information available at the time of preparation and
ii) the assumptions, conditions, and qualifications set forth in this Report. This Report is intended for
use by BDO and MCM subject to the terms and conditions of the agreed contract with SRK and
relevant securities legislation in Australia.
Except for the purposes legislated under prevailing securities law, any other use of this Report by
any third party is at that party's sole risk. The responsibility for this disclosure remains with MCM.
The purpose of the ISR is to compile the results of previous technical studies into a single document
and to provide an independent overview and assessment of the technical merits that might
reasonably be expected to be applied by the market when considering investment in the South
African mineral assets currently held by MCM. Further, it provides an assessment of the
reasonableness of the Coal Resource estimates at each of the Company's projects and the
reasonableness of the technical inputs underpinning the Company's models. In particular, the ISR
covers the pertinent aspects in detail appropriate to the strategic importance of the projects and
provides commentary on the exploration and development potential of the Mineral Assets. However,
based on the outcome of the discounted cash flow (DCF) modelling, a market-based valuation
approach has been adopted. Therefore, the technical inputs to the project models have not been
presented in the ISR.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 1
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Introduction FINAL
1.2 Reporting compliance, reporting standard and reliance
1.2.1 Scope of work
As requested by BDO, SRK is to provide BDO with an independent opinion of the market valuation of
the Vele Colliery, Greater Soutpansberg Project and MC Mining's interest in any residual resources
or reserves of the Makhado Project and the Uitkomst Colliery that are not already incorporated into
their respective cash flow models (Models). To this end, SRK is to review the technical inputs and
assumptions to the Models and provide BDO with an assessment of the reasonableness of the
following:
1. Coal Reserves and Coal Resources incorporated into the Models
2. mining physicals (including tonnes of coal mined, quality, waste material and mine life)
3. processing physicals (including yield, coal processed and produced)
4. production and operating costs (including but not limited to drilling, blasting, mining, haulage,
processing, transport, general administration, distribution and marketing, contingencies and
royalties or levies)
5. capital expenditure (including but not limited to pre-production costs, project capital costs,
sustaining capital expenditure, salvage value, rehabilitation and contingency)
6. any other relevant technical assumptions not listed above.
In so doing, SRK is to explain the basis for which a discounted cash flow valuation approach may not
be considered appropriate for the Vele Colliery.
In regard to the Makhado Project and the Uitkomst Colliery Models, if an assumption is considered
unreasonable, this should be reflected in SRK's Report and BDO advised ahead of the report
delivery. Consideration of the assumptions for more than one scenario may be required.
In addition, SRK is to provide BDO with an expected rehabilitation cost for both the Makhado Project
and the Uitkomst Colliery for inclusion in the respective Models.
Furthermore, SRK is to prepare a report summarising its findings, recommendations and valuation
opinion of the Market Value of MC Mining's mineral assets outside of the Models for the purpose of
supporting BDO's IER.
SRK's services exclude any work in relation to:
- marketing, commodity price and exchange rate assumptions adopted in the financial models
- financial and/or corporate taxation analysis.
As part of its investigations, SRK has made enquiries but not conducted any independent due
diligence on the status of the associated mineral titles and issues relating to land access and
environmental regulations. SRK is not qualified to make legal representations in this regard and
therefore specifically disclaims responsibility for these aspects for the purpose of this review.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 2
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Introduction FINAL
1.2.2 Reporting standard
The authors of this Report are Members or Fellows of the Australasian Institute of Mining and
Metallurgy (AusIMM) and/or the Australian Institute of Geoscientists (AIG) and therefore are bound
by both the VALMIN and JORC codes. SRK's Report is prepared in accordance with the
Australasian Code for Public Reporting of Technical Assessments and Valuations of Mineral Assets
– VALMIN Code (2015), which incorporates the Australasian Code for Reporting of Exploration
Results, Mineral Resources and Ore Reserves – JORC Code (2012), in addition to other regulatory
guidance (RG) (i.e. Australian Securities and Investment Commission (ASIC) RGs 111 and 112).
As per the VALMIN Code (2015), a draft of the Report was supplied to BDO and MCM to check for
material error, factual accuracy and omissions before the final version of the Report was issued.
1.2.3 Work program
This assignment commenced in October 2024. It relies on data and information supplied by MCM, as
well as other publicly available data and other information sourced by SRK from literature, as well as
subscription databases such as S&P Capital IQ Pro database services. MCM also provided SRK
with access to an online data room.
To meet the requirements set out in Section 11.1 of the VALMIN Code (2015), a site inspection of
the material Mineral Assets may be required. SRK previously (from 13 to 15 February 2024)
conducted a site visit to MCM's Vele and Makhado projects, and has previously inspected the
Uitkomst Colliery (for a previous assignment in May 2022), but did not visit the exploration mineral
asset portfolio given the early-stage exploration status.
SRK's designated project manager, Shaun Barry, coordinated the contributions from each team
member to ensure consistency of approach and appropriate levels of reporting as befitting an ISR for
public reporting purposes.
SRK has satisfied itself and MCM has warranted that all material information in its possession has
been fully disclosed to SRK.
1.2.4 Legal matters
SRK has not been engaged to comment on any legal matters. SRK notes that it is not qualified to
make legal representations as to the ownership and legal standing of the mineral tenements that are
the subject of this Report. In accordance with Section 7.2 of the VALMIN Code (2015), SRK has
satisfied itself regarding the legal status of the Company's projects as it was provided in a legal
opinion from White and Case Inc. dated 15 March 2024 that outlines the status of the project
tenures. SRK has been informed by MCM that there has been no change to the legal status of the
Company's projects since this date.
1.2.5 Effective Date
The Effective Date of this Report is 27 November 2024.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 3
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Introduction FINAL
1.3 Project team
This Report has been prepared by a team of SRK consultants and associates in South Africa and
Australia. Details of the qualifications and experience of the consultants who have conducted the
work in this Report, who have extensive experience in the mining industry and are members in good
standing of appropriate professional institutions, are set out below in Table 1.1.
Table 1.1: Details of the qualifications and experience of the project team
Site Professional
Specialist Position Responsibility Length and type of experience
inspection designation
30 years – 12 years in consulting
specialising in valuation, financial
modelling, sensitivity analyses,
BSc Hons,
Project manager, due diligence studies, IERs,
Principal MSc Eng,
Shaun Barry reporting and optimisation studies, risk analysis, No
Consultant AusIMM (CP)
valuation business and marketing strategy
MRICS
development; 9 years marketing;
7 years analyst; 2 years in
operations.
>35 years – +20 years in BSc Hons, MSc
exploration, evaluation and (Expl. Geol), GDip
Principal
Ian de Klerk Geology assessment of Mineral Resources, No Eng (Mining
Consultant
15 years in geological modelling Engineering),
and resource consulting. MAusIMM
+35 years – 20 years in consulting BEng (Mechanical),
with experience in various BEng Hons
technical and managerial (Mining), MBA,
capacities to include studies, GDip (Mine
Associate Mining and
Jack reviews and due diligences, and Ventilation),
Principal infrastructure/ No
Steenekamp balance of career in operational FAusIMM(CP),
Consultant services
and management roles within RPEQ
corporate mining companies,
specialising in coal mining
operations and projects.
>30 years in coal processing City and Guilds
Associate including CHPP Manager and 040 and 051 Coal
Richard Klecha Principal Coal processing Study Manager roles with various No Preparation
Consultant Tier One companies, as well as Technology,
extensive consulting experience. MAusIMM
12 years – 6 years in consulting
specialising in environmental,
BSc, MSc Eng,
Senior Environmental and social and governance studies and
Ludovic Rollin No EUR ING (CP),
Consultant social reviews, 6 years in environmental,
MAusIMM
social and health and safety
operational management
+20 years of experience in
PhD (Geology),
exploration targeting, structural
Gerry Principal BA Nat Sci Hons
Peer review geology risk analysis, geological No
McCaughan Consultant (Geology),
modelling and resource estimation
MAusIMM, MAIG
of coal deposits.
Note: CHPP – Coal Handling and Preparation Plant.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 4
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Introduction FINAL
1.4 Limitations, reliance on information, declaration and consent
1.4.1 Limitations
SRK's opinion contained herein is based on information provided to SRK by MCM throughout the
course of SRK's investigations as described in this Report, which in turn reflects various technical
and economic conditions at the time of writing. Such technical information as provided by MCM was
taken in good faith by SRK. SRK has not independently verified the stated Exploration Results, Coal
Resources and Coal Reserves by means of recalculation but instead has completed limited
verification and review for the purposes of establishing whether they are reasonable in accordance
with the purpose of this Report.
This Report includes technical information, which requires subsequent calculations to derive
subtotals, totals, averages and weighted averages. Such calculations may involve a degree of
rounding. Where such rounding occurs, SRK does not consider them to be material.
As far as SRK has been able to ascertain, the information provided by MCM was complete and not
incorrect, misleading or irrelevant in any material aspect. MCM has confirmed in writing to SRK that
full disclosure has been made of all material information and that to the best of its knowledge and
understanding, the information provided by MCM was complete, accurate and true and not incorrect,
misleading or irrelevant in any material aspect. SRK has no reason to believe that any material facts
have been withheld.
1.4.2 Statement of SRK independence
Neither SRK, nor any of the authors of this Report, have any material present or contingent interest
in the outcome of this Report, nor any pecuniary or other interest that could be reasonably regarded
as capable of affecting their independence or that of SRK. SRK has no beneficial interest in the
outcome of this Report capable of affecting its independence.
1.4.3 Indemnities
As recommended by the VALMIN Code (2015), MCM has provided SRK with an indemnity under
which SRK is to be compensated for any liability and/or any additional work or expenditure resulting
from any additional work required:
- that results from SRK's reliance on information provided by MCM or from MCM not providing
material information
- that relates to any consequential extension workload through queries, questions or public
hearings arising from this Report.
1.4.4 Consent
SRK consents to this Report being included, in full, in BDO's IER documents in the form and context
in which it is provided, and not for any other purpose. SRK provides this consent on the basis that
the technical assessment and valuation expressed in the Executive summary and in the individual
sections of this Report are considered with, and not independently of, the information set out in the
complete Report.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 5
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Introduction FINAL
1.4.5 Practitioner consent
The information in this Report that relates to Technical Assessment and Valuation of the Coal Assets
is based on and fairly reflects information compiled and conclusions derived a team of consultants
supervised by Mr Shaun Barry, who is a Member of the AusIMM. Mr Barry is employed by SRK, an
independent mining consultancy. Mr Barry has sufficient experience that is relevant to the Technical
Assessment and Valuation of the Mineral Assets under consideration, the style of mineralisation and
the types of deposit under consideration and to the activity being undertaken to qualify as a
Practitioner as defined in the 2015 edition of the Australasian Code for Public Reporting of Technical
Assessments and Valuations of Mineral Assets, and as a Competent Person as defined in the 2012
Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore
Reserves. Mr Barry consents to the inclusion in the report of the matters based on their information
in the form and context in which it appears.
1.4.6 Consulting fees
SRK's estimated fee for completing this Report is based on its normal professional daily rates plus
reimbursement of incidental expenses. The fees are agreed based on the complexity of the
assignment, SRK's knowledge of the assets and availability of data. The fee payable to SRK for this
engagement is estimated at approximately A$55,000. The payment of this professional fee is not
contingent upon the outcome of this Report.
1.4.7 Units of measure and currency
Throughout this report, measurements are in metric units and currency in South African rands (ZAR),
United States dollars (US$) or Australian dollars (A$) unless otherwise stated.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 6
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Overview of MC Mining FINAL
2 Overview of MC Mining
2.1 Company background
MCM is a mineral resources company listed on the AIM, ASX and JSE, and is primarily focused on
its metallurgical coal assets in South Africa. Formerly known as Coal of Africa Limited (CoAL), the
Company received shareholder approval for its name change to MC Mining Limited in November
2017.
Following the purchase of the Uitkomst Colliery in 2017, the Company's focus has shifted to a
combination of project development and operations. The Company's key projects (Figure 2.1)
include the Uitkomst Colliery (PCI metallurgical coal), Makhado Project (hard coking and thermal
coal), Vele Aluwani Colliery (semi-soft and thermal coal) and the GSP – MbeuYashu (coking and
thermal coal).
MCM is an emerging developer of high-quality coking and thermal coal assets, located primarily in
the Limpopo Province of South Africa.
Figure 2.1: Location of operations and projects
Source: MCM
With good access to rail and port infrastructure, MCM can effectively service domestic and
international coal markets, providing a much-needed resource for economic growth and development
to the country and the provinces in which it operates.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 7
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Uitkomst Colliery FINAL
3 Uitkomst Colliery
3.1 Overview
Uitkomst Colliery (Pty) Ltd (UCPL) is a producer of thermal and metallurgical coal from the Uitkomst
Colliery (Uitkomst) which is situated 20 km northwest of Utrecht and 23 km northeast of Newcastle in
the KwaZulu Natal Province (Figure 3.1). The colliery lies approximately 315 km directly northwest of
the Richards Bay Coal Terminal (RBCT) and 320 km southeast of Johannesburg.
Uitkomst is an underground bord and pillar (conventional drill and blast) colliery that extracts the Gus
coal seam.
The operation is accessible via a well-maintained largely sealed road network and a rail line that runs
to the west of the operations. The Wykom rail siding is located 5.7 km north of the town of Newcastle
and provides the main loading point for rail transported coals.
MCM owns an 84% interest in UCPL, which is the registered holder of a consolidated mineral right
for coal issued by the South African Department of Mineral Resources (DMR) under reference
KZN30/5/1/2/2/94 MR (94 MR).
Figure 3.1: Location of the Uitkomst Colliery
Source: MCM website, accessed 13 May 2022
The colliery is situated at the foothills of the Balele Mountains within an important sheep farming and
major cattle and mixed farming region.
The surrounding region to the colliery experiences a temperate climate with mild summers (typically
15°C to 28°C) and cool winters (typically 3°C to 23°C). Rain typically falls during the summer
months, mostly from October through to March. Mining can take place throughout the year.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 8
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Uitkomst Colliery FINAL
3.2 History
Uitkomst Colliery currently consists of the operating section, the South Mine (the 'Uitkomst area') and
the planned future expansion, the North Mine (the 'Klipspruit area').
The Klipspruit area represents the previously-mined underground Klipspruit Colliery, originally owned
by Newcastle Coal Mines (Pty) Ltd. The colliery commenced production in 1987, before being sold in
1989 to Welgedacht Exploration Company (Pty) Ltd, a Rand Mines Limited subsidiary, and later
acquired by Ingwe Coal Corporation. The colliery was then sold to Kangra Holdings in 1993. In 2014,
the colliery was owned by Shanduka Resources, although it had ceased operations and
rehabilitation was completed (Barker's Coalfield Maps of South Africa, 2014).
Operations were commenced in the adjacent Uitkomst area (the original Uitkomst Colliery) in 2007
by Brandywine Valley Investments (Pty) Ltd (Brandywine). In April 2015, Blue Falcon 232 Trading
(Pty) Ltd (Blue Falcon) bought Brandywine and consolidated the Klipspruit and Uitkomst mineral
rights through a Section 102 application, which was granted in March 2016. Blue Falcon was
acquired by Pan African Resources PLC, effective 1 April 2016, which then ceded the mineral rights
to its subsidiary, UCPL. In June 2017, the company was acquired by MCM.
Uitkomst was then mined by an independent mining contractor, Khethekile Mining, until 1 August
2018, when MCM acquired all the contractor's mining equipment and employees. The mine has
been owner-operated ever since.
Details of historical exploration are limited. Exploration was conducted from the 1950s through to
2013 by a variety of companies (Table 3.1), resulting in a total of 491 drill holes. However, analytical
results are only available for 429 of these holes.
Twenty of the drill holes completed in 2023 delineated the old Klipspruit workings. These have been
incorporated into the most recent statement of Coal Resources and Coal Reserves reported as at 30
June 2024.
Table 3.1: Historical exploration for the Uitkomst Colliery
Year Number of drill holes Company
1971, 1978–79 41 Iscor Ltd1
1983 16 St George Mining
1980–88 268 Grinaker Desert Spar/Grinaker Mining2
1987–88 19 Newcastle Coal Mines (Pty) Ltd2
1988–89 16 Rand Mines Ltd/Ingwe Ltd
2001 24 Welgedacht
2007–09 27 Brandywine
2013 13 Uitkomst Colliery
2017 20 Uitkomst Colliery
2019 6 Uitkomst Colliery
2023 41 Uitkomst Colliery
Total 491
Source: Minxcon (2017), Independent Competent Persons Report on the Uitkomst Colliery.
Notes:
1
Previously, the state-owned South African Iron and Steel Industrial Corporation Limited.
2
Subsidiary of Anglovaal Ltd.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 9
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Uitkomst Colliery FINAL
3.3 Local geology
Uitkomst Colliery is located in the Utrecht Coalfield (Figure 3.2) – the coal seams are developed in
the Vryheid Formation of the Ecca Group, which is of Permian age. Seven main seams and two
smaller seams are recorded (Figure 3.3), although not all seams are developed in all areas. Four
seams are demonstrated to have economic value – the Coking, Dundas, Gus and Alfred seams.
Dolerite intrusions ranging from thin dykes to very thick sills are extremely common in the coalfield,
often causing major displacement of the seams (in the order of 150 m) and affecting the quality and
rank of the seams. Coal rank varies from medium to high within the Utrecht Coalfield depending on
proximity to dolerite intrusions.
Figure 3.2: Coalfields of South Africa
Source: Hancox and Götz (2014)
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 10
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Uitkomst Colliery FINAL
Figure 3.3: General stratigraphy of the coal zone in the Utrecht Coalfield
Source: Hancox and Götz (2014)
At Uitkomst, only two seams are intersected, namely, the Alfred and Gus seams. As the Alfred Seam
is poorly developed, only the Gus Seam is currently extracted.
The Gus Seam occurs in a north–south trending zone in the central portion of the mining lease and
outcrops to the south in the Dorpspruit and Kweekspruit valleys. To the north, the seam extends
beneath the escarpment at a depth from surface of around 300 m; due to the extreme topography of
the escarpment, the depths increase rapidly to over 800 m. The seam ranges in thickness from
0.8 m to 1.9 m and consists of banded bright, dull and lustrous coal with the coal quality decreasing
towards the top of the seam. This upper portion also contains a number of fine-grained sandstone
partings, that may attain thicknesses of 20 cm.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 11
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Uitkomst Colliery FINAL
3.4 Exploration potential
Drilling north of the presently defined LOM area suggests there may be potential for additional
resources to be defined through ongoing exploration, although this is considered to be limited. Future
drilling campaigns will target these areas.
3.5 Coal Resources and Coal Reserves
3.5.1 Coal Resources
The critical variable considered for the Uitkomst coal product is the ash content; the main products
are both domestic products, namely a 12% ash product from the -10 mm fraction, usually sold to
ArcelorMittal South Africa Limited, and a 12–14% ash product from sized and unsized coal sold into
the local domestic market.
In addition, the following cut-off values were imposed to estimate the mineable Coal Resource:
- Mineral Rights boundaries
- seam sub-crop
- mined out areas have been excluded
- raw dry, ash-free (DAF) volatile matter (VM) >27% to exclude devolatilised areas
- minimum depth of 25 m for mineable tonnes in situ (MTIS) – any coal less than 25 m below
surface is difficult to access from underground and does not have open cast potential due to the
abrupt topography
- maximum seam depth of 300 m
- a minimum seam thickness of 0.5 m for gross tonnes in situ (GTIS) and 1.2 m for MTIS.
The Coal Resource estimates were also discounted for unknown geological structures, based on the
confidence in the Coal Resource classification; namely:
- Measured 10%
- Indicated 15%
- Inferred 20%.
SRK has reviewed the geological model and is satisfied that the data are represented sufficiently
accurately in the grids, that the modelling principles employed and the estimation methods used are
fit-for-purpose and that the geological model and the resource estimates can be relied upon.
The Coal Resources were estimated by Mr John Sparrow in accordance with Edition 1 (2004) of the
South African National Standard 10320 (SANS10320). Mr Sparrow is a Competent Person as
defined by the South African Code for the Reporting of Exploration Results, Mineral Resources and
Mineral Reserves (SAMREC Code, 2020).
All Coal Resources and coal qualities have been estimated on an air-dry basis and are inclusive of
the Coal Reserves.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 12
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Uitkomst Colliery FINAL
The Coal Resources as at 30 June 2023 are shown in Table 3.2. The Coal Resources are reported
in accordance with both the SAMREC (2020) and JORC (2012) codes.
Table 3.2: Uitkomst Coal Resources (as declared at 30 June 2023)
MCM MCM
GTIS MTIS
Resource Category Attributable Attributable
(Mt) (Mt)
Interest (%) Resource (Mt)
Measured 15.941 14.347 84 12.051
Indicated 3.964 3.369 84 2.830
Subtotal Measured and
19.905 17.716 84 14.881
Indicated
Inferred 5.678 4.543 84 3.816
Total 25.583 22.259 84 18.697
Source: MCM 2023 Annual Report
MCM has supplied SRK with a spreadsheet updating the Uitkomst Coal Resource to 30 June 2024
but that is yet to be released to the market. The updated Coal Resource (2024) is shown in Table 3.5
and accounts for depletion of approximately 0.499 Mt of coal mined, and approximately 0.194 Mt of
mining and layout losses, from the measured gross tonnes in situ category over the year and an
increase of some 1.47 Mt (GTIS) in the Indicated and Inferred categories, due to additional drilling.
SRK has used the June 2024 Coal Resources in its valuation of the Uitkomst Colliery value
contribution in this report. The change is not material to the overall market value ascribed to MCM's
coal assets.
Table 3.3: Uitkomst Coal Resources (as at 30 June 2024 – undisclosed)
MCM MCM
GTIS MTIS
Resource category attributable attributable
(Mt) (Mt)
interest (%) Resource (Mt)
Measured 15.248 13.723 84 11.527
Indicated 4.017 3.415 84 2.868
Subtotal Measured and
19.265 17.138 84 14.396
Indicated
Inferred 7.101 5.681 84 4.772
Total 26.366 22.819 84 19.168
Source: 46.09.02.202406 resources and reserves by project2_2024.xlsx
3.5.2 Coal Reserves
The stated Coal Reserves disclosed to the market and dated 30 June 2023 are shown in Table 3.4.
The Coal Reserves were estimated and reported by Mr Craig Archer. Mr Archer is a Competent
Person as defined by the SAMREC Code (2020).
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 13
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Uitkomst Colliery FINAL
Table 3.4: Uitkomst Coal Reserves as at 30 June 2023 (in 100% terms)
Coal Reserves Category ROM Mt Sales Mt
Proved 6.044 3.917
Probable 1.021 0.696
Total 7.065 4.613
Source: MC Mining Limited Annual Report 2023
Notes:
1
Includes all contamination and roof brushing.
2
There are 0.762 Mt of ROM that are unclassified that are included in the LOM.
The updated Coal Reserves as at 30 June 2024 shown in Table 3.5 are from information provided by
MCM and as yet undisclosed to the market. It is noted that a reported 498,589 run-of-mine (ROM)
tonnes have been mined at Uitkomst Colliery since the preparation of the previous Coal Reserves
estimate, i.e. from 1 July 2023 to 30 June 2024. From the information provided, it is noted that the
Coal Reserves for Uitkomst are based on a detailed revised LOM layout as of 1 July 2024.
SRK has used the June 2024 Coal Reserves in its valuation of the Uitkomst Colliery value
contribution in this report. The change is not material to the overall market value ascribed to MCM's
coal assets.
Table 3.5: Uitkomst Coal Reserves as at 30 June 2024 – undisclosed (in 100% terms)
Coal Reserves category ROM (Mt) Sales (Mt)
Proved 6.730 4.472
Probable 1.254 0.878
Total 7.984 5.351
Source: 46.09.02.202406 resources and reserves by project2_2024.xlsx
Notes:
1
Includes all contamination and roof brushing.
2
The declared Coal Reserves are based upon Measured and Indicated Coal Resources only.
3
SRK was provided with information in an Excel sheet format. These updated Coal Reserves have not yet been disclosed to
the market.
3.6 Mining
The defined Coal Resources target the Gus Seam and outcrop in the valley portions in the southern
and northern parts of the mining right. This seam ranges between 0.8 m and 1.9 m in thickness.
The key constraint to the mine layout is the escarpment topography, which rises to over 800 m with
cover, which impacts on potential coal recovery. The outcrop areas are accessed from a box-cut to
approximately 30 m depth to allow an adit-type access into the coal seam.
The coal seam is considered to be horizontal (i.e. it has a zero dip) but does have some floor rolls
that affect the potential mining height. The mining panels have been laid out from the development
drive in Adit 1 to the extent of the mining thickness, as defined by a minimum seam thickness of
1.2 m and a minimum overburden cover of 30 m. The maximum panel cover is set at 150 m
overburden thickness, where the coal recovery beyond this becomes uneconomic (refer Figure 3.4).
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 14
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Uitkomst Colliery FINAL
The original old Klipspruit workings in the vicinity of Adit 2 were mined on a similar basis before
discontinuing the operations.
The plan in Figure 3.5 shows the mined-out areas and the remaining panels to be mined in the LOM
plan provided by MCM, dated 2022. The mine essentially splits into the South mine exploited from
Adit 1 and the North mine, accessed from Adit 2, which is adjacent to the old Klipspruit workings to
reduce travel time and aid in ventilation. The two blocks are planned to be joined by a main
development, but the seam is thinner in the area between the two blocks and hence will need to
have the main roads roof brushed to provide sufficient mining height. The area is intersected by
several dykes, but the panels are able to mine through and exploit the coal beyond these intrusive
bodies (Figure 3.5).
Figure 3.4: Uitkomst Colliery overburden depth to the Gus Seam
Source: Minxcon (2017), Uitkomst Technical Review.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 15
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Uitkomst Colliery FINAL
Figure 3.5: Uitkomst Colliery mining panel layout
Adit 2
Adit 1
Source: MCM, 2024
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 16
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Uitkomst Colliery FINAL
The mining method is bord and pillar, drill and blast mining in the thin seam using coal cutters for the
undercut, and with electric hand drills for blastholes. The mine panels are designed as 13 or 15 road
panels at a bord width of 6.0 m, and the pillars are designed in a squat pillar design to a safety factor
of 1.6. In the main development panels, this is increased to 2.0. This means that there is no potential
pillar recovery planned.
The clearance of the coal is achieved using battery powered scoops prior to loading onto a low-
profile feeder breaker and conveyor system to exit the mine.
The mine is ventilated by two main surface fans supplying 125 m3/s of fresh air into the workings
through a ventilation shaft that was commissioned in March 2022. The roof support is done using low
profile roof bolters. The mine has sufficient equipment to operate three sections, and occasionally
when required combines the sections into a single panel for faster linear advance. Within the panels,
the travelling ways are roof brushed to 2.0 m, and the conveyor transfer points are brushed to 2.6 m.
The mine attempts to extract the full coal horizon, hence dilution from the roof and floor is included in
the ROM tonnages stated in the Coal Reserves.
All mine planning information is uploaded to an XPAC software database for scheduling purposes,
together with the coal qualities and sales product information. The latest Coal Reserves estimate
generated for the mine was completed by Mr C Archer in June 2024, who is of good standing as a
qualified mining engineer and registered member of the SAIMM (706388).
It is understood that the sections are scheduled at approximately 15,000 to 20,000 ROMt/month on a
two-shift basis, with slight variation for the mining height. SRK notes that in developing a scheduled
mining rate for thin seam mines, the schedule is highly dependent upon roof conditions and floor
tramming conditions, which can be extremely disruptive to production activities and rates. Also, the
use of coal cutters is an older mining technology, and is very dependent upon the reliability of
refurbished machinery, as these are not manufactured as new anymore. SRK does not expect that
the design of future panels will vary significantly from historical panels, hence is also not expecting
that the scheduled rates will deviate largely in the future LOM.
Uitkomst produced close to 500,000 ROMt from July 2023 to June 2024, which is in line with future
planned production of approximately 500,000 ROMt/annum, e.g. 510,828 t for FY2025 and 513,405 t
for FY2026. At this annual production rate, Uitkomst has a remaining mine life of approximately
15 years.
3.7 Geotechnical
The underground mining activities at Uitkomst are relatively mature, with well-established
geotechnical practices and standards with regards to pillar and bord widths, ground support
requirements and ground hazard plans. Examples of minutes from monthly Mine Planning meetings
indicate that bord width and ground support spacing for developing areas is assessed on an ongoing
basis – with checking and identification of nonconformances and the development of problem issues,
and update of ground hazard plans. Directions and recommendations are then made to mitigate
issues and ensure that required standards are maintained. Ongoing vigilance and assessment of
varying conditions will ensure that risks are kept to a minimum.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 17
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Uitkomst Colliery FINAL
3.8 Processing
The Uitkomst wash plant is located adjacent to the South Mine Adit 1. The plant was constructed in
2007 and primarily treats ROM coal from the South Mine. The wash plant is owner-operated and
employs conventional well-tested coal washing technology with a total design capacity of 70 kt/min.
The plant consists of a dual stage roller crushing circuit followed by coarse (10 to 40 mm), coal
(1 to 10 mm) dense medium cyclone (DMC) washing circuits with the fines (-1 mm) material
upgraded in a fines spirals circuit. Equipment is generally in good condition with the plant being
structurally sound. The plant is operated using mainly grid power, with make-up water sourced from
nearby farm dams and potable water from boreholes.
The plant is currently underutilised treating only 40 kt/min of coal on average due to the current ROM
schedule, and this is consistent with future ROM predictions in the financial model.
Uitkomst produces and sells 'export' (0 to 40 mm) and 'peas' (10 to 25 mm) sized coal products. The
plant produces a 28 MJ/kg (6,690 kcal/kg) coal with an ash and sulfur content of 12% and 1%
respectively. The plant yield ranged between 60% to 64%, averaging 61% between July 2023 and
September 2024. SRK expects that practical plant yields on Uitkomst material will be maintained at
current levels for the LOM.
Plant coarse and slimes discards are deposited on a co-disposal facility. The slimes are pumped to
the centre and stored in three paddocks which operate in sequence. Once dry and depending on
qualities, the slimes are removed and sold separately from normal Uitkomst products. The costs in
producing these additional sales tonnes still form part of the overall plant costs used in the supplied
financial model, as they are not accounted for separately.
Dry slimes are blended with a thermal middlings product produced from the three-product DMS
cyclone module to produce a net as received (NAR) 5,000 kcal/kg product. The three-product DMS
cyclone allows for a production of a thermal middlings product in addition to the 12 to 14% ash peas
product.
The main product from Uitkomst is used by ArcelorMittal as a metallurgical coal for PCI processing,
with the balance being a typical thermal export grade coal. This thermal product is marketed through
agents. Other users include A-grade domestic coal.
3.9 Infrastructure and services
Power to the mine is provided by Eskom and is sufficient for the underground mining operations and
the processing plant. A series of generators provide a back-up to the main supply. The colliery has
six generator sets in use for back-up power supply. Water is provided from surrounding farm dams
and underground boreholes, and is reportedly sufficient for the plant and mine use.
Other surface administration and workshops are temporary structures located at Adit 1.
The mine is serviced by a rail siding (Wykom siding), which is a spur line from the main line with
connections to RBCT. Coal is loaded into trains using contractor front-end loaders (FELs), with some
sales distributed directly by truck via a weighbridge located near the processing plant.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 18
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Uitkomst Colliery FINAL
3.10 Environmental and social aspects
3.10.1 Mining rights and land access rights
Uitkomst Colliery holds a consolidated mining right issued on 20 May 2016 by the Department of
Mineral Resources and Energy (DMRE), which is recorded as KZN 30/5/1/2/2/94MR (94MR).
The consolidated mining right, 94MR, incorporates various properties that previously formed part of
mining right reference KZN30/5/1/2/2/21 (21MR), as well as the properties held under the original
mining right 94MR (Minxcon, 2017)1. Based on information reviewed, the mining right granted for
Uitkomst Colliery is presented in Table 3.6.
Table 3.6: Uitkomst Colliery mining right
File Surface Date Effective Expired Farms Portion
Ref area (ha) granted date* date
No.
Kweekspruit No.22 (Portion 3 [of 2] and Portion 8 [of 1]); Uitkomst
No.95-HT (Remainder of Portion 1 and Portion 5 [of 2]); Vaalbank
No.103-HT (Remainder of Portion 1, Portion 4 [of 1] and Portion 5 [of
KZN 30/5/1/2/2/94 MR
1]), Rustverwacht No.151-HT (Remainder of Portion 1, Remainder of
Portion 2, Remainder of Portion 3 [of 1], Portion 4 [of 1], Portion 5 [of
1], Remainder of Portion 6 [of 1], Portion 7 [of 1], Portion 8 [of 2],
Initially:
Remainder of Portion 9 [of 2], Portion 11 [of 6], Portion 12 [of 9],
02/10/2023
11,169.4 20/05/2016 26/05/2016 Portion 13 [of 2], Portion 14 [of 2], Portion 15 [of 3], Portion 16 [of 3]
As amended:
and Portion 17 [of 2]); Waterval No.157-HT (Portion 18 [of 3]);
20/11/2052
Jackhalsdraai No.299-HT (Remainder of Portion 1); Jericho B
No.400-HT (Remainder, Portion 1, Portion 2, Portion 3); Jericho C
No.413-HT (Remainder and Portion 1); Jericho A No.414-HT
(Remainder of Portion 1, Remainder of Portion 2 [of 1], Portion 3 [of
1], Portion 4 [of 1], Portion 5 [of 2] and Portion 6 [of 1]); Margin
No.420-HT (Remainder).
Sources: Minxcon (2017); Elemental (2023a)
Notes: * Date on which the Environmental Management Programme Report (EMPR) is approved in terms of section 39(4) of the Mineral and
Petroleum Resources Development Act 28 of 2002 (MPRDA).
The supplied LOM schedule and associated cashflow model for the Uitkomst Colliery provides that
operations are planned to cease in June 20402. Upon completion of the operations, SRK expects a
minimum of 2 years for closure works and 10 years post-closure monitoring activities as specified in
the 2023 annual closure update report (Elemental, 2023a)3 (i.e. 2052), which is within the validity
period of the mining right.
According to the 2017 Minxcon review, the surface rights for the farm portions where mine and
plant infrastructure are situated are owned by the Qophumlando Communal Property
Association with whom a lease agreement was in place.
1 Minxcon, 2017. Uitkomst Colliery Pty Ltd, Summary of technical Review 2017, Minxcon Pty Ltd, 18 January
2017
2 46.05.03.02 Uitkomst Model 202410.xlsm, October 2024
3 Elemental, 2023a. Annual update of the preliminary closure and financial provision assessment for Uitkomst
Colliery, 2022–2023 closure update report, Elemental Sustainability Pty Ltd, 7 August 2023
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 19
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Uitkomst Colliery FINAL
The status of conformance with the mining right, land ownership, rental and land access agreements
requirements is regularly reviewed by management. Based on information reviewed by SRK, there is
no evidence of anything that would suggest MCM does not remain compliant. SRK recommends that
MCM undertakes a detailed compliance review to identify Uitkomst's operational risks associated
with the current land access agreements. Additional budget and time might be required to amend
agreements.
The environmental and social compliance risk is considered qualitatively in SRK's assessment of an
appropriate range of resource multiples to apply in determining its valuation range.
3.10.2 Environmental approvals
According to the 2023 annual closure report (Elemental, 2023a)4, the following environmental
approvals are held by Uitkomst Colliery:
- A consolidated EMPR in support of the consolidated mining right was approved on 26 May 2016.
- Environmental Authorisation (EA) for section 102 was granted on 4 May 2023, and is supposedly
valid for the life of mine.
- Water Use Licences (WULs):
– licence number 11/V32B/ACGIJ/11507 issued on 8 April 2022
– licence number 11/V31D/ACGIJ/13085 issued on 11 June 2023.
3.10.3 Social and Labour Plan
Based on the information reviewed, it is SRK's understanding that the new Social and Labour Plan
(SLP) for the period 2021–25 was approved on 24 March 2022.
3.10.4 Environmental and social management
It was reported that the Environmental Management System (EMS) adopted at the Vele and
Uitkomst collieries was developed as the formal tool for environmental management. Continuous
monitoring is implemented at the mining sites to assess the effectiveness of controls with regular
analysis and reporting, and action management on failures. It is noted that, while not
ISO 14001:2015 accredited, MCM states that its Uitkomst EMS is aligned with ISO 14001.
The water quality report for the period from September 2021 to November 2021 was provided for
Uitkomst Colliery (Elemental Sustainability, 2021a) and Wykom Siding (Elemental Sustainability,
2021b) and indicated the following key impacts:
- Uitkomst Colliery:
– Mitigation measures have been put in place to ensure no discharge from the Pollution
Control Dam (PCD).
4 Elemental, 2023a. Annual update of the preliminary closure and financial provision assessment for Uitkomst
Colliery, 2022–2023 closure update report, Elemental Sustainability Pty Ltd, 7 August 2023
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 20
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Uitkomst Colliery FINAL
- Wykom Siding:
– The water within the PCD is polluted and the management measures to ensure that the PCD
does not spill into the receiving environment should be maintained.
– When considering the upstream surface points of MP01, MP03 and MP05 (and then
compared to downstream point MP04), it is clear that there are other system contributors that
change electrical conductivity, total dissolved solids, pH and sulfate levels.
Annual internal WUL audits for Uitkomst Colliery (Uitkomst Colliery, 2022) and Wykom Siding
(Wykom Siding, 2022) dated February 2022, prior to issuing the new WULs, were provided for
review. The key non-compliances were related to:
- Uitkomst Colliery:
– exceeding quality limits for disposal of stormwater/dirty water
– impact from the mine activities on the groundwater resources
- Wykom Siding:
– calibration of flow meters
– exceeding disposal quantities into the Pollution Control Dam, Slurry Dam, Settling Pond,
Return Water Dam
– exceeding disposal quantities onto the Discard Dam
– exceeding dust suppression limits
– exceeding quality limits for disposal of stormwater/dirty water.
In September 2021, the DMRE conducted a monitoring and compliance inspection in respect of the
Uitkomst Colliery mining right renewal application. The findings of the inspection resulted in the
issuing of a notice of intent to issue a compliance notice in terms of Section 31 L of the National
Environmental Management Act (Act 107 of 1998) (NEMA) due to transgressions relating to waste
management, poor housekeeping and non-implementation of a general environmental awareness or
job-specific environmental awareness plan on site (DMRE, 2022).
External environmental and water performance against the colliery's consolidated EMPR and
Integrated WUL (IWUL) were not made available, and therefore the level of compliance with
regulatory requirements could not be determined. The materiality of these aspects can therefore not
be assessed as SRK does not have the information to give an informed opinion on whether the
operation is complying with the requirements of its environmental licences and permits.
The supplied financial model shows annual environmental cost provisions through the Uitkomst
Colliery LOM totalling ZAR88,903,292. It is unclear what this cost covers. SRK assumes this to be
related to environmental management and monitoring activities.
3.10.5 Mine closure provisions
SRK understands that the Uitkomst Colliery mine closure plan and associated financial provision are
to be updated annually to comply with the regulations. The 2023 annual closure update (Elemental,
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 21
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Uitkomst Colliery FINAL
2023a)5 provided the following costs to cover closure liabilities for the current and proposed
operations:
- ZAR28,820,936.58 for the current Uitkomst Colliery's closure liabilities
- ZAR7,857,645.42 for the proposed development at Klipspruit Adit 2K.
This closure cost estimation has been developed in accordance with the 2005 Department of Mineral
Resources guideline. Known as the asset retirement obligation cost, it considers current
environmental liabilities and activities of the site and excludes any planned activities.
SRK understands that MCM holds current rehabilitation financial guarantees of ZAR28,952,253 for
Uitkomst Colliery as of December 20236. SRK understands that this total rehabilitation financial
guarantee is equivalent to the estimated cost for Uitkomst Colliery's closure liabilities.
The supplied LOM schedule and associated cashflow model for the Uitkomst Colliery mine provides
that operations are planned to cease in June 20407. Upon completion of the operations, SRK
expects a minimum of 2 years for closure works and 10 years for post-closure monitoring activities
as specified in the 2023 closure report (i.e. 2052), which is within the validity period of the mining
right. The supplied financial model shows no provision for Uitkomst Colliery mine closure. Uitkomst is
an underground operation and therefore opportunities for concurrent rehabilitation are limited. The
2023 closure report estimates that only 5% of the mine residue disposal can be rehabilitated on an
annual basis.
SRK notes that the costs outlined in the Elemental (2023a) report include the following assumptions
and comments:
- Costs estimations are conceptual and based on current day liability costs (i.e. costs that could be
required in case of sudden closure), not LOM closure costs, with the exception of the proposed
development at Klipspruit Adit 2K.
- All demolition rubble is considered General Waste as per the definition of Demolition waste in
Category B of Schedule 3 of the National Environmental Management Waste Amendment Act
and based on the classification as General can therefore be incorporated into the backfill. The
cost associated with potentially contaminated waste management is excluded.
- Concurrent rehabilitation of the Mine Residue Disposal Site will be performed as mining
progresses. However, no cost for concurrent rehabilitation is included in the current provision.
- Contractor rates were obtained in 2018 for the demolition and/or removal of the various types of
infrastructure and structures, and the rehabilitation of affected areas. The average of the three
contractor rates obtained were used to establish a unit rate for each rehabilitation action. The
contractor rates have been updated with CPI since 2019 and the average CPI for the 2022
period update of 6.9% was used. However, the cost does consider CPI increase over the LOM of
the operation until the closure phase.
5 Elemental, 2023a. Annual update of the preliminary closure and financial provision assessment for Uitkomst
Colliery, 2022–2023 closure update report, Elemental Sustainability Pty Ltd, 7 August 2023
6 MCM SA Guarantees-202312 (1 1), December 2023
7 46.05.03.02 Uitkomst Model 202410.xlsm, October 2024
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 22
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Uitkomst Colliery FINAL
- Preliminary and General are set at 7.5%, however, no justification is provided. It is good
international industry practice for Preliminary and General to be at 12% for cost estimates under
ZAR100 M.
- VAT at 15%.
- The estimate incorporates a 5% continency allowance. As the accuracy of conceptual closure
design typically ranges from ±30% to ±35%, it is good international industry practice for
contingency allowances to range between 25% and 35%8.
- For post-closure monitoring, costs of groundwater and surface water monitoring have been
assumed to take place over a period of 10 years with sampling taking place on a biannual basis,
and 2–3 years required for maintenance of vegetation after rehabilitation.
- Several cost elements do not appear to be included in the provision:
– specialist studies, professional fees and project management
– detailed assessment of long-term decant from workings and its treatment costs
– labour redundancy or other human resources
– social transitioning to closure related costs.
- The cost estimates presented in the calculations was prepared to an accuracy level of ±70%
(including 5% contingency). Elemental's estimated total liability cost ranges from ZAR11 M to
ZAR62 M.
Current closure provisions totalling ZAR37 M to an accuracy level of ±70% (including 5%
contingency) provided for Uitkomst Colliery are conceptual and have been developed to consider
current disturbance/liabilities of the mine site for financial reporting processes. There is a risk that
additional costs may be required once the underlying assumptions have been addressed such as
alignment with closure designs and completion criteria, alignment with project development,
contamination assessments, ground-truth measurements and inventory, site-based rehabilitation
trials, and cashflow scheduling alignment. As such, there is a risk that the Uitkomst Colliery LOM
closure cost estimations are underestimated. This conclusion is based on the information outlined in
the 2023 Preliminary Closure and Financial Provision Assessment, as well as liability cost estimate
assumptions, and considering current practice in similar mining and processing operations in South
Africa. At this conceptual stage of the closure cost estimations, SRK recommends a minimum 35%
contingency and 12% Preliminary and General be applied to the closure provisions for a base case
LOM closure cost estimate of ZAR47.9 M. Current and recommended costs are presented in
Table 3.7.
8 AusIMM Cost Estimation Handbook, Second Edition, Monograph 27
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 23
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Uitkomst Colliery FINAL
Table 3.7: Uitkomst Colliery's total closure cost estimations – as at 7 August 2023
Elemental's Asset Retirement SRK's LOM closure cost minimum
Obligation estimates (ZAR) recommendations (ZAR)
Liability cost estimate 28,350,595 28,350,595
Preliminary and
General
2,126,295 3,402,071
Elemental 7.5%
SRK 12%
Contingency
Elemental 5% 1,417,530 9,922,708
SRK 35%
Total excluding VAT 31,894,419 41,675,374
VAT (15%) 4,784,163 6,251,306
Base case total
36,678,582 47,926,680
(including VAT)
Low case total (-70%) 11,003,575 -9
High case total
62,353,589 81,475,357
(+70%)
Source: Elemental (2023a)
SRK understands that no whole-of-mine-life closure cost estimates are available for Uitkomst
Colliery. Good international industry practice normally requires estimation of whole-of project closure
costs for the mine, processing plant and associated auxiliaries. SRK recommends an LOM closure
cost estimate be developed according to the updated LOM plan and aligned with the closure
objectives and requirements for Uitkomst Colliery. There is a risk the Uitkomst Colliery LOM closure
cost estimate is underestimated.
3.11 Risks and opportunities
Geological risks relate to devolatilisation of the coal due to the presence of unmapped, and hence
unexpected, dolerite intrusions.
SRK notes that with thin seam mining in particular, variations in floor and roof rolls will affect the
mining height more severely, which could create unforeseen risks within these mining conditions.
Uitkomst Colliery has historically mined in these conditions and has been managing this aspect by
the existing drilling practices, and also by limited horizontal drilling conducted at the mine, to
proactively provide information on potential anomalies within the seam and/or roof and floor
conditions.
Equipment obsolescence, in particular the outdated Joy coal cutters and the scoop trams, present
further risk, with the latter not common in the local thin seam coal mining industry. This has been
managed by owning surplus equipment, allowing for repairs to be undertaken as required and fewer
impacts on the mining operation.
9 Considering closure cost estimations for similar operations, SRK does not suggest a low case estimate lower
than the recommended base case estimate.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 24
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Uitkomst Colliery FINAL
In August 2018, MCM took ownership of the equipment from the contract miner at Uitkomst Colliery
and transferred staff who were familiar with the equipment and operation. This retained the
necessary skills and subsequent equipment availability at the operation, which could be considered a
noticeable risk with related consequences, if not managed appropriately.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 25
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Vele Aluwani Colliery FINAL
4 Vele Aluwani Colliery
4.1 Overview
The Vele Aluwani Colliery (Vele) is located 48 km west of the town of Musina and 100 km north of
the town of Alldays in the Limpopo Province, South Africa. Musina is the last major town before the
Beitbridge border crossing between South Africa and Zimbabwe, and lies 520 km north of Pretoria
(Figure 4.1).
MCM holds a 100% interest in the Vele Colliery through its wholly owned subsidiary, Limpopo Coal.
The project is held under a new order mineral right number LP 103 MR, which is granted and
remains valid until 18 March 2040. MCM also holds a prospecting right LP 1136 PR over the farm
Alyth 837MS.
The colliery started thermal coal production in January 2012 and was subsequently placed on care
and maintenance in October 2013 – it recommenced mining with contractor Hlalethembeni
Outsourcing Services (Pty) Ltd (HOS) during October 2022. The mine was operated by HOS
between October 2022 and December 2023, before mining was suspended again in December 2023
due to the fall in thermal coal prices. Dispatch of stockpiled product continued into 2024. HOS has
since been considering options for optimisation of the overall operation, to again achieve financial
viability despite low coal prices.
The Limpopo River, which represents the international border between South Africa and Zimbabwe,
bounds the Vele operations to the north. The Mapungubwe National Park's eastern border is located
37 km west of the western boundary of the Vele Colliery. The Mapungubwe Hills within the park is a
World Heritage site.
The Vele Colliery is well situated with respect to existing rail and road infrastructure. The main road
linking South Africa to Zimbabwe and associated rail routes pass through Musina. The R572 sealed
bitumen road from Pontdrift to Musina is located adjacent to the Vele Colliery on the southern
boundary.
Figure 4.1: Location of Vele Colliery
Source: MCM website, accessed 13 May 2022
The climate at Vele is semi-arid and characterised by hot to extremely hot summers and warm to
cool winters, with minimal precipitation. Mining activity is able to be conducted all year round.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 26
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Vele Aluwani Colliery FINAL
4.2 History
Southern Sphere Mining and Development Company Limited undertook exploration drilling between
1973 and 1983. This involved drilling 61 drill holes using air flush coring, resulting in a core size of
approximately 16.8 mm. Some 36 large diameter drill holes were also completed for washability and
coking testing purposes. All exploration activity then ceased for the next 22 years, after which
Limpopo Coal acquired the prospecting rights to various properties within the current colliery area. In
2006, CoAL's predecessor company, GVM, acquired a 74% stake in Limpopo Coal and in 2008,
Silkwood Trading 14 (Pty) Ltd obtained additional prospecting rights on the Vele area but was bought
by CoAL later that year. CoAL received shareholder approval for its name change to MCM in
November 2017.
A high-resolution airborne magnetic and radiometric geophysical survey was flown over the area in
2008. After detailed processing, the final products were a digital terrain model and a geological map,
as well as other geophysical data maps.
In March 2010, the mining right was granted by the DMR. An appeal was subsequently lodged
against the mining right. In June 2010, the DEA issued a pre-compliance notice followed by a
compliance notice in August 2010. The compliance notice was in relation to the commencement of
listed activities without National Environmental Management Act authorisation. In the same month,
the Department of Water Affairs (now Department of Water and Sanitation – DWS) issued a directive
to cease all unlawful water activities. In March 2011, a coalition of non-government organisations
opposed to Vele submitted an appeal to the country's Water Tribunal. Consequently, the IWUL was
automatically suspended but this suspension was lifted in October 2011.
Subsequent to the above, Vele has secured all of the necessary licences to operate at its forecast
capacity.
Open pit coal production started in the East Pit in January 2012. Production ceased in October 2013
after logistical difficulties on the Matola railway line in Mozambique (as the coal was exported
through the Matola Coal Terminal at Maputo) as well as depressed international thermal coal prices.
The plant produced an 18% ash export thermal coal until it was put on care and maintenance. After
additional drilling and analysis, a plant redesign has been planned to produce a 10% ash semi-soft
coking coal (SSCC) product and a 5,500 kcal (NAR) thermal coal product.
Following a strategy review it was decided that the optimal strategy was to recommence operations
on an outsourcing basis. In December 2022, a 5-year Contract Mining Agreement with HOS was
signed. Construction of the overhead electricity line was completed in April 2023 and the Vele CHPP
was connected to the national power grid in May 2023. HOS successfully dewatered the Vele
open cast pit and produced 269,051 t of saleable thermal coal during CY2023.
Following this, HOS informed MCM that, due to the operating challenges at Vele, combined with
elevated logistics costs and the depressed API4 coal price, it intends downscaling operations while it
progresses a production optimisation strategy at the colliery.
4.3 Local geology
The Vele Colliery is located in the Permian Tuli Basin of the Limpopo Coalfield. The Limpopo
Coalfield is a small intracratonic east–west striking fault-bounded coalfield, where the sedimentation
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 27
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Vele Aluwani Colliery FINAL
was fault-controlled from initial deposition; the preserved basin length is around 120 km, and the
width is approximately 80 km; the coalfield extends north into Botswana and northeast into
Zimbabwe (Malaza, 2014). The coalfield is bounded by east-northeast trending normal faults.
The basin sediments belong to the Dwyka and Ecca groups of the Karoo Supergroup and consist of
basal diamictites and sandstone of the basal Tshidzi Formation, followed by the sandstone-siltstone-
shale-coal assemblage of the Madzaringwe Formation (Figure 4.2). This is overlain by alternating
black shale, sandstone and coal of the Mikambeni Formation and sandstones and conglomerates of
the Fripp Formation.
The overlying Beaufort Formation is represented by the siltstone and fine-grained sandstones and
mudstones of the Solitude Formation. In the central part of the basin, the Solitude Formation is
overlain by the coarse sandstones and conglomerates of the Stormberg Group's Klopperfontein
Formation. The red and purple mudstones and subordinate siltstones of the Bosbokpoort Formation
are encountered above the Klopperfontein Formation. In turn, these are overlain by the fine-grained
sandstones of the Red Rocks and Tshipise Members of the Clarene Formation.
Figure 4.2: Vele and Makhado – general stratigraphy
Source: Sparrow (2012)
The generalised stratigraphy at Vele is depicted in Figure 4.3 and shows the SBL ply of the Bottom
Seam to be the thickest individual coal horizon.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 28
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Vele Aluwani Colliery FINAL
Figure 4.3: Vele project seam stratigraphy
Source: Photograph from site visit, 13 February 2024
Currently exposed coal seams in East Pit are shown in Figure 4.4. East Pit targets the Top, Middle
and Bottom seams.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 29
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Vele Aluwani Colliery FINAL
Figure 4.4: Vele East Pit, looking northeast
Top Seam
Middle Seam
Bottom Seam
not exposed
Source: Photo from site visit, 13 February 2024
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 30
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Vele Aluwani Colliery FINAL
Figure 4.5 depicts the surface geology of the Vele area.
Figure 4.5: Surface geology of the Vele area
Source: VBKOM (2017)
The strata are interpreted to dip northwards at approximately 2° in the Vele area, although the dip
increases locally close to faults; the strata sub-crop to the east and south. Near-vertical dolerite
dykes are encountered, devolatilising the coal, but not displacing it. Faults not only controlled
deposition, but also subdivided the coalfield into a number of blocks, resulting in varying seam
depths between the blocks; parts of the deposit can be exploited from surface, while other blocks
need to be mined from underground. The differing block depths are shown in Figure 4.6.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 31
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Vele Aluwani Colliery FINAL
Figure 4.6: Top Lower Seam depth illustrating different blocks due to faulting
Source: VBKOM (2017)
At Vele, the coals were extracted from the Main Coal Zone of the Madzaringwe Formation within the
Ecca Group. The Main Coal Zone is approximately 15 m thick and consists of three coal-bearing
horizons: the Top, Middle and Bottom coal horizons/seams, comprising interlaminated carbonaceous
shale, mudstones and coal. The Top Seam is further subdivided into the Top Upper, Top Middle and
Top Lower seams, while the Bottom Seam is subdivided into the Bottom Upper and Bottom Lower
seams (Table 4.1). The Top Middle and Top Upper seams are not considered economic.
Table 4.1: Vele seam thicknesses
Seam or zone Average Maximum Minimum Proportion of coal
(m) (m) (m) (%)
Main Coal Zone 16.42 31.95 0.25
Top Lower 1.52 7.66 0 55–65
Middle 1.05 2.19 0 25–45
Bottom Upper 1.98 5.48 0 65–80
Bottom Lower 3.68 7.87 0 65–80
Source: VBKOM (2017)
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 32
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Vele Aluwani Colliery FINAL
The coal has been petrographically classified as medium rank, high vitrinite C-grade bituminous coal.
The coking coal fraction is classified as a SSCC and can produce a 10% ash coking coal (primary
product) and a secondary 5,500 kcal (NAR) thermal product.
4.4 Exploration potential
Future exploration in areas located between areas covered by the LOM plan and the prospecting
right boundary are limited, but better fault delineation will assist with defining any potential resources.
To date, four inclined drill holes were successful in delineating faults.
MCM has an existing prospecting right to the farm Alyth 837 MS. The area covered by this right
requires significant drilling in order to upgrade the presently defined Coal Resources.
4.5 Coal Resources and Coal Reserves
4.5.1 Coal Resources
With regard to the defined Coal Resources at Vele, the critical variable to exclude devolatilised coal
is the VM content. The following cut-off values were applied when estimating the mineable resources
at Vele:
- mineral rights boundaries (the mining right and prospecting right are reported separately)
- the 100-year floodline for the Limpopo River
- the limit of oxidation
- a 50 m wide exclusion zone around dykes and other geological structures
- minimum raw VM of 18% dry ash free
- a minimum seam thickness of 0.5 m for GTIS
- thickness cut-off criteria for underground resources (Bottom Lower seam) – minimum of 1.4 m
and maximum of 4.5 m
- MTIS has been estimated by applying the theoretical mining heights and an estimated mining
layout loss of 2% for open cast areas and 10% for underground areas. This translates to an
average mining layout loss of 5% for the mining right area and 8% for the prospecting right area.
The Coal Resource estimates were also discounted for unknown geological structures, based on the
confidence in the Coal Resource classification, namely:
- Measured 10%
- Indicated 15%
- Inferred 20%.
The Coal Resources have been estimated by Mr John Sparrow and reported in accordance with the
JORC Code, 2012.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 33
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Vele Aluwani Colliery FINAL
The Coal Resources were estimated from the geological model, constructed by Mr Sparrow using
MinexTM software. SRK has reviewed the geological model and considers that it provides an
accurate reflection of the data and that the Coal Resources have been estimated in an appropriate
manner.
All Coal Resources and coal qualities have been estimated on an air-dry basis and are inclusive of
the Coal Reserves. Note that the Coal Resource estimates include significant amounts of
intercalated non-coal material that will be removed during beneficiation.
The Coal Resources as reported at 30 June 2024 are shown in Table 4.2; the Coal Resources,
subdivided into those attributable to the mining right area and the prospecting right area are shown in
Table 4.3 and Table 4.4, respectively.
Table 4.2: Vele Coal Resources – as at 30 June 2024
Resource Category GTIS MTIS MCM MCM
(Mt) (Mt) attributable attributable
interest (%) Resource (Mt)
Measured 146.789 5.353 5.353
Indicated 426.854 3.961 3.961
Subtotal Measured and 100
573.643 9.314 9.314
Indicated
Inferred 218.932 0.704 0.704
Total 792.575 10.018 100 10.018
Source: MC Mining Limited Annual Report 2023
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 34
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Vele Aluwani Colliery FINAL
Table 4.3: Vele Coal Resources – mining right only
MCM MCM Raw TTIS coal qualities
Resource GTIS TTIS attributable attributable
category (Mt) (Mt) interest Resource CV Ash VM FC TS IM
(%) (Mt) (MJ/kg) (%) (%) (%) (%) (%)
Measured 140.58 126.52 126.52 15.69 48.0 21.5 28.8 1.78 1.6
Indicated 356.92 303.39 303.39 14.73 50.7 20.7 26.9 1.80 1.6
Subtotal 100
Measured and 497.50 429.91 429.91
Indicated
Inferred 167.93 134.35 134.35 14.51 51.5 20.6 26.2 1.86 1.7
Total 665.43 564.25 100 564.25 14.88 50.3 20.8 27.2 1.81 1.6
Source: VBKOM (2017)
Notes: CV – calorific value; FC – fixed carbon; IM – inherent moisture; TS – total sulfur; TTIS – total tonnes in situ.
Table 4.4: Vele Coal Resources – prospecting right only
MCM MCM Raw TTIS coal qualities
GTIS TTIS attributable attributable
Resource category CV Ash VM FC TS IM
(Mt) (Mt) interest Resource
(%) (Mt) (MJ/kg) (%) (%) (%) (%) (%)
Measured 7.59 6.83 6.83 15.69 48.0 21.5 28.8 1.78 1.7
Indicated 69.93 59.44 59.44 14.73 50.7 20.7 26.9 1.80 1.6
Subtotal Measured and 100
77.52 66.27 66.27
Indicated
Inferred 51.00 40.80 40.80 14.51 51.5 20.6 26.2 1.86 1.7
Total 128.52 107.07 100 107.71 14.88 50.3 20.8 27.2 1.81 1.6
Source: VBKOM (2017)
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 35
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Vele Aluwani Colliery FINAL
4.5.2 Coal Reserves
Vele declared a Coal Reserve in 2017 (VBKOM, 2017) based on parameters adopted at an
adjacent open pit operation, also supplemented by underground mining. As noted before, mining
operations recommenced in December 2022 but ceased again in December 2023. The latest Coal
Reserves estimate, provided in Excel spreadsheet format by MCM for Vele, as at 30 June 2024 is
shown in Table 4.5.
Table 4.5: Vele Coal Reserves (100% attributable basis)
Saleable
ROMt
Coal Reserves category primary
(Mt)
product (Mt)
Proved 3.404 1.362
Probable 3.188 1.275
Total Reserves 6.592 2.637
Source: MC Mining Limited Annual Report 2023
It is clear there is a much larger Coal Resource within the mining right, however the Coal Reserves
declared are of substantially lower magnitude. The Coal Reserves (Table 4.5) were estimated and
reported by HOS for a 5-year plan only, and these estimates do not represent a true LOM Coal
Reserve. Hence, until a clear development profile is established, any assessment of this mining
right should be completed on an implied resource multiples basis.
4.6 Mining
The Vele Colliery is located in the Thuli Coalfield and as indicated by MCM in response to a query,
has an estimated mine life of approximately 40 years – this is supported by a shorter mine life
however, as indicated in the Vele Colliery Financial model (46.06.02.01 Vele Model 20230801_StR)
provided by MCM of 27 years, which is accepted by SRK as the more accurate LOM estimation.
MCM signed an agreement and appointed a contractor to the Vele operations in December 2022,
initiating the recommissioning of the Vele Colliery CHPP, as well as commencement of mining by
the contractor. The agreement signed between the parties is on an exclusive basis to produce
thermal coal and endures for an initial 5-year period up to December 2027. The contract stipulates
that, at the end of the 5-year term, MCM (via its 100% subsidiary Limpopo Coal Co. – LCC – which
holds the Vele licences), will pay the contractor the equivalent of the 'value in use' of the plant and
other operating assets for their return to LCC.
The contractor targeted a monthly production of 60,000 t of saleable thermal coal from the
operation, with LCC according to the contractual terms earning ZAR200/t (excluding VAT) for each
tonne of saleable coal produced, i.e. if the average monthly API4 export coal price holds above
US$120/t.
The agreement stipulates that the contractor is responsible for all mining and processing costs at
Vele, while LCC remains responsible for the colliery's regulatory compliance, rehabilitation
guarantees, relationships with authorities and communities as well as the supply of bulk electricity
and water.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 36
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Vele Aluwani Colliery FINAL
Following recommencement of mining in late December 2022, ramp-up to full production was
targeted for H2, CY2023. However, the operation did not deliver as planned.
This was further exacerbated by the depressed API4 coal price, resulting in a decline in the thermal
coal price delivered, with the 3-month average API4 price for Q1, CY2023 at US$146/t, reducing to
US$115/t in Q2, CY2023, US$109/t in Q3, CY2023, and down to US$102/t in Q4, CY2023.
Hence, due to these impacts on the financial performance and viability of the Vele operation, the
contractor reportedly exercised the hardship clause in the agreement, and subsequently ceased
operations at Vele during December 2023. MCM in collaboration with the mining contractor
proceeded with consideration of various improvement initiatives. MCM has advised that this has not
been completed yet, and no further activities or development of formal plans have taken place for
the Vele operation.
It is noted that the contractor has indicated that its production optimisation strategy (Operation
Shandukani) will potentially include, among other changes, changes to the mining methodology, as
well as further modifications to the CHPP and securing access to rail transport at competitive
prices. It was mentioned that the potential for underground mining in a northwesterly direction was
also considered, in an attempt to access higher-yielding coal compared to that achievable with
open cut methods.
SRK conducted a 1-day site visit to Vele Colliery during February 2024 to further understand the
mine status and the remaining infrastructure and services following suspension of production. It was
observed that there was no apparent activity on site, other than sporadic loading of remaining coal
product to be transported by road to a customer in Mpumalanga. No equipment remained on site
other than the preparation plant and associated conveyors and stackers, as well as management
offices and change houses, which were all in generally good condition at the time. Bulk water and
electricity infrastructure remained in place and was functional.
It was noted during SRK's site visit that there was a substantial amount of water in the exposed pit
area, with no pumps or pumping in progress. Access haul roads and ramps were established but
would need to be repaired and upgraded in some areas before mining could recommence. Coal
faces were open for mining, and backfilling with plant discard and rehabilitation with burden and
topsoil was evident. SRK's assessment was that a noticeable measure of pit preparation would be
required to enable mining operations to recommence.
All of the above mining review are contributing factors to SRK's advice to BDO that there are
insufficient reasonable grounds to value Vele Colliery using a DCF approach.
4.7 Geotechnical
A pit slope design schematic provided for Vele indicates the following:
- bench face angles of 35° in the sandy soil of ~5 m thickness
- vertical bench faces in the fresh rock and weathered rock, but with 'soft' bench crests removed
in the weathered rock by cutting back the upper bench face to an angle of 63°
- benches of maximum 13 m height in the fresh and weathered materials
- bench faces of 88° in the coal zone in the lowermost part of the slope
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 37
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Vele Aluwani Colliery FINAL
- berms of 7 m width, with bunds constructed 3 m back from the bench crest.
This generates an overall slope angle of 63° over a slope height of approximately 50 m. SRK
considers this fairly steep, particularly in the weathered materials. By comparison, the slope
designed at Makhado is less than 40° over a similar height as discussed in Section 5.7.
Observations made during the site visit by Steven Muller in February 2024 suggest that, except for
loose material that spilled over the high wall (probably due to rain), there was no evidence of
slope/high wall failures. Therefore, it seemed the design was successfully employed during
previous mining at the site. As SRK is not certain of the properties of the materials within the pit
walls, it was suggested that this be considered a moderate risk, and the slope performance and
groundwater levels be closely monitored during further mining.
4.8 Processing
MCM had planned to mine, crush and screen 3.2 Mt/a of ROM coal at the Makhado mine to a top
size of approximately 225 mm before scalping at 31.5 mm. The +31.5 mm (approximately 34% to
38% of the ROM) was going to be discarded and placed on the carbonaceous dump or backfilled
into the Makhado open pits as high-ash waste, while the -31.5 mm coal, which accounts for
approximately 62% to 66% of the ROM, was going to be hauled with side tipper trucks to the Vele
coal processing plant for washing. Vele is approximately 134 km from the Makhado mine.
This plan has now changed to only processing Vele coal at Vele. A new 4.0 Mt/a coal processing
plant is proposed to be constructed at Makhado to process the Makhado coal production.
The existing plant at Vele (Figure 4.7) was based on a production rate of 2.2 Mt/a ROM and
operated between February 2012 and October 2013 producing a thermal export product (18% ash)
at an average yield of 32%.
The current plant consists of the following main sections:
- crushing and screening plant
- secondary washing plant (modular)
- spiral plant (modular)
- filter presses
- ROM, product and discard stockpiles
- general plant services
- a slurry pond.
ROM material supplied from the open cast mining activities comprises a top size of 300 mm. The
plant was designed for a ROM feed of 500 t/h into the crushing and screening plant.
The Vele plant was placed on care and maintenance in September 2012 to allow for plant
modifications. The objective of the modifications was to create capability to produce multiple
products, reduce the amount of fines generated by materials crushing and handling, improve
product yield by adding froth flotation to capture the ultra-fine coal and simultaneously produce
coking and thermal coal, and reduce operational costs by improving materials handling systems in
the plant.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 38
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Vele Aluwani Colliery FINAL
During the 2012 operational period it was clear that there were significant yield and product losses.
During this period, investigations showed that product quality coal in the smaller size fractions
(fines) was being spoiled either to slimes or discards.
A Front End Engineering and Design study was performed by Sedgman in 2016 to modify the
existing CHPP to process 500 t/h ROM and produce an SSCC and a thermal coal product.
The plant upgrade study included:
- a new ROM dual tip hopper, with an 800 mm top size
- a new feeder breaker to size the ROM coal to nominal 50 mm
- new and extended conveyors to transport coal between new plant modules, discard and
product stockpiles
- a feed bin for surge capacity
- an upgrade of the de-stoning plant
- a new discard bin and discard extraction system
- a tertiary screening plant for nuts and peas as well as a stacking system
- modification to the coking coal plant feed system (larger openings and vibrating feeder chutes)
- an upgrade of the existing DMS cyclone
- new thermal coal stockpile facilities
- an upgrade of fines beneficiation by incorporating a reflux classifier and flotation circuit
- dewatering using a high frequency screen for thermal coal and screen bowl centrifuge for
coking coal
- dust and fire suppression systems as well as integrated control and communication systems.
To SRK's knowledge, none of the above mentioned upgrades and improvements have been
implemented to date, and the contractor undertaking mining and processing at Vele between
October 2022 and December 2023 used the plant in its unmodified condition. SRK's site visit to
Vele showed no evidence of any mining and/or coal processing activities taking place on site apart
from loading, weighing and transport from the 6,000 kcal/kg stockpile.
In general, the processing plant seems in good condition apart from a mobile feeder breaker and
destoning plant that have been removed. No maintenance or processing activities were evident.
Two final product stockpiles were observed, a 6,000 kcal/kg (RB1) stockpile and a 5,500 kcal/kg
(RB3) stockpile. The 6,000 kcal product is in the process of being loaded and sold.
The plant and associated conveyor infrastructure are all intact with no evidence of spares pirating
or stripping.
The slimes dam is full and there are activities underway to remedy this, including the sale of dry
slimes. There was evidence of some dry slimes being loaded out for prospective clients interested
in using the dried fines for briquetting.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 39
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Vele Aluwani Colliery FINAL
Figure 4.7: Vele wash plant
Source: Minxcon Projects (2022), Makhado Colliery Bankable Feasibility Study (BFS)
The current Vele plant has provision for water, power and the necessary pollution controls already
implemented.
In the event that HOS does not proceed with mining, the plant can be separated into its
components and potentially used at Makhado.
4.9 Infrastructure and services
The nearest town to the Vele Colliery is Musina, which is the seat of the local municipality and has
a history of mining activity and several active mines in the region. Services available at Musina
include schools, rail linkages, a hospital, bitumen roads and electricity from the national grid.
Various infrastructure and services were re-established and commissioned from July 2022
onwards, in preparation for the contractor operation that commenced in October 2022. MCM
reported during SRK's previous assessment earlier this year, that the following main infrastructure
and services were installed (excluding the preparation plant infrastructure/services):
- A 5 MVA overhead line from the Pontdriff Substation to provide power to Vele, eliminating the
operation's reliance on the diesel generator – the generator remains on standby for when
required.
- The boreholes located at the Limpopo River are now energised by Eskom, and the diesel
generator remains on standby for when required.
- The raw water dam pumps are now also energised by Eskom, and the diesel generator
remains on standby.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 40
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Vele Aluwani Colliery FINAL
- Five replacement boreholes were implemented at the Limpopo River, improving water
availability to the site.
- A new HDPE water pipeline for dewatering the mining pit(s) was laid from the pits to the slurry
pond, located at the plant.
- Replacement of the dilapidated clarifying water tank was completed.
- A crushing and screening plant
- Additional ROM stockpile capacity
- Additional product stockpiles.
SRK's site visit in February 2024 to Vele Colliery confirmed that the power supply infrastructure on
and surrounding the mine site was in relatively good condition, other than a section providing power
to the substation and eight site-supply water boreholes along the Limpopo River bank which was
damaged by a weather event. This damage was subsequently repaired. However, from the site visit
it was observed that the powerlines and electrical panels do need clearing of vegetation, as this
could cause downtime if not maintained regularly.
Other infrastructure on site and security fencing – e.g. the explosives magazine, substations and
electrical gear – remained in good condition but also required clearing of vegetation and follow-up
maintenance on a regular basis to prevent potential damage. General road access to the site and
other secondary roads were accessible and in relatively good condition.
The site visit revealed that the slimes dam was filled to capacity, but it was evident that the
southern dam wall was disturbed and dry fines were removed from this end. SRK was informed
that this was sold to a customer who was experimenting with and marketing briquetting of fines for
the South African market. Coal is transported from the mine to an existing and upgraded rail siding
in Musina, located approximately 50 km by road from the colliery. During 2023 the contractor also
experienced challenges in attaining the targeted monthly saleable coal production – while unit
costs have been adversely impacted – by the lack of access to rail capacity to transport Vele's coal
to port. When recommencing production activities during December 2022, the railing of coal was
anticipated to result in a significant reduction in logistics costs, due to the colliery's isolated location
and the high cost of trucking coal to port and domestic customers.
4.10 Environmental and social aspects
4.10.1 Mining right and land access rights
The Vele Colliery was issued with a new order mining right (No. 30/5/1/2/2/103) on 19 March 2010.
The mining right covers an area of approximately 8,662 ha and expires on 18 March 2040. The
mining right overlaps with farm land. The 2016 VBKOM Independent Competent Person Report
(VBKOM, 2016)10 summary of the mineral and land access obtained by CoAL for the Vele Colliery
10 VBKOM, 2016. Independent Competent Person's Report for the Vele Colliery operated by Coal of Africa
Limited in the Limpopo Province, South Africa, VBKom Consulting Pty Ltd, 15 January 2016
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 41
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Vele Aluwani Colliery FINAL
is presented in Table 4.6 and represented in Figure 4.8. SRK understands from the 2016 VBKOM
review that:
- Alyth prospecting right expired in 2013. An application for the renewal of the Alyth prospecting
right was submitted to the DMR in September 2013. No decision has been made on this
application.
- Over the mineral right, partial land access right was secured by CoAL, through its wholly owned
subsidiary, Investments Holdings Pty Ltd. These farms constituted the areas for mining
operations.
- Compensation agreements were in place with the remainder of the farms. However, land
claims were reported on the farms Bergen Op Zoom 124 MS and Semple 155 MS. Land claims
might affect land access rights but there has been no progress on the land claims over the past
10 years.
The supplied LOM schedule provides for operations to cease in June 203511. Upon completion of
the operations, SRK expects a minimum of 2 years for closure works and 10 years post-closure
monitoring activities (i.e. 2047). SRK notes that the mining right expires in 2040. There should be
sufficient time for the lodgement of a revised validity period of the mining right to be aligned with
the Vele LOM plan.
Table 4.6: Summary of Vele Colliery mining rights and surface rights
Source: VBKOM (2016)
11 46.06.02.01 Vele Model 20230801_StR, August 2023
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 42
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Vele Aluwani Colliery FINAL
Figure 4.8: Summary of Vale Colliery mining rights and surface rights
Source: VBKOM (2016)
4.10.2 Environmental approvals
According to the 2023 annual closure update (Elemental, 2023b)12, Vele Colliery holds the
following environmental approvals:
- Approved EMPR on January 2017 under Section 39 of the MPRDA.
- Two EAs have been granted for listed activities in terms of the NEMA for the LOM duration. An
amendment to the EA was approved in January 2015, and subsequently appealed. On
19 November 2015, the Minister dismissed the appeal lodged against the Vele Colliery's
amended EA. In January 2017, DMR approved an EA for a river diversion.
- An IWUL (No. 01/A71/ABCEGUK/420) was issued on 29 March 2011 and subsequently
renewed on 18 December 2015 (No. 27/2//2/A1171/1/4) for a period of 20 years (i.e. December
2035). The 2015 IWUL and two other individual IWULs were consolidated into a single IWUL in
December 2018.
12 Elemental, 2023b. Annual update of the quantum for closure-related financial provision, Vele Colliery, 2022-
2023 for MCMining Limited, Elemental Sustainability Pty Ltd, May 2023
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 43
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Vele Aluwani Colliery FINAL
Various permits were issued by the Department of Agriculture, Forestry and Fisheries (DAFF)
to relocate protected trees under Section 15(1) of the National Forests Act (Act 84 of 1998).
The DAFF permits were executed within the period of validity and have subsequently expired.
While SRK understands that HOS is considering optimisation of Vele, the current mine life extends
beyond the validity period of some environmental approvals (such as the water licence) and
changes to the LOM plan might potentially change the environmental and social management
conditions and objectives.
4.10.3 Social and Labour Plan
Vele had two SLPs previously approved by the DMRE. The new SLP for the period from 2022 to
2026 has been submitted to the DMRE and the Company awaits approval for this. For the purpose
of valuation, this is considered in the choice of an appropriate valuation range.
4.10.4 Environmental and social management
An EMS has been adopted at Vele Colliery and was developed as the formal tool for environmental
management. This system is independently audited every quarter, and reports are submitted to the
regulatory authorities (MCM, 2021a). Core system procedures have been developed for each of
the EMS elements, supported by legislated Codes of Practice (COPs) and operational Standard
Operating Procedures (SOPs).
Vele Colliery has also implemented an Environmental Management Committee (EMC) in
accordance with the EA, which comprises various stakeholders from regulatory authorities, relevant
state and municipal representatives, and other stakeholders identified during the initial public
process. The EMC has various sub-committees including the heritage and water sub-committees
that were established to monitor compliance with the heritage management plan and IWUL,
respectively.
Continuous monitoring is implemented at the mining sites to assess the effectiveness of controls
with regular analysis and reporting, and action management on failures. Monitoring data are
reviewed by the EMC on a quarterly basis, and the monitoring program and/or protocols revised
where necessary (MCM, 2021a). According to the annual report (MCM, 2021a), the following
monitoring is undertaken at the Vele Colliery:
groundwater – quarterly
surface water – monthly
biomonitoring – biannual
heritage – monthly
air quality (dust and PM10) – monthly (dust) and continuous (PM10).
Based on SRK's review of the 2020 Integrated Water and Waste Management Plan (IWWMP)
(VELE/EMS/E10-IWWMP/2009 – MCM, 2020), surface water quality monitoring results are
generally within IWUL limits, however, the groundwater quality results exceed the limits stipulated
by the IWUL. It was recommended that the water quality limits within the IWUL are reviewed and
revised to reflect the local context (high natural background levels of certain parameters) of the
catchment.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 44
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Vele Aluwani Colliery FINAL
At Vele Colliery, environmental performance is measured against prescribed criteria in line with
Environmental Management Procedures. The DWS, DMRE and the South African Heritage
Resources Agency undertake annual audits of the colliery. Audit reports for the colliery indicate
compliance with the conditions of the environmental approvals.
4.10.5 Mine closure provisions
SRK understands that the Vele Colliery mine closure plan and associated financial provisions are
updated annually to comply with regulations. The 2024 annual closure update (Elemental, 2024a)
states that Vele Colliery's closure liability was calculated at ZAR79,325,278.30 for the period 2023–
24. This closure cost estimation has been developed in accordance with the 2005 Department of
Mineral Resources guideline. Known as the asset retirement obligation cost, it considers current
environmental liabilities and activities at the site and excludes any planned activities.
The supplied financial model provides for operations to cease in June 2035 and includes a
provision of ZAR75 M for closure for the year 203113. Upon completion of the operations, SRK
expects a minimum of 2 years for closure works and 10 years post-closure monitoring (i.e. 2047).
SRK understands that this cost is equivalent to the current rehabilitation financial guarantees of
ZAR75,124,134 held by MC Mining for Vele Colliery as at December 2023 14.
SRK notes that the costs outlined in Elemental (2024a) include the following assumptions and
comments:
- Costs estimations are conceptual and based on current day liability costs (i.e. costs that could
be required in case of sudden closure), not LOM closure costs.
- The clean water dam (1.28 ha) will not be rehabilitated and will be handed over to the farmers
after closure.
- The unit rate update is based on average CPI over the 2023 period and was calculated at
5.9%. However, no scheduled cost is included in the quantum calculations. The cost does
consider CPI increase over the LOM of the operation until the closure phase.
- Preliminary and General at 12% and VAT at 15%.
- A weighting factor of 1.05 was applied as per the 2005 Department of Mineral Resources
guideline based on the proximity of the mine to an urban centre.
- The estimate incorporates a 10% continency allowance. As the accuracy of conceptual closure
design typically ranges from ±30% to ±35%, it is good international industry practice for
contingency allowances to range between 25% and 35% (AusIMM, 2011).
- For post-closure monitoring costs, surface water monitoring, groundwater monitoring and
biomonitoring have been assumed to take place for a period of 2–3 years. However, it is good
international industry practice to consider a minimum of 10 years post-closure monitoring
activities (i.e. 2043).
13 46.06.02.01 Vele Model 20230801_StR, August 2023
14 MCM SA Guarantees-202312 (1 1), December 2023
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 45
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Vele Aluwani Colliery FINAL
- Several cost elements do not appear to be included in the provision:
– concurrent rehabilitation cost
– specialist studies, professional fees and project management
– detailed assessment of long-term decant from workings and its treatment costs
– labour redundancy or other human resources
– social transitioning to closure related costs.
The current closure provision totalling ZAR79 M (including 10% contingency) provided for Vele
Colliery is conceptual and developed to consider current disturbance/liabilities of the mine site for
financial reporting processes. There is a risk that additional costs may be required once the
underlying assumptions have been addressed such as alignment with closure designs and
completion criteria, alignment with project development, contamination assessments, ground-truth
measurements and inventory, site-based rehabilitation trials, and cashflow scheduling alignment.
As such, there is a risk the Vele Colliery LOM closure cost estimations are underestimated. This
conclusion is based on the information outlined in the 2024 annual update of the quantum for
closure-related financial provision, as well as liability cost estimate assumptions, and considering
current practice in similar mining and processing operations in South Africa. At this conceptual
stage of the closure cost estimations, SRK recommends a minimum 35% contingency be applied to
the closure provisions for a LOM closure cost estimate of ZAR95.6 M. Current and recommended
costs are presented in Table 4.7.
Table 4.7: Vele Colliery's total closure cost estimations– as at June 2024
Elemental's Asset Retirement SRK's LOM closure cost minimum
Obligation estimates (ZAR) recommendations (ZAR)
Liability cost estimate 53,847,387 53,847,387
Weighting factor 2
56,539,756 56,539,756
(1.05)
Preliminary and
6,784,771 6,784,771
General (12%)
Contingency
Elemental 5% 5,653,976 19,788,915
SRK 35%
Total excluding VAT 68,978,503 83,113,442
VAT (15%) 10,346,775 12,467,016
Base case total
79,325,278 95,580,458
(including VAT)
Source: Elemental (2024a)
SRK understands that no whole-of-mine-life closure cost estimates are available for Vele Colliery.
Good international industry practice normally requires estimation of whole-of project closure costs
for the mine, processing plant and associated auxiliaries. SRK recommends that an LOM closure
cost estimate be developed according to the updated LOM plan and aligned with the closure
objectives and requirements for Vele Colliery. There is a risk that the Vele Colliery LOM closure
cost estimate is underestimated.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 46
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Vele Aluwani Colliery FINAL
4.11 Risks and opportunities
Geological risks include as yet unidentified dolerite dykes and faults that may reduce the blocks
available for mining.
Risks are evident from the suspended mining operations, with financial viability driven by the
market-determined thermal coal pricing, and in turn the ability to mine and wash the coal at a cost
sufficient to create a profit margin despite subdued prices. In addition, curtailing the costs to
transport the coal to port and other offset points is of utmost importance.
SRK notes that, although Vele Colliery shows a potential mine life of approximately 40 years based
on the identified Coal Resources, very low Coal Reserves have been declared. This requires mine
planning and related study work to be completed in advance to support a robust Coal Reserves
estimate, and importantly to focus on areas with higher yields to optimise profits for the same
amount of coal mined.
The required infrastructure for a mining operation is already established, including power supply
with a back-up generator, and adequate water supply for the operation from boreholes in the
Limpopo River. This provides the opportunity for the Vele operation to be re-established at low cost,
and the potential to be economically viable with the correct planning and management. SRK
however notes that a period of 8 months has expired since its previous site visit, and the condition
of the mining areas and equipment and services could have deteriorated since then.
The Vele plant produced lower than expected product yield due mainly to generation of excessive
fine coal material (<1.0 mm) and loss of fines due to an under-designed fines beneficiation circuit in
the plant where ultra-fines are not recovered.
These risks and opportunities are considered in Section 8 of this report.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 47
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Makhado Project FINAL
5 Makhado Project
5.1 Overview
The Makhado Project is situated in the Soutpansberg Coalfield, approximately 36 km north of the
town of Makhado on the National Route N1 highway or 65 km southwest of Musina (Figure 5.1).
Polokwane lies some 130 km southwest of the project area, while RBCT is 680 km southeast.
MCM holds a 67% interest in the Makhado Project through a wholly owned subsidiary, Baobab
Mining & Exploration (Pty) Ltd. A new order mining right No. 30/05/1/2/2/204 MR (204 MR) was
granted and is valid until 25 January 2046.
The project lies 80 km southeast of the Company's Vele Colliery.
The Makhado Project remains in development and is a proposed open cast operation with a
forecast mine life of over 28 years at 3.2–4 Mt/a, with the potential for further expansion into an
underground operation.
Figure 5.1: Location of Makhado Project
Source: MCM website, accessed 13 May 2022
The project is directly accessed from the bitumen sealed N1 highway, which runs north–south
along the western boundary of the mining right area. The N1 links the project to the towns of
Musina, Louis Trichardt and Polokwane. Several gravel roads and tracks provide further access
across the various sites of the project.
A railway line lies west of the project, runs in a northeast–southwest direction, and offers
connections to RBCT and other potential export hubs and domestic markets. The planned
Huntleigh Rail Siding is located 15 km northwest of the project area.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 48
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Makhado Project FINAL
As at Vele, the climate at the project is semi-arid and characterised by hot to extremely hot
summers and warm to cool winters, with minimal precipitation. Mining activity can be conducted all
year-round, as no appreciable mining downtime is expected due to unfavourable climate or
weather conditions.
The east–west orientated Soutpansberg Mountains run along the southern boundary of the project.
The topography of the project area is characterised in the north by a relatively flat plain at an
average elevation of 750 m above sea level, rising steeply in the south to an elevation of 1,750 m,
forming the Soutpansberg Ridge. Immediately beyond the southern boundary of the project tenure,
the land falls rapidly to around 800 m.
5.2 History
Iscor explored the Soutpansberg Coalfield during the 1970s and 1980s, drilling approximately
1,250 holes and opening a bulk sample pit on the farm, Fripp 645 MS, in 1979. No historical mining
occurred.
MCM acquired the full Iscor dataset for the Makhado Project area. The dataset included 316
diamond core drill holes within the current Makhado tenure. MCM, then known as CoAL, began its
own exploration in 2007, with exploration drilling on Fripp 645 MS.
By 2011, 214 drill holes had been drilled within Makhado, as well as aerial magnetic and
radiometric geophysical surveys being conducted. A box-cut was excavated on the farm Tanga
648 MS in 2010–11, from which a bulk sample of 45,849 t of material was extracted. The coal
produced from this material (21,800 t) was used to confirm the coal and coking properties and to
test a number of coal processing options.
In May 2015, a 30-year mining right was granted by the DMR, now termed the DMRE. A WUL,
valid for 20 years, was granted by the DWS. The EA for the duration of the LOM was granted by
the Limpopo Department Economic Development Environment and Tourism and has since been
amended.
In FY2023, MCM commenced planning and development for the Makhado Project. MCM
subsequently appointed Erudite (Pty) Ltd to complete the detailed designs for the Makhado CHPP
and also employed independent consultants to review the Makhado mine plan that was developed
internally. Early works at Makhado commenced in H2 CY2023 including bulk water infrastructure,
construction of a bridge across the Mutamba River, and site security.
5.3 Local geology
Makhado is situated in the Tshipise Basin of the Soutpansberg Coalfield (Figure 3.2). The strata of
this coalfield are preserved in a northward-dipping half-graben located on the northeastern edge of
the Kaapvaal Craton, and terminating against east–west striking faults associated with the Limpopo
Mobile Belt in the north and sub-cropping in the south (Figure 5.3). The entire Soutpansberg
Coalfield is faulted, with extensive east-northeast normal faults, parallel to the regional strike,
controlling the preservation of the coal-bearing Karoo strata. This fault system resulted in the horsts
and grabens characteristic of the coalfield, with throws to either to the north or south with
displacement of around 500 m. A secondary fault system trends west-northwest to northwest, with
throws generally to the southwest.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 49
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Makhado Project FINAL
Figure 5.2: Makhado – diagrammatic cross section
Source: Venmyn Deloitte (2012)
Sedimentation within the coalfield was fault-controlled. The Karoo strata overlie the Soutpansberg
Formation and, within the Tshipise Basin, the coal-bearing sediments are found in the 30–40 m
thick carbonaceous portion of the Madzaringwe Formation. This formation comprises coal, shale,
mudstone and siltstone, and the coal seams consist of alternating bands of coal and mudstone.
The coal is generally bright and high in vitrinite, and the vitrinite content decreasing with depth.
The Madzaringwe Formation is overlain by mudstones, shales and sandstones of the Mikambeni
Formation, followed by the coarse sandstone of the Fripp Formation.
This is followed by the siltstones and mudstones of the Solitude Formation of the Beaufort Group;
the sandstone of the Klopperfontein Formation; the red mudstones and sandstone of the
Bosbokpoort Formation; the sandstone of the Clarene Formation (all of the Stormberg Group) and
finally, the basaltic lavas of the Lebombo Group (Figure 5.3).
The surface geology, aeromagnetic geophysical data and stratigraphy of the Makhado area are
shown in Figure 5.3.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 50
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Makhado Project FINAL
Figure 5.3: Makhado – surface geology, aeromagnetic data and stratigraphy
Source: Venmyn Deloitte (2012)
Within the project area, the strata display an average dip of 12° to the north, varying from 4–18° to
the north.
The northwest–southeast-striking Siloam Fault, identified on the farm Lukin 643 MS, offsets the
sub-crop (Figure 5.3). This has been taken into consideration when designing the infrastructure
and the mine layout. Faulting also restricts the distribution of the coal along strike, on the western
and eastern edges of the project, while the position of some smaller faults needs to be confirmed
by targeted drilling.
Drilling has identified a 50 m-thick dolerite intrusive sill that transgresses the coal seams in two
places in the centre of the project area, situated above the coal horizons on the farms Lukin
643 MS and Tanga 648 MS, but below the coal on the farm Fripp 645 MS (situated between the
other two farms). The coal has been devolatilised close to this sill and burnt where the sill
transgresses the seams, which has destroyed the coking properties of the coal in this area.
Interpretation of the aeromagnetic geophysical data by GAP Geophysics suggests that few
magnetic intrusive dykes traverse the area and that those that have been identified are vertical, in
the order of 2–5 m thick and are steeply dipping. A bulk sample pit on Fripp 645 MS, excavated by
Iscor, revealed a thin, discontinuous dyke in the high wall.
MCM has identified six major seams within the Madzaringwe Formation, namely, the Upper, Middle
Upper, Middle Lower, Bottom Upper, Bottom Middle and Bottom Lower seams (Figure 5.3). The
Bottom Middle Seam is usually excluded from the Coal Resource estimate, as it is mostly
mudstone. MCM has modelled the other five seams to estimate the Coal Resources. Average
modelled seam thicknesses range from 1.80 m to 4.32 m (Table 5.1).
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 51
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Makhado Project FINAL
Table 5.1: Makhado – modelled seam thicknesses
Seam thickness (m)
Seam
Minimum Maximum Mean
Upper 0.1 6.48 2.48
Middle 0.1 18.54 4.32
Middle Lower 0.1 6.03 1.80
Bottom Upper 0.1 7.58 3.78
Bottom Lower 0.1 11.07 3.85
Source: Makhado BFS, Minxcon (2022)
Notes: Minimum thickness is a cut-off limit imposed during modelling; note that this cut-off is greater (1.5 m) for resource
estimation.
The coal is suitable for producing a primary hard coking coal (HCC) with 10% ash, total sulfur
between 1.0 and 1.1%, and an average theoretical yield for all size fraction of 21.2%, as well as a
secondary thermal coal, with an ash content of less than 25.9%, a CV of 5,500 kcal/kg, total sulfur
between 0.7 and 0.9% and a theoretical yield of approximately 17.6%.
5.4 Exploration potential
No areas remain to be drilled for additional resources. However, some consideration has been
given to extending the extractable resources below a depth of 200 m on the Middle Lower and
Bottom Upper seams. This would require transitioning to underground extraction and has not yet
progressed beyond concept stage.
The northern limits of the pit edge infrastructure will be determined using limit of oxidation drilling –
this may result in the definition of some additional resources.
5.5 Coal Resources and Coal Reserves
5.5.1 Coal Resources
The critical variable considered for both the primary coking coal product and the secondary thermal
product is ash (<10% and <25.9%, respectively). In addition, the following cut-off values were
imposed:
- Mineral Rights boundaries
- 50 m limit around known geological structures
- the limit of oxidation
- minimum seam thickness of 0.5 m for GTIS
- minimum seam depth of 17 m for MTIS
- maximum seam depth of 200 m for MTIS.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 52
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Makhado Project FINAL
The Coal Resource estimates (MTIS) were also discounted for unknown geological structures,
based on the confidence of the Coal Resource classification; namely:
Measured 5%
Indicated 8%
Inferred 10%.
The Coal Resources have been estimated by Mr John Sparrow (MCM) in accordance with the
JORC Code (2012). The Coal Resources have been reviewed by Mr Uwe Engelmann (Minxcon);
both Mr Sparrow and Mr Engelmann are Competent Persons as defined by the JORC Code
(2012).
The Coal Resources were estimated from the geological model, constructed by Mr Sparrow using
MinexTM software.
SRK has reviewed the geological model and is satisfied that the data are represented sufficiently
accurately in the grids, that the modelling principles employed and the estimation methods used
are fit-for-purpose and that the geological model and the Coal Resource estimates can be relied
upon.
The MTIS Coal Resources have been declared per planned mining pit (open pit only, no
underground mining considered) between depths of 17 m and 200 m. Note that no Coal Resources
are declared for the farm Fripp 645 MS, as this is occupied by the Mudimeli village.
All Coal Resources and coal qualities have been estimated on an air-dry basis and are inclusive of
the Coal Reserves.
Total Coal Resources at Makhado, as at 30 June 2024 and unchanged from 2023, are shown in
Table 5.2.
Table 5.2: Makhado Coal Resources (as declared at 30 June 2024)
Resource Category GTIS MTIS MCM MCM
(Mt) (Mt) Attributable Attributable
Interest (%) Resource (Mt)
Measured 387.340 241.945 166.942
Indicated 254.000 54.055 37.298
Subtotal Measured and 69%
641.340 296.000 204.240
Indicated
Inferred 116.200 38.857 26.811
Total 757.540 334.857 69% 231.051
Source: MC Mining Limited Annual Report 2023
Metallurgical testwork and studies on fine coal beneficiation, together with optimisation of the mine
plan, have resulted in updated simulated average practical product yields of 21.2% for HCC and
17.6% for thermal coal respectively across the proposed Makhado pits (ASX:MCM announcement
dated 30 June 2023).
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 53
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Makhado Project FINAL
The coal products comprise a primary 64 mid-volatile HCC at 10% ash, total sulfur between 1.0%
and 1.1% and volatiles of 29.6%, as well as a secondary thermal coal product with an ash content
of less than 25.9%, a CV of 5,500 kcal/kg, total sulfur between 0.7% and 0.9% and volatiles of
25.1%.
5.5.2 Coal Reserves
The Makhado Project was evaluated under a feasibility study (FS) conducted in 2017. The 2017 FS
considered the project was phased in such a manner as to initially use the beneficiation plant at
Vele and then build a plant at Makhado for the longer term. This plan was subsequently modified
into a new FS in 2021, to mine the Makhado coal using the beneficiation plant at Vele, that will be
modified to allow fine coal beneficiation.
During 2022 and 2023 MCM continued assessing the Makhado Project and potential options to
optimise beneficiation and the distribution of product coal. This assessment was aimed at providing
opportunities to increase mining and beneficiation throughput, as well as allowing more flexibility in
the design of the wash plant and reducing costs during the overall project life. These changes in the
project philosophy were not addressed through an amendment to the FS, but were addressed
separately through focus on the various technical and commercial aspects of this new approach
and captured at high level in an overarching Project Definition Statement for the 'Colliery
Establishment', which was released in April 2023.
The Coal Reserves declared for Makhado, as of 30 June 2024, as based on the information
provided in Excel spreadsheet format by MCM, are listed in Table 5.3. The saleable product also
include a thermal coal as a secondary product.
Table 5.3: Makhado Coal Reserves as at June 2024 in 100% terms
Coal Reserves ROM tonnes Saleable Saleable
classification (Mt) primary product secondary product
(Mt) (Mt)
Proved 97.756 20.672 17.281
Probable 8.498 1.846 1.415
Total Reserves 106.254 22.518 18.696
Source: MC Mining Limited Annual Report 2023
5.6 Mining
Future development of the Makhado Project envisages three open pits namely the East, Central
and West pits as shown in Figure 5.4, with a life of mine for the project estimated at 28 years.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 54
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Makhado Project FINAL
Figure 5.4: Makhado proposed open pits
Source: Minxcon Projects (2022), Makhado Colliery BFS
The sequence of the development is to exploit the East Pit first, due to its coal quality and proximity
to the location of the planned CHPP, followed by the other two pits. The farm between the pits, the
Fripp Farm, is not included in the current development.
Five coal seams are recognised at Makhado separated by mudstone interburden. The seams are
identified as the (i) Upper Seam, (ii) Middle Seam, (iii) Middle Lower Seam, (iv) Bottom Upper
Seam, and (v) Bottom Lower Seam. The Bottom Middle Seam generally comprises predominantly
mudstone within the horizon, hence this is excluded and not specifically targeted for mining and
beneficiation purposes.
These seams display dips between 4° and 18°, with an average of 12° from the outcrop position,
and, as the seams dip towards the hilly overburden, this becomes the limiting factor for future pit
development (Figure 5.5). For the most efficient mining, the pits will be mined at an apparent dip,
i.e. 30° to the general strike direction to the final high wall position – this creates an apparent dip of
no more than 10°. The seams are then mined individually from the partings to maximise coal
recovery.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 55
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Makhado Project FINAL
Figure 5.5: Cross section of the coal seams
Source: Minxcon Projects (2022), Makhado Colliery BFS
The Makhado Project area is intersected by identified faults, specifically on the farms, Windhoek
and Lukin, with the latter in the East Pit area. The Lukin fault is a major, northwest–southeast
trending fault, where it has displaced the coal seam and offset the sub-outcrop. Information on the
occurrence of small-scale faulting has reportedly not yet been clearly defined, and it has also been
reported that a 13 m thick dolerite sill is present above the coal seams on the Tanga and Lukin
farms, with the latter again in the East Pit region. Aeromagnetic data however indicate that there
are generally few dykes within the planned mining areas.
Pit optimisation software has been run to establish the most technical and financially viable areas
and limits for mining, which resulted in the East Pit measuring at a length of 4.2 km and up to 460 m
in width. The pit will have a maximum depth at the end of life of between 80 m and 90 m, resulting
in a projected strip ratio of approximately three or less.
In-pit filling has been included as part of the mine design and schedule, which is advantageous and
significantly reduces cost of haulage and eventual rehabilitation costs. This has been reported to be
scheduled as soon as sufficient in-pit space becomes available. It has been noted that a minimum
of 40 m working space from the high wall, and 120 m from the direction of mining have been
incorporated into the pushback designs, with complete in-pit filling designs including up to the
high wall.
Despite a review of geotechnical design criteria indicating no significant shortcomings, it was noted
in 2023 that additional exploration drilling is required to upgrade the confidence level of the designs,
as the initial or most recent designs were only conceptual.
Mining is planned to be contracted out, with the contractor responsible for providing the entire
primary mining fleet, and the ancillary and support equipment required for an efficient operation.
Current planning is to have an appointed contractor at top of terrace in the mining process at Q1,
CY2025. The mining process is planned to be conducted with a primary fleet of 70–90 t excavators,
and with 90 t and 55 t trucks for haulage. The bench heights have been designed at 15 m, with
ramp widths at 30 m and ramp angles at a maximum of 10%. Coal benches have been designed,
depending on the dip of the seam in the specific location, between 50 m and 250 m, with the waste
benches maintained at horizontal.
The overburden material within East Pit generally consists of sand and quartz for the first 6 m of
depth, followed generally by weathered siltstone and mudstone for the next 20 m. Thereafter,
another at least 2 m of unweathered but degraded mudstone covers the coal seam horizon. Drilling
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 56
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Makhado Project FINAL
and blasting will be required for the overburden removal, including the partings between the seams,
however it is anticipated that coaling will be free-dig with excavators in a backhoe configuration,
due to the relatively low unconfined compressive strength (UCS) value of between 5 MPa and
15 MPa for the coal.
Mining of the East Pit will commence with the establishment of a box-cut, including substantial
removal and haulage of overburden and waste material, before coal mining will commence. The
East Pit design and schedule reportedly results in a total of 17.9 Mt of ROM coal excavated, at an
average of 324 kt/month over the first 5 years of the Makhado Project life. An average strip ratio of
approximately 3:1 is achieved over this period, based on a total of 52.6 Mbcm of waste material
removed.
5.7 Geotechnical
5.7.1 Design studies
The geotechnical slope design study for Makhado was carried out by Middindi Consulting (Pty) Ltd
in September 2011. The design recommendations were incorporated into the January 2013
Makhado FS (Mining Geotechnical Design Chapter 5 – Section 2), by CoAL, and carried forward
into the definitive feasibility study pit designs presented in the report Makhado Colliery Bankable
Feasibility Study (4. Geotechnical and Geohydrology (M2021_038a BFS) by Minxcon (Pty) Ltd,
March 2022.
Outstanding geotechnical work is required for the coal outcrop in East Pit, as well as the Central
and West pits. The plant geotechnical work has been completed.
Details of the design of stockpiles have been provided for the 2022 Minxcon BFS report
(7b. Engineering and Infrastructure Design).
5.7.2 Geotechnical conditions
Soft weathered materials, including a thin topsoil layer at surface are present up to a maximum of
~20 m below surface (i.e. these will constitute the upper one or two 10 m benches). Below this,
stronger unweathered rocks include bedded units of the Karoo Supergroup – shales, mudstones,
carbonaceous materials and sandstones.
Five coals seams are present, between 2.2 m and 4.2 m in thickness, with interburden of
mudstone. A large dolerite dyke and two significant large faults are present at Makhado, however,
these will not have an influence on pit slope stability.
5.7.3 Geotechnical data and analyses
Five geotechnical drill holes were drilled, but these were limited to the East Pit area and hence data
coverage is spatially limited. It is possible that the available geotechnical data may not be
representative for all the mining areas. The data that has been collected in each drill hole is
however comprehensive.
In the absence of test results for the soft (soil and weathered rock) materials, appropriate
properties were derived following a literature survey of databases of similar materials. Itasca FLAC
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 57
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Makhado Project FINAL
software was employed for design stability analyses for these materials, assumed to be up to 20 m
in thickness.
For the unweathered shale, mudstone, coal and sandstone, input values were defined for
Hoek-Brown (H-B) criterion shear strength parameters. These include UCS, material constant (mi),
and geological strength index (GSI, which is a measure of rock mass quality).
GSI and RMR (Bieniawski, 1989) rock mass classification values were obtained from geotechnical
logging; mi values were taken from suggested values in Rocscience Rock Data software.
No UCS testing was conducted; UCS values for analyses were assumed using data from the
Witbank Coalfields. UCS values assumed for the shale and sandstone represent strong rock
(70–85 MPa), while weak rock (~20 MPa) values have been assumed for the mudstone and coal.
Although the quality of the rock mass, as defined by the GSI values, is generally moderate
(40 GSI 60), minimum values in the late twenties and early thirties represent locally poor-quality
rock mass.
Bedding dips from south to north at a shallow angle (10° to 14°) and daylights only into southeast
slopes. No actual shear testing of discontinuities (bedding or joints) was undertaken, however, 70%
of discontinuities have dip angles less than their expected minimum friction angles. Therefore,
sliding failure is not expected to be a commonly occurring failure mechanism, nor are toppling or
wedge failures expected to be significant failure mechanisms. Rather, rotational failure in moderate
to weak quality materials, perhaps with a contributing sliding mechanism at its base, is expected to
be the main instability mechanism in most slopes.
The mine is in an area of relatively low seismic risk and therefore no seismic loading was included
in the stability analyses for design.
The design analyses were carried out with the assumption that the groundwater level (phreatic
surface) is at 25 m below surface. No slope depressurisation considerations were made in the
2022 study.
For bench-scale, design stability analyses were carried out using limit equilibrium analyses with a
design acceptance criteria (DAC) of factor of safety (FoS) 1.3 – which is relatively high for
individual benches. This was also on the basis that mined strips will be backfilled within 12 months.
For overall and inter-ramp slopes, design stability analyses were also conducted using limit
equilibrium methods, with a DAC FoS of 1.5. The required FoS was increased to 2.0 where the
consequences of failure are regarded as serious – i.e. failure in medium sized or high slopes
including major haul roads or above permanent mine installations.
5.7.4 Recommended design – pit slopes
The slope designs are based on limited field and testing geotechnical data, therefore precedent
practices have been used.
For soft weathered materials (i.e. the upper one or two benches), the following parameters have
been recommended:
bench height = 10 m
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 58
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Makhado Project FINAL
- bench face angle (BFA) = 55°
- berm width = 6.5 m.
This generates a crest-to-crest inter-ramp angle (IRA) of 36.5°.
For relatively strong, fresh materials the following parameters were investigated for the 2013 FS:
- bench height = 15 m (two benches in height)
- BFA = 90°
- berm width = 10 m to 20 m.
- A berm width of 20 m generates an IRA of 37°; however, depending on equipment and mobility
constraints, it was indicated that a steeper angle of up to 47° could possibly be accommodated,
with substantially lower berm widths. It was stated that this would only be appropriate if further
studies based on the forward works program of more comprehensive geotechnical data
acquisition is completed.
- The recommendations in the 2022 BFS include a different configuration: 55° BFAs with 7.5 m
berm widths, generating an IRA of 39.8°.
Slope design angles for the box-cuts are shallower: 30° in soft weathered material, with a 15 m
catch berm at the boundary of the weathered and unweathered materials, a bench height of 15 m
and a berm width of 7.5 m.
SRK considers that the slope design angles are appropriate for the geotechnical conditions
identified, as the selected DAC are onerous, and the designs therefore may be relatively
conservative.
5.7.5 Stockpiles
With regards to the design of non-carbonaceous stockpiles, these have been designed with an
overall slope angle of ~30°, and consist of individual 10 m high benches of ~40° slope angles, with
5 m-wide berms. The intended heights of the stockpiles vary from 54 m (in the west) to
approximately 100 m (in the east). The basis for these designs is not evident; depending on the
actual material properties it is possible that angles of 31° over 100 m may present a FoS that is
lower than ideal, though it is acknowledged that drainage of the stockpiles has been allowed for.
For the stockpile foundations, it has been recommended that the upper ~900 mm of topsoil and
subsoil are removed and replaced with compacted fill of suitable type, which seems appropriate.
5.7.6 Recommendations for further work
The recommended forward works program, as detailed in the 2013 FS, should be conducted during
the next development phase. This includes:
- the drilling, logging and sampling of ~15 additional drill holes across the mining tenure
- downhole televiewer surveys
- laboratory strength testing: UCS, direct shear of discontinuities, triaxial testing of weak
materials, swell and slake durability testing
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 59
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Makhado Project FINAL
- appropriate synthesis of geotechnical data and further assessments to confirm geotechnical
design parameters.
If it has not been done already, it is also recommended that the slope angles in the stockpiles be
confirmed and suitable material properties be identified including stability analyses.
5.8 Processing
A new CHPP processing facility will be built at the Makhado mine site to process 4 Mt/a ROM coal.
ROM material will be hauled by truck from the open cut mines to the ROM tip facility and tipped into
a 250 t ROM tip bin at a nominal maximum size of 800 mm. Material greater than 800 mm will be
reduced in size to pass 800 mm by a rock breaker located on top of the bin.
ROM material will then be fed from the ROM tip bin by an apron feeder to a primary mineral sizer,
that will reduce the top size of the material to a nominal -225 mm before conveying the crushed raw
coal to the ROM screen.
The screen will separate the raw coal into plus and minus 50 mm fractions with the +50 mm
material discharged to the secondary mineral sizer. The secondary sizer will crush the oversize
material to -50 mm before it is combined with the ROM screen underflow.
The combined material will then be discharged via conveyor onto the plant feed stockpile.
Vibrating feeders installed below the plant feed stockpile will draw the crushed feed material from
the stockpile before conveying it to the primary sizing screen. The primary sizing screen will
separate the feed material to plus and minus 15 mm feed fractions with the +15 mm fraction
directed to the Larcodem DMS circuit.
The Larcodem circuit will separate the product material from the discards and employ a
conventional dense medium process incorporating drain and rinse screens and magnetic
separators to recover and reprocess the magnetite. The product material from the Larcodem will be
discharged to the thermal coal conveyor with the discards reporting to the discard conveyor.
The primary sizing screen underflow fraction will report to a pre-wash screen where the
15 mm × 1 mm fraction will report to the high gravity dense medium cyclone circuit and the -1 mm
fraction will report to the fines processing plant. A schematic flowsheet of the proposed plant is
shown in Figure 5.6.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 60
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Makhado Project FINAL
Figure 5.6: Makhado CHPP block flowsheet
Sources: Enprotec/Erudite (Pty) Ltd flowsheets
The +1 mm fraction will be pumped from a high gravity mixing box together with a magnetite
medium pulp to the high-gravity dense medium cyclone for separation. The dense medium cyclone
will separate the feed coal into floats and discard fractions with the discard fraction reporting to the
discard conveyor and the floats directed to the low-gravity dense medium cyclone mixing box for
further processing.
The floats from the high gravity circuit will be pumped from the low-gravity mixing box together with
a magnetite medium pulp to the low gravity dense medium cyclone for separation. The low gravity
dense medium cyclone will separate the high gravity floats material into coking and thermal
fractions, with each reporting to their respective product conveyors.
Both high gravity and low gravity dense medium circuits have a conventional dense medium design
using drain and rinse screens and magnetic separators to recover and reprocess the magnetite.
The -1 mm fraction reporting from the pre-wash screen will be directed to the fines tank before
being pumped to desliming cyclones for separation into -0.25 mm and +0.25 mm fractions. The
+0.25 mm fraction will be directed to the two stage spirals processing circuit and the -0.25 mm
fraction will report to the slimes thickener before being processed in the two-stage flotation circuit.
The spirals circuit will undertake a high gravity separation in the first stage with the high gravity
discard material dewatered prior to reporting to the discard conveyor. The low gravity material will
report to the low gravity spirals where the material will be separated into coking and thermal
product fractions. Both product streams will be dewatered by fine coal centrifuges before reporting
to the coking and thermal coal conveyors respectively. The coking and thermal product conveyors
discharge to stockpiles via stacking conveyors.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 61
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Makhado Project FINAL
The -0.25 mm fraction will be pumped from the slimes thickener into the flotation feed tank for
processing by the two-stage flotation circuit. The first flotation stage will remove the coking product
concentrate for dewatering in the product filter press circuit. The second stage will receive the
flotation cell tailings stream and recover any further coking product before combining with the
primary product concentrate. The dewatered coking coal product will be discharged to the coking
coal product conveyor system.
The secondary float cell tailings stream will be directed to the tailings thickener before being
pumped to the tailings filter presses. Dewatered tailings will then be discharged to the discard
product conveyor system for discharge into a discard bin before being trucked back to the mine for
disposal.
SRK is satisfied that the proposed plant design and associated flowsheet is appropriate for the type
of coal being processed, and that adequate and appropriate fine coal processing circuits have been
accounted for in the design.
Metallurgical testwork and studies on fine coal beneficiation, together with optimisation of the mine
plan, have resulted in updated estimates and increases in the average practical product yields to
21.2% for HCC and 17.6% for thermal coal respectively across the proposed Makhado pits
(ASX:MCM announcement dated 30 June 2023).
SRK has reviewed the available sizing and washability. The summary table for three East Pit large
diameter holes (S188T604, S188T605 and S188T606) indicates that coking and thermal yield
determinations were based on extracting the float and sink yields at a perfect separation at the
nominated product ash. These values were then pro-rated on a mass of sample basis versus a
total mass of all relevant plies by size with a contamination value entered before an organic
efficiency (OE) value was applied. The OE value has been applied to reflect the downstream
processing inefficiencies in lieu of undertaking actual process simulations. The basis of the OE
value is not derived from actual simulations.
Analysis of the summary tables identified that an increase in coking flotation yield had been applied
after the contamination adjustment from 60% to 62% for the -0.25 mm fractions in contrast to the
reduction applied to the remaining yields based on the addition of a dilution component.
Based on the reviewed data, SRK concludes that the HCC yield will be highly sensitive to dilution
and liberation in the coarser size fractions. SRK agrees that the predicted HCC yield of 21.2% is
achievable but cautions that it may not be consistently achievable.
5.9 Infrastructure and services
It has been reported by an external engineering consultant that the anticipated electricity demand
for the Makhado Project exceeds available capacity from the nearest Eskom power distribution
station, i.e. the Paradise substation located to the south of the project, with a maximum available
capacity of 7.5 MVA. This has however been secured from Eskom and will be supplied via a new
22 kV (of 33 kV insulation design) overhead powerline of approximately 14 km in length. At the time
of SRK's site visit in February 2024, vegetation clearing had been completed for construction of the
powerline, however construction had not yet commenced.
The external consultant indicated that the capacity of the line will be 'borderline' for mining and
other infrastructure requirements, and the operation will be 'subject to load curtailment', with a
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 62
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Makhado Project FINAL
cogeneration requirement envisaged. Additional power will also be sourced from the Makhado
Municipality as well as Eskom's 22 kV rural networks for potable water storage and distribution, as
well as mine industrial area power requirements.
A further 1.15 MVA on Eskom's Makhado/Vhembe 22 kV network has also been negotiated,
however it has been reported that the performance of this network is 'not ideal', and load shedding
rules apply. MCM has indicated that future upgrades of power supply will be considered for
Makhado, during the life of the operation. This has not yet been reflected in the Makhado financial
model received from MCM, titled 46.04.05.01 MKD_ Financial_Model_PostPDS.v23. It was also
reported that the two overhead powerlines that are fed from the 400 kV municipality network have
been commissioned with only mechanical works outstanding. The latest feedback from MCM is that
power supply to Makhado is planned to be completed by August 2025.
MCM has reported that the Makhado mine and associated infrastructure will require a maximum
water supply of 2.6 ML/day. It was stated during SRK's February site visit that the main source of
process water will be from the bulk sample pit established in 2011, at approximately 430 kL/day,
while the main source of potable water will be a natural spring at Tanga Lodge (an estimated
capacity of 172 kL/day), both situated in the West Pit area.
SRK was notified by MCM that various other boreholes are available and will be powered, as part of
the implementation plan, to provide sufficient water supply for the operations. It is also noted in the
PFS that water balance modelling indicates that the water supply required for the operations will be
replaced by water inflows to the mining pits after 18 months of operation, but also further states that
access to supplementary water from the Nzhelele Dam may be required as part of future expansion
plans.
Foundations have been prepared on site for storage and transfer water tanks for water supply at
the East Pit entrance, i.e. process water and potable water supply, each in a 100 m 3 tank. From
these two tanks the water will be pumped to three process and one potable water tank, each with a
capacity of 2,500 m3, located at the main entrance of the project area. The tanks are however yet
to be implemented, and no pipeline construction has commenced.
Access to site will require construction of a two-lane bridge over the Mutamba River, which is also
planned for completion as part of the next phase of construction activities. The bridge will provide
all-weather access to site, and will be designed and constructed to a 65 t payload. Various regional
roads and intersections will require upgrades to cater for heavy loads, as product coal is
transported by road to the allocated siding, or port if required.
Lump sum amounts have been included in general and mining infrastructure establishment over a
3-year period in the Makhado financial model received from MCM (titled 46.04.05.01
MKD_Financial_Model_PostPDS .v23) to cover project capital for the required infrastructure to
establish the infrastructure for commencing the mining operations. However, given that a DCF
valuation approach has not been used, SRK has assessed whether the capex requirements are in
excess of what is typically observed in the comparable coal transactions selected and has reflected
this in its assessed resource multiple.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 63
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Makhado Project FINAL
5.10 Environmental and social aspects
5.10.1 Mining rights and land access rights
Based on information reviewed, the mining right granted for Makhado Colliery is presented in
Table 5.4.
Table 5.4: Makhado Colliery mining right
File Ref No. Surface Date Effective Expired Farms Portion
area (ha) granted date* date
30/05/1/2/2/204 7,651 26/01/2016 Not stated 25/01/2046 Windhoek 847MS; Mutamba 668MS;
MR Tanga 849MS; Daru 848MS; Fripp
645MS; Lukin 643MS; Salaita 188MT
Note: * Date on which the EMPR is approved in terms of Section 39(4) of the MPRDA.
According to the 2023 Project Definition Statement (MCM, 2023)15, all surface land rights
associated with the mining right area have been secured.
At this stage, the status of stakeholder relationships with the landowners and traditional owners is
good based on site visit feedback. Although there is no evidence of weak relationships, the raising
of unresolved concerns or grievances between parties could result in potential social disruptions
and reputational risk to the current operations.
The supplied LOM schedule and associated cashflow model for the Makhado Colliery provides that
operations started in June 2024 and will cease April 205116. Upon completion of the operations,
SRK expects a minimum of 2 years for closure works and 10 years post-closure monitoring
activities (i.e. 2063). SRK notes that the mining right expires in 2046. Although there might be
sufficient time for the lodgement and approval of a revised validity period for the mining right to be
aligned with the Makhado life of mine plan, there is a risk that the tenement may not be renewed,
and would therefore affect the exclusive mineral right over the Makhado site beyond the current
validity period. SRK recommends that MCM undertakes a detailed review to identify Makhado's
operational risks associated with the potential loss of the mining right.
5.10.2 Environmental approvals
The following environmental approvals are held by Makhado Colliery:
An EA (Reference No. 12/1/9/2-V3) was granted on 30 August 2013. Subsequent amendments
were granted in July 2016 and September 2018 to account for changes in the project
description and extension of the validity period for the approval, requiring the project to
commence before 5 July 2021. Otherwise, the EA would lapse and a new application for an EA
15 MCM, 2023. Makhado Project, Project Definition Statement: Colliery Establishment, MKD 20230426PDS,
Baobab Mining & Exploration, MC Mining, 26 April 2023
16 46.04.05.01 MKD_Financial_Model_PostPDS.v23
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 64
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Makhado Project FINAL
must be made. In June 2021, MCM notified the DMRE of the commencement of certain
activities approved in the EA (MCM, 2022)17.
- An IWUL (No. 01/A80D/ABCEGJ/4138) was issued to Baobab on 24 December 2015.
According to the 2023 Project Definition Statement (MCM, 2023), the IWUL was appealed and
suspended in February 2016. A licence amendment was granted on 16 January 2019 and was
valid for 17 years to 15 January 2035. This licence includes the water allocations from the
irrigation farmers in addition to the water uses authorised in 2015. The appeal was set to be
heard by the tribunal in January 2022 (MCM, 2021a). The hearing has been postponed
indefinitely and there is no outcome yet. According to the report, some water uses related to
the plant area were omitted from the licence by the regulator and this issue remains to be
addressed.
- Waste disposal in terms of the residue stockpile and residue deposits was initially approved
under the MPRDA. These associated activities now fall under the National Water Act (NWA) as
well as the NEMA and are deemed to be approved under NEMA and NWA Section 21 water
uses approval.
- Other environmental approvals pertaining to protected tree and plant removal as well as grave
relocation were granted. These approvals have a short validity (between 1 month and
12 months) and it is advised that the project revisit the need to apply for these permits if they
are required in the future (i.e. if further grave relocations or removal of protected flora species
are required).
Based on the information reviewed, the environmental approvals in place for the Makhado Project
are based on an outdated project description and mine plan, and need to be aligned with the
current project status. It is unclear if the changes of the Makhado Colliery LOM plan have been fully
assessed against current environmental approvals conditions and requirements. The mine life
extends beyond the validity period of some environmental approvals (such as the water licence)
and changes to the LOM plan might potentially change the environmental and social management
conditions and objectives. SRK notes that this review does not constitute a legal audit and is based
on information provided by MCM at the time of SRK's review. No detailed compliance assessment
was undertaken by SRK to confirm whether the conditions of approvals were being met. In the
case of nonconformance with the current approvals' conditions, there could be a risk for approvals
to be withdrawn and could present a risk to Makhado operations. SRK recommends that MCM
undertakes a detailed compliance review to identify Makhado's operational risks associated with
the current approvals. Additional budget and time might be required to amend approvals, and to
implement updated environmental and social management plans.
5.10.3 Social and Labour Plan
MCM has an approved SLP for 2015 to 2019, which was submitted to the DMRE in 2015 and only
approved in May 2019 following approval to amend the 2015–19 SLP in April 2019. A new SLP is
in the process of being developed for the 2020 to 2024 period and the associated annual
implementation plans and reports must be submitted for 2020 and 2021.
17 MCM, 2022. Audit report 2022, Financial Liability Report - Makhado Colliery LP 30/5/1/3/2/1 (204) EM,
Baobab Mining & Exploration, MC Mining, February 2022
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 65
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Makhado Project FINAL
5.10.4 Environmental and social management
MCM has an environmental policy which is used to guide its environmental management activities
(MCM, 2021a).
An EMS is not yet in place for the Makhado Project. However, according to the Makhado Project
Information Memorandum (MCM, 2019), the intention is to consolidate the existing Vele safety,
health and EMS systems and procedures into an integrated Safety, Health and Environment
Management System that will be adopted for implementation at the Makhado site. Contractors are
required to manage their impacts on the environment in accordance with the Contractor
Management Pack (MCM, 2018). The EMS needs to be implemented as construction phase
activities have commenced (MCM, 2021b) to ensure that the company records and manages all
aspects related to its impacts on the environment.
There are several management plans currently in place for the project, however, these plans will
require revision to align with the most up-to-date project description and mine plan.
The only monitoring undertaken at present is dust fallout monitoring (which is not ongoing at this
stage).
According to the August 2021 monthly monitoring report (Skyside, 2021), there are currently three
sampling locations that are all operational. It is anticipated that the monitoring program will ramp-up
with the commencement of construction extending into the operational phase. The following
monitoring will be undertaken monthly (Minxcon, 2022; MCM, 2021a):
- surface water
- groundwater
- heritage
- air quality (dust)
- biodiversity
- waste management.
Commitment to monitoring needs to be aligned with the recommendations from both the specialist
studies undertaken in support of the EA as well as what has been included in the EMPR. It is
recommended that the EMPR is reviewed to ensure that all the management and mitigation
measures are still relevant and aligned with the most up-to-date project description.
SRK understands that audits of EAs took place upon commencement of construction and an
environmental monitoring and audit report was submitted to the DMRE in March 2023 and received
a positive compliance statement.
The latest EMPR performance review was conducted in November 2021 (Elemental Sustainability,
2021c) for activities that have commenced. The colliery received full compliance on the relevant
associated EMPR activities assessed. The latest external WUL audit was undertaken in October
2021 (Elemental Sustainability, 2021d). The colliery received full compliance on the relevant
associated conditions assessed.
SRK understands that environmental monitoring requirements as specified in the EA and EMPR
have commenced with listed activities, and the Company has informed the DMRE of this.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 66
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Makhado Project FINAL
The supplied financial model shows annual sustainability cost provisions throughout the Makhado
East Pit project of ZAR386,183,000. This cost is provided to cover stakeholder engagement,
marketing and communication, centre of learnings, SLP, and environmental management
(assessments, audits and monitoring). SRK recommends this provision be extended to cover the
full LOM plan for Makhado Colliery, including operations at Central Pit and West Pit, for a total of
ZAR765,157,200 in the case of a DCF valuation method. However, in the case of using
comparable market transactions this is considered when choosing an appropriate multiple.
5.10.5 Mine closure provisions
SRK understands that the Makhado Colliery mine closure plan and associated financial provisions
are updated annually in accordance with regulatory requirements. The 2024 Makhado Colliery
financial liability report (MCM, 2024)18 states that:
- Closure liability of current activities was calculated at ZAR11,970,733.59 for the period 2023.
This closure cost estimation is known as the asset retirement obligation cost. It considers
current environmental liabilities and activities at the site and excludes any planned activities.
- The calculated current financial liability related to activities before the mining right was granted
was calculated at ZAR11,878,078.16.
- The closure cost for Year 1 of mining conducted as part of the environmental impact
assessment was calculated at ZAR72.4 M and was used for the initial financial guarantee for
the project. However, the cost estimate does not provide details of the underlying assumptions
inherent in the cost estimate.
- The current financial guarantee held for the Makhado Project amounts to ZAR82.1 M.
SRK understands that MCM holds current rehabilitation financial guarantees of ZAR82,340,350 for
Makhado as of December 202319. SRK understands that this total rehabilitation financial guarantee
is equivalent to the estimated cost for Makhado Colliery's closure liabilities.
The supplied LOM schedule and associated cashflow model for the Makhado Colliery provides that
operations are planned to cease in April 205120. Upon completion of the operations, SRK expects a
minimum of 2 years for closure works and 10 years post-closure monitoring activities (i.e. 2063).
Current closure provisions totalling ZAR72.4 M stated for Makhado Colliery are conceptual and
developed to consider current disturbance/liabilities of the site for financial reporting processes.
There is a risk that additional costs may be required once the underlying assumptions have been
addressed such as alignment with closure designs and completion criteria, alignment with project
development, contamination assessments, ground-truth measurements and inventory, site-based
rehabilitation trials, and cashflow scheduling alignment. As such, there is a risk that the Makhado
Colliery LOM closure cost estimations are underestimated. This conclusion is based on the
information outlined in the 2024 financial liability report and considering current practice in similar
mining and processing operations in South Africa.
18 MCM, 2024, Financial Liability report – Makhado Colliery, Audit report 2023, March 2024
19 MCM SA Guarantees-202312 (1 1), December 2023
20 46.04.05.01 MKD_Financial_Model_PostPDS.v23
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 67
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Makhado Project FINAL
SRK understands that no whole-of-mine-life closure cost estimates are available for Makhado
Colliery. Good international industry practices would normally require estimation of whole-of project
closure costs for the mine, processing plant and associated auxiliaries. SRK recommends that a
LOM closure cost estimate be developed according to the updated LOM plan and aligned with the
closure objectives and requirements for Makhado Colliery. There is a risk the Makhado Colliery
LOM closure cost provision is underestimated.
The supplied financial model has a provision of ZAR336,705,000 for East Pit lifetime rehabilitation
works. However, the costing does not provide details of the underlying assumptions inherent in the
cost estimate. SRK recommends this provision be extended towards the full LOM plan for Makhado
Colliery, including the Central Pit and West Pit operations, for a total of ZAR687,556,406 in the
case of a DCF valuation method. However, in the case of using comparable market transactions
this is considered when choosing an appropriate multiple.
5.11 Risks and opportunities
No geological risks were identified during the risk assessment conducted as part of the Makhado
BFS.
From a mining perspective, major faults of the magnitude displacing the coal seam and offsetting
the sub-outcrop are always a risk, and although known, need to be planned for meticulously as
various unforeseen impacts can be experienced when mining near these faults. These features
constitute a potential risk to the mine design and productivity and should be appropriately mitigated
prior to mining and as such should have negligible effect on the valuation.
The reported lower or conceptual confidence level of the geotechnical designs due to lack of
information from exploration drilling creates a risk for the project, as these designs would have been
and would in future be based on assumptions that are not necessarily aligned with actual conditions
experienced when mining occurs.
In SRK's opinion, the key concerns with regards to pit slope stability are related to lack of data in
terms of spatial coverage of drilling in the West and Central pit areas and the lack of laboratory
strength testing (UCS and direct shear of discontinuities, particularly bedding). The recommended
slope designs seem likely to be conservative however, and so SRK does not regard the current
lack of data confidence as a major risk. However, it is reiterated that the forward works program
recommended in the 2013 FS, should be conducted during the next development phase to confirm
the geotechnical design parameters going forward. The geotechnical risk assessments performed
for the box-cut indicate that the risks are generally in the moderate to low category.
As stated earlier, there may be an opportunity for a steeper IRA in the unweathered materials
within the pits to be accommodated, with substantially lower berm widths. However, this would
need to be supported by the results of further studies based on the forward works program of more
comprehensive geotechnical data acquisition.
SRK is also of the opinion that full reliance on a contractor to provide the entire primary mining
fleet, and ancillary and support equipment could pose a risk if the contractor is not fully funded and
prepared with the required equipment when mining commences. This will require careful
management well in advance of mining commencement, together with daily management of the
contractor's operations to ensure that planned production and productivities are achieved.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 68
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Makhado Project FINAL
The optionality and design for backfilling is a significant opportunity and allows for various
efficiencies and cost savings over the life of the mine. Furthermore, the occurrence of multiple
mineable seams within the project area provides for favourable open cut mining efficiencies, based
on low strip ratios and results in lower cost bases.
Infrastructure and services requirements appear to be understood and relevant provisions have
been made in budget forecasts. The timing of implementation of these requirements are however
crucial, and especially reliance on external parties for delivery of either infrastructure or services
needs to be carefully managed to ensure no extended delays occur when mining operations are to
commence or are already underway.
The risk of sufficient and constantly reliable power supply is reported to be of current concern,
although cogeneration is proposed to address this as best as practically possible. To the contrary,
information indicates that the abundance of groundwater, albeit requiring pumping initially, is a
benefit to the project and can be used as an opportunity to reduce cost and delays if managed
proactively.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 69
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Greater Soutpansberg Project FINAL
6 Greater Soutpansberg Project
6.1 Overview
The GSP, is contiguous to the Makhado Project, and situated to the north of the Soutpansberg
Mountains in the Limpopo Province. It comprises three sub-projects: Mopane, (Jutland and
Voorburg), Generaal (Generaal and Mount Stuart) and Chapudi (Chapudi, Wildebeesthoek and
Chapudi West) (Figure 6.1).
The Mopane Project comprises the Jutland and Voorburg sections. The nearest town is Musina,
situated approximately 30 km to the north of the project area. Pretoria lies approximately 380 km to
the south.
The project is accessed via a network of unsealed dirt roads that branch from the R525 unsealed
dirt road and are connected to the sealed national N1 highway.
A railway line runs along the southeastern boundary of the Jutland section and connects the GSP
with the main rail network. Eskom grid powerlines are located parallel to the N1.
The towns of Louis Trichardt and Musina are regional centres and provide modern facilities
including accommodation and services to the project. These are owned by MbeuYashu (Pty) Ltd, a
company jointly owned by MCM (74%) and its Black Economic Empowerment partner, Rothe
Investments (Pty) Ltd (26%) (Figure 6.2).
Figure 6.1: Location of Greater Soutpansberg Project
Source: MCM website, accessed 13 May 2022
The Mopane and Generaal mining rights were legally executed in December 2023 and the Chapudi
mining right was expected to be executed in Q1 CY2024.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 70
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Greater Soutpansberg Project FINAL
Figure 6.2: Shareholding of Greater Soutpansberg Project
MCM
Source: Venmyn Deloitte, CoAL CPR, 2016
6.2 History
No mining has taken place on any areas of the GSP. This section discusses the known exploration
in the various sections.
6.2.1 Mopane Project
Voorburg Section
Exploration on Cavan 508 MS was first conducted by Rapburn Exploration (Pty) Ltd in the early
1970s. This consisted of reconnaissance drilling with seven holes drilled, of which six were
sampled. None of the analysis results have been used in MCM's geological models or resource
estimates. In 1976, Iscor drilled 43 diamond holes on Banff 502 MS and Voorburg 503 MS. These
drilling programs were widely spaced for reconnaissance purposes. Iscor recognised the high
coking properties of the coals and produced two reports on the mining potential of the properties.
CoAL acquired Iscor's Soutpansberg database, covering all the GSP, in 2007.
Rio Tinto drilled one drill hole on each of Banff 502 MS (diamond), Delft 499 MS (reverse
circulation – RC), Vera 815 MS (diamond) and Krige 495 MS (RC) as part of its regional
exploration program. No data from any of these drill holes have been incorporated into the MCM
modelling or resource estimation, as either MCM has its own drill hole data or the holes are outside
MCM's immediate area of interest.
In 2006, CoAL drilled 15 diamond drill holes on the farm, Voorberg 503 MS. Five large diameter
drill holes were sunk at each of three sites.
Downhole geophysical surveys have been conducted on all the drill holes, using a tool suite
suitable for dual density, natural gamma and calliper measurements. These measurements were
used to identify, correlate and sample the coal.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 71
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Greater Soutpansberg Project FINAL
A photographic/LiDAR survey was conducted in 2008 to produce orthophotographs and ground
elevation data.
Historical mining took place on the farm Cavan 508 MS between 1911 and 1918 to supply the
smelter at Messina Copper Mine. The mine was located a few hundred metres west of the Liliput
rail siding, into the side of a small hill. Reportedly, 14,488 t was mined, but the quality is unknown.
New order prospecting rights to the Voorburg Section were acquired by CoAL in 2006.
Jutland Section
Trans Natal Coal Mining Corporation undertook the earliest exploration between 1968 and 1975 for
reconnaissance purposes – 53 holes were drilled, although no information about them exists.
Between 1975 and 1982, Iscor performed extensive exploration, totalling 106 drill holes and
including bulk sampling on the farms Jutland 536 MS, Stubbs 558 MS, Mons 557 MS and Cohen
591 MS. However, the location of the drill holes and the bulk samples could not be ascertained by
MCM. A pre-feasibility study (PFS) was conducted by Iscor in 1982 for these farms, concluding that
about 50 Mt of coal could be mined from underground. No further work appears to have been done.
During 2006 and 2007, Rio Tinto drilled three reconnaissance vertical holes on the farms
Hermanus 553 MS, Verdun 535 MS and Ursa Minor 551 MS. Downhole geophysics were
conducted on the drill holes; no remote sensing was undertaken.
CoAL drilled five PQ3 drill holes in 2012 for confirmatory purposes, as well as 10 RC holes to assist
with the structural interpretation – these holes have not been incorporated into the geological
model. No remote sensing or geophysical exploration has taken place.
6.2.2 Generaal Project
Mount Stuart Section
Iscor drilled 417 holes between 1975 and 1978, plus a number of deflections and possibly some
large diameter holes. Uncertainty regarding the drilling and sampling protocols used exists, as they
are unknown, nor whether the drill hole collars were professionally surveyed. Analysis was
conducted by Iscor's in-house laboratory and was usually undertaken on a float fraction of RD1.40;
analyses comprised proximate analysis, CV, Roga and Swell Index.
Rio Tinto conducted some limited exploration and CoAL acquired data for nine holes, seven of
which were diamond drill holes (on the farms Nakab 184 MT, Schuitdrift 179 MT, Mount Stuart
153 MT and Ter Blanche 155 MT) and a further two on Nakab 184 MT were percussion holes.
CoAL started drilling in 2009 on the farm Riet 182 MT; nine holes have been drilled to date. Ground
magnetic geophysical data for the farm Nakab 184 MT and aeromagnetic data for the farm
Schuitdrift 179 MT were acquired from Rio Tinto.
Downhole geophysics was conducted on all Rio Tinto and CoAL drill holes to identify, correlate and
sample the coal horizons. Sondes deployed included those for dual density, natural gamma and
calliper measurements.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 72
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Greater Soutpansberg Project FINAL
Generaal Section
Most of the exploration has been conducted by Iscor; between 1975 and 1978, 64 holes were
drilled. Downhole logging data and partial coal quality data for 13 of these holes were acquired by
CoAL in 2007.
Rio Tinto drilled a total of 11 holes on the farms Generaal 587 MS, Fanie 578 MS and Van
Deventer 641 MS.
CoAL drilled 26 holes – consisting of diamond and RC holes, as well as 4 water boreholes – in
2013 that were used to update the geological model. However, there are no quality data for these
drill holes and the historical quality data are not considered reliable – therefore no Coal Resources
have been declared for this section. No downhole geophysical logging or remote sensing has been
conducted.
6.2.3 Chapudi Project
Little information seems to exist regarding historical exploration at Chapudi. CoAL obtained a
historical database from the then Council for Geological Sciences in 2013 – this included 162 holes
drilled by Iscor.
Chapudi Section
Rio Tinto conducted extensive exploration, including drilling and various forms of remote sensing.
Rio Tinto was targeting thermal power station coal, with or without an export coking coal fraction.
As MCM is targeting coking coal, the information from all this previous work will be reassessed and
future exploration planned accordingly.
Rio Tinto started drilling in 2003 on the farm Chapudi 752 MS, drilling 125 holes along strike and
focusing on areas near the sub-crop and for short distances down-dip. The holes consisted of both
diamond core holes and open holes. Three deep holes were drilled to verify the down-dip
continuity.
Aeromagnetic and radiometric geophysical surveys were flown in 2005 and used to identify
intrusions and lineaments over the central area of the section. Three resistivity and four vertical
electrical traverses were performed in 2006 and two north–south seismic traverses were conducted
in 2007. These results were used to determine the depth of weathering. Aerial photograph
interpretation resulted in data for a digital terrain model.
Downhole geophysical logging was conducted on most of the Rio Tinto drill holes. This included
three-arm calliper, density, natural gamma, full-wave sonic, resistivity, neutron-neutron, magnetic
susceptibility and an acoustic televiewer.
CoAL acquired Rio Tinto's full drill hole database in 2011, as well as detailed data reports and the
complete geological model. MCM has not yet drilled any confirmatory holes, although three RC
holes were drilled in 2012 for structural purposes and to update the physical geological model.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 73
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Greater Soutpansberg Project FINAL
Chapudi West Section
Trans Natal Coal Mining Corporation drilled holes and Iscor a further 11 drill holes during 1973 and
1974. Although the data from these holes have been used in the geological model, no resources
have been declared.
Rio Tinto conducted some reconnaissance drilling between 2003 and 2005. This involved three drill
holes on the farms Grootvlei 684 MS and Grootboomen 476 MS. Only petrographic analysis was
conducted on these holes.
Wildebeesthoek Section
Iscor drilled 94 holes between 1975 and 1978. Although CoAL acquired these data, quality data
only exist for two of the drill holes.
Rio Tinto drilled four holes on the farms Wildebeesthoek 661 MS and Mapani Ridge 660 MS,
sampling Seam 6 on a ply-by-ply basis.
CoAL drilled 20 holes (10 diamond core and 10 RC) in 2013 to assist with the structural
interpretation; none of the holes were sampled and the results were only used to update the
geological model to estimate resources.
6.3 Local geology
The GSP consists of three separate sub-projects:
- the Mopane Project, comprising the Voorburg and Jutland sections
- the Generaal Project, comprising the Mount Stuart and Generaal sections
- the Chapudi Project, comprising the Chapudi, Chapudi West and Wildebeesthoek sections.
Figure 6.3 depicts the location of these projects with respect to one another.
The Soutpansberg Coalfield has been subdivided by faulting into a number of separate basins, also
referred to in the literature as coalfields. The GSP falls within these separate basins and is divided
into three projects (Figure 6.3). Figure 5.2 illustrates the general dip of the strata across these
basins of the western part of the Soutpansberg Coalfield.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 74
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Greater Soutpansberg Project FINAL
Figure 6.3: Projects comprising the Greater Soutpansberg Project
Excluded from this report
Source: modified after Venmyn Deloitte (2016) – not to scale
6.3.1 Mopane Project
The Mopane Project has been subdivided into the Voorburg and Jutland sections; Coal Resources
have only been declared by MCM for the Voorburg Section. The coal has the potential to produce a
semi-hard coking coal.
Voorburg Section
The Voorburg Section is the most advanced exploration part of the Mopane Project and located in
the Sand River Basin, an isolated, upfaulted block of Karoo sediments, about 10 km north of the
main part of the Soutpansberg Coalfield (Figure 6.1 and Figure 6.3). It is a half graben with an
unconformable southern contact due to the upsloping edge of the depositional palaeobasin. It is
fault-bounded to the north by a southwest to east-northeast striking normal fault. This fault is 25 km
long with an upthrow of approximately 1,000 m to the south. Semi-parallel smaller faults form
offshoots to the main fault, with throws between 5 m and 10 m. Figure 6.4 depicts the surface
geology of the area and the typical stratigraphy encountered in this basin. Minor faulting and
dolerite intrusions have been identified in historical drill holes and by mapping; only one 0.4 m thick
dolerite sill has been intersected in recent drilling.
The coal seams are thickest in the north, thinning southwards; dips are in the order of 5° north
(Figure 5.2). The sediments of the Lower Ecca Group are absent and the coal is found in the
sediments of the Mikambeni Formation as alternating coal bands and mudstone laminae. Six
potentially economic seams have been identified – the Upper, Middle Upper, Middle Lower, Bottom
Upper, Bottom Middle and Bottom Lower seams. The coal measures are overlain by the red shales
and mudstones of the Beaufort Group, followed by the coarse sandstones of the Fripp Formation
(Figure 6.4).
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 75
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Greater Soutpansberg Project FINAL
Coal was previously mined at Liliput, in the east on the farm Cavan 508 MS, on the main rail line
from South Africa to Zimbabwe.
A LiDAR survey conducted in 2008 produced ground elevation data and orthophotos. CoAL (now
MCM) conducted a drilling program of mainly 83 mm core size vertical drill holes. Triple tube
diamond drilling was used to confirm the drill hole results from historical Iscor drilling and to
increase the drill hole density such that resources could be declared. Large diameter drill holes with
a 122.8 mm core size were sunk for bulk sampling purposes. All drill holes were geophysically
logged to identify, correlate and sample the coal horizons. Standard coal analyses were
undertaken (proximate analysis, CV and washability from RD1.35–1.70 in 0.05 g/cm3 intervals and
from RD1.70–2.00 in 0.10 g/cm3 intervals). The Free Swell Index was also determined to indicate
the coking potential.
Figure 6.4: Voorburg Section – surface geology and typical stratigraphy
Source: Venmyn Deloitte (2017)
The seams vary in thickness from 0.5 m to a maximum of 6.0 m (Upper and Middle Upper seams);
the Middle Lower and Bottom Upper seams are thinner than the other seams (Figure 6.5).
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 76
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Greater Soutpansberg Project FINAL
Figure 6.5: Voorburg Section – seam thicknesses in metres
Source: Venmyn Deloitte (2017)
The seam depths vary from <20 m in the west to a maximum of 240 m (Bottom Seam) in the north
(Figure 6.6). The coal is mainly shallow (i.e. at depths able to be extracted using open cast
methods) from the sub-crop in the south, but specific seams will need to be mined via underground
methods to the north. The majority of the project area has stripping ratios less than 4 bcm/t of coal.
Figure 6.6: Voorburg Section – seam depths in metres
Source: Venmyn Deloitte (2017)
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 77
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Greater Soutpansberg Project FINAL
Washed coal is forecast to produce a theoretical product at RD1.40 with an ash content between
8% and 12%, depending on the seam; VM varies between 10% and 38%, and increases to the
south for the Upper, Upper Middle and Middle Lower seams, while increasing to the southeast for
the Bottom Upper and Bottom Lower seams. The Free Swelling Index ranges from 5.0 to 7.0 and
theoretical yields up to 55%, depending on the seam; lower yields are found in seams with a
greater amount of intercalated mudstone – the lowest yields occur in the Upper Seam and the
highest average yield on the farm Banff 502 MS (Figure 6.7).
Figure 6.7: Voorburg Section – theoretical product yield at RD 1.40
Source: Venmyn Deloitte (2017)
Jutland Section
No Coal Resources have been declared for the Jutland Section, although the presence of coal is
known.
The Jutland Section is located in the Mopane Basin of the Soutpansberg Coalfield and is classed
as an early-stage exploration project – it is the least developed section of the Mopane Project.
The coal is preserved in a half-graben, with an unconformable southern contact; the lower Karoo
sediments are not developed but the coal-bearing Mikambeni Formation is present (Figure 6.8).
The seams dip northwards at approximately 10–12° (Figure 5.2). The coal-bearing sediments are
found as alternating coal bands and mudstone laminae with the coal horizons divided into five
economic horizons, named the Upper, Middle Upper, Middle Lower, Bottom Upper and Bottom
Lower seams. The Mikambeni Formation is overlain by the red shales and mudstones of the
Beaufort Group, followed by the coarse sandstone of the Fripp Formation.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 78
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Greater Soutpansberg Project FINAL
Figure 6.8: Jutland Section – surface geology and typical stratigraphy
Source: Venmyn Deloitte (2017)
6.3.2 Generaal Project
The Generaal Project is subdivided into the Mount Stuart and Generaal sections; Coal Resources
have only been declared for the Mount Stuart Section (Inferred Coal Resources). Both sections are
located in the Tshipise North Basin, northeast of the Makhado Project (Figure 6.3).
Mount Stuart Section
The Mount Stuart Section is the more advanced of these two exploration sections. The Tshipise
North Basin is an isolated, upfaulted block of Karoo strata (Figure 6.9). The lowermost strata
comprise 10 m of conglomerate-diamictite belonging to the Tshidzi Formation and these are
followed by 190 m of alternating black shales, sandstones, siltstones and interbedded coal seams
of the Madzaringwe Formation. Overlying this formation is the 140 m thick Mikambeni Formation
(consisting of mudstone and shale and lesser amounts of sandstone) with the 60 m-thick Fripp
Formation of coarse-grained sandstones forming east–west trending ranges of low hills. The Fripp
Formation is overlain by Solitude Formation (110 m of shale with minor sandstone and grit), the
Klopperfontein Formation (similar to the Fripp Formation) and finally, the Bosbokpoort Formation
(300 m of fine sandstone and mudstone, Figure 6.9).
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 79
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Greater Soutpansberg Project FINAL
Figure 6.9: Mount Stuart Section – surface geology and typical stratigraphy
Source: Venmyn Deloitte (2017)
Four seams of commercial interest have been identified, namely, the Upper, Middle Upper, Bottom
Upper and Lower seams. The seam thicknesses range from <0.5 m to over 9.0 m and the Upper
Seam is usually the thinnest (Figure 6.10).
The coal seams dip to the north and the shallowest part of the basin is in the south (Figure 6.11).
Depths vary from less than 50 m in the south to a maximum of almost 900 m for the Bottom Lower
Seam in the north. A large northeast–southwest striking fault has been identified in the west of the
farm Mount Stuart 153 MT, which continues west across the farms Schuitdrift 179 MT and Nakab
184 MT and beyond. The coal would need to be extracted from surface in the south and then
specific seams could be extracted from underground as mining progresses northwards.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 80
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Greater Soutpansberg Project FINAL
Figure 6.10: Mount Stuart Section – seam thickness in metres
Source: Venmyn Deloitte (2017)
Figure 6.11: Mount Stuart Section – seam depths in metres
Source: Venmyn Deloitte (2017)
The section is interpreted to have the potential to produce a hard coking coal. The theoretical
product at RD 1.40 equates to approximately a 12% ash product, although the ash varies between
5% and 20% depending on the seam; the VM is in the order of 10–30% and theoretical yields as
high as 50%, depending on the seam. The lowest average yields are obtained from the Upper and
Bottom Lower seams.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 81
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Greater Soutpansberg Project FINAL
Generaal Section
The Generaal Section is located immediately north of the Makhado Project. It is classed as an
early-stage exploration project; although the presence of coal is known, no Coal Resources have
been declared.
The section is located within the northern part of the Waterpoort Basin of the Soutpansberg
Coalfield. It is a 20 km long east–west striking upfaulted block with the coal found in the northern
part of the project area in the Mikambeni Formation. Here the formation consists of a 20–30 m-thick
package of banded coal-bearing sediments with large proportions of non-coal material. Three
horizons with relatively lesser proportions of non-coal material have been identified, with average
thicknesses between 2.9 m and 3.0 m (Figure 6.12). Dips are in the order of 4–5° (Figure 5.2) but
are steeper in the central part of the project area.
Figure 6.12: Generaal Section – surface geology and typical stratigraphy
Source: Venmyn Deloitte (2017)
6.3.3 Chapudi Project
The Chapudi Project lies west of the Makhado Project (Figure 6.3) in an extension of the Tshipise
Basin of the Soutpansberg Coalfield, named the Waterpoort Basin. In terms of area, the Chapudi
Project is the largest of the GSP, covering 21 farms. It has been subdivided into three sections, all
of which offer the potential to produce a primary coking coal product and a middlings thermal coal
product.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 82
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Greater Soutpansberg Project FINAL
Chapudi Section (the central section)
The Chapudi Section is the central section in the project and is the most advanced of the three,
hosting Inferred Coal Resources (Table 6.1).
Early exploration by Rio Tinto led to the identification of seven coal zones – three in Lower Ecca
and four in Upper Ecca, named, from the base upwards, Seam 1 through to Seam 7 (Figure 6.13).
The zones consisted of finely interbanded carbonaceous mudstones and coal and are overlain by
the Fripp Formation, which attains a maximum thickness of 40 m. The strata dip northwards at
approximately 12° (Figure 5.2).
Figure 6.13: Chapudi Section – surface geology and typical stratigraphy
Source: Venmyn Deloitte (2017)
The best developed zone is Seam 6, with total seam thickness ranging between 5 m and 40 m; the
coal-only thickness generally averages 25 m (Figure 6.14). Seam floor depths range from surface
to at least 800 m below surface (Figure 6.15). The coal is frequently bright with a high vitrinite
content. MCM has divided Seam 6 into six mining horizons: Upper Seam, Middle Upper Seam,
Middle Lower Seam, Bottom Upper Seam, Bottom Middle Seam and Bottom Lower Seam. The
Bottom Lower Seam consists mainly of mudstone and has been excluded from the resource
estimates. The seam is amenable to open cast extraction with average strip ratios estimated
around 2 bcm/t coal, which increase to the north.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 83
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Greater Soutpansberg Project FINAL
Figure 6.14: Chapudi Section – Seam 6
Source: Venmyn Deloitte (2017)
Notes: Top – total thickness in metres; Bottom – coal only thickness in metres.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 84
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Greater Soutpansberg Project FINAL
Figure 6.15: Chapudi Section – Seam 6
Source: Venmyn Deloitte (2017)
Notes: Top – floor elevation (m AMSL); Bottom – floor depth in metres.
Seam 7 is also well-developed (12–15 m thick) but has high ash content and low yields. Only
Seam 6 is deemed by MCM to have economic potential and exclusively makes up the declared
resources.
The resource area is constrained by major faulting; the frequency of smaller-scale faulting in the
area is not well understood. Dolerite intrusions mainly strike east–west and were identified through
an aeromagnetic geophysical survey (Figure 6.13). In the west and central parts of the Chapudi
Section, the intrusions are limited to a single 0.5–1 m thick dyke, but are more common in the
eastern part, where they can reach thicknesses of up to 80 m. However, these intrusions do not
impact Seam 6 above depths of 150 m and are unlikely to have a significant impact on open cast
mining.
The potential to produce a 10% ash coking product is believed by MCM to be good, with this
potential increasing with increasing coal seam depth, although this is based on limited testwork.
The coal is 90% vitrinite with qualities on a dry, mineral matter free basis being 35.5 MJ/kg average
CV, volatile matter between 37% and 44%, and highly variable ash.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 85
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Greater Soutpansberg Project FINAL
Chapudi West Section
The Chapudi West Section is an early-stage exploration project, similar to the Chapudi Section in
terms of the stratigraphy and seams intersected. The area is believed to have the potential to
produce coking coal and a middlings thermal product.
No Coal Resources have been declared to date.
Wildebeesthoek Section
The Wildebeesthoek Section, immediately north of the eastern extremity of the Chapudi Section
(Figure 6.3) and northwest of the Makhado Project, is the least developed of the Chapudi Project
sections. It is an isolated, upfaulted block of Karoo strata, and has been interpreted to represent an
upfaulted extension of the coal seams from down-dip of the main Chapudi Section (Figure 6.16).
Although the presence of coal over the area is known, no Coal Resources have been declared.
Figure 6.16: Wildebeesthoek Section – surface geology and typical stratigraphy
Source: Venmyn Deloitte (2017)
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 86
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Greater Soutpansberg Project FINAL
6.4 Exploration potential
Much of the GSP remains to be explored in greater detail, particularly those areas where Coal
Resources remain to be declared – that is, the Jutland Section (Mopane project), the Generaal
Section of the Generaal Project, and the Chapudi West and Wildebeestfontein sections of the
Chapudi Project. The Coal Resources of the Mount Stuart Section (Generaal Project) and the
Chapudi Section of the Chapudi Project will require additional exploration, particularly drilling, to
increase the confidence and upgrade the Coal Resource classification from the Inferred category.
6.5 Coal Resources
6.5.1 Coal Resources
The critical variable considered for both the primary coking coal product and the secondary thermal
product is ash (<10% and <25.9%, respectively). In addition, the following cut-off values were
imposed:
- prospecting rights' boundaries
- sub-crop in the south
- minimum VM content of 18% for MTIS
- minimum seam thickness of 0.5 m for GTIS
- a mining layout loss of 2% for MTIS.
The Coal Resource estimates were also discounted by the Company for unknown geological
structures, based on the confidence in the Coal Resource classification; all Coal Resources have
been classified as Inferred.
The Coal Resources were estimated from a geological model, constructed by Mr John Sparrow
using MinexTM software.
SRK has reviewed the geological model and is satisfied that the data are represented sufficiently
accurately in the grids, that the modelling principles employed and the estimation methods used
are fit-for-purpose and that the geological model and the Coal Resource estimates can be relied
upon.
All Coal Resources and coal qualities have been estimated on an air-dry basis and are inclusive of
the Coal Reserves. Note that the in situ Coal Resource estimates include significant amounts of
intercalated non-coal material that will be removed during beneficiation.
The Coal Resources as reported in the MCM annual report (MCM, 2023) are shown in Table 6.1.
Note that Coal Resources have only been declared for the Voorburg Section of the Mopane
Project, for the Mount Stuart Section of the Generaal Project and for the Chapudi Section of the
Chapudi Project.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 87
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Greater Soutpansberg Project FINAL
Table 6.1: Greater Soutpansberg Coal Resource estimate (30 June 2024)
Project Resource GTIS MTIS MCM MCM
Category (Mt) (Mt) attributable attributable
interest Resource
(%) (Mt)
Measured 109.435 94.916 97 92.012
Indicated 125.034 100.507 96 96.444
Mopane Measured and
234.469 195.423 188.456
(Voorburg Section only) Indicated
Inferred 36.239 24.001 88 21.130
Total 270.708 219.424 209.586
Generaal (Mount Stuart Section only) Inferred 407.163 55.511 100 55.511
Chapudi (Chapudi Section only) Inferred 6,399.023 1,318.481 74 975.676
All Total 7,016.894 1,593.416 ±65 1,031.187
Source: MC Mining Limited Annual Report 2023
6.6 Environmental and social aspects
6.6.1 Mining rights and land access rights
According to the MCM website21, the Chapudi, Mopane and Generaal project areas comprise
MCM's longer term Greater Soutpansberg Project. SRK understands from documents reviewed
that the mining rights granted for the GSP projects are as presented in Table 6.2.
According to the 2016 Deloitte Independent Competent Person Report (Deloitte, 2016), 'CoAL has
agreements with the various surface rights owners to access properties for exploration purposes
and access is sufficient for its prospecting requirements.' However, Deloitte reported a number of
land claims for the following sections of GSP Mineral rights: Voorburg, Jutland, Mount Stuart,
Generaal, Chapudi West and Wildebeesthoek. The status of conformance with the mining rights,
land ownership, rental and land access agreements requirements was last reviewed in 2016.
Based on information reviewed by SRK, there is no evidence of anything that would suggest MCM
does not remain compliant. SRK recommends that MCM undertakes a detailed compliance review
to identify GSP's operational risks associated with the current land access agreements and surface
rights. Additional budget and time might be required to amend agreements.
At this stage, the status of stakeholder relationships with the landowners and traditional owners is
good, based on feedback from the site visit.
21 GSP/MbeuYashu - MCMining Limited, https://www.mcmining.co.za/our-business/projects/gsp-mbeu-yashu,
last accessed 21/02/2023
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 88
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Greater Soutpansberg Project FINAL
Table 6.2: SRK reviewed list of Greater Soutpansberg Project mining rights
Project Holder File Ref No. Surface Date Effective Expired Farms portion
area (ha) granted date* date
Fanie 578 MS, Kleinberg 636 MS,
Bekaf 650 MS, Joffre 584 MS,
LP 10044 MR 2,531.57 28/10/2019 30/11/2023 27/10/2049 Chase 576 MS, Rissik 637 MS,
Wildgoose 577 MS, Maseri Pan 520
Chapudi Chapudi Coal MS, Solitude 111 MT
Banff 502 MS, Delft 499 MS, Krige
10032 MR 4,353.63 19/09/2017 14/12/2023 18/09/2047
495 MS, Schalk 542 MS
10036 MR 1,283.61 23/05/2018 14/12/2023 22/05/2048 Ursa Minor 551 MS
Regulus 10029 MR 2,233.63 28/10/2019 14/12/2023 27/10/2050 Mons 557 MS, Stubbs 558 MS
Mopane Investment
Holdings LP 10045 MR 871.293 28/10/2019 30/11/2023 27/10/2049 Schuitdrift 179 MT
Juliana 647 MS, Phantom 640 MS,
Van Devender 641 MS, Daru 889
LP 10050 MR 4,740.23 13/09/2017 30/11/2023 12/09/2047
MS, Tanga 894 MS, Coen Britz 881
MS, Coen Britz 646 MS
Portion 1, 2 and Remaining Extent
LP 10053 MR 1,452.43 13/09/2017 30/11/2023 12/09/2047
of General 587 MS
Portion 1 and Remaining Extent of
LP 10054 MR 866.87 13/09/2017 30/11/2023 12/09/2047
Boas 642 MS
LP 10058 MR 1,056.66 13/09/2017 30/11/2023 12/09/2047 Beck 568 MS
Kwezi Mining
Generaal
Exploration 10030 MR 1,002.93 23/05/2018 14/12/2023 22/05/2048 Vera 815 MS
10031 MR 577.80 23/05/2018 14/12/2023 22/05/2048 Scheveningen 500 MS
Pretorius 531 MS, Remaining
extent and Portion 1 on Pretorius
531 MS, Remaining extent of Otto
(Honeymoon) 560 MS, Hermanus
10035 MR 6,409.29 23/05/2018 14/12/2023 22/05/2048
533 MS, Faure 562 MS, Remaining
extent of Du Toit 563 MS, Bierman
559 MS, Remaining extent of
Verdun 535 MS
Remaining Extent and Portion 2 of
Mount Stuart 153 MT, Nakab 184
LP 10047 MR 5,716.56 13/11/2017 30/11/2023 12/11/2047 MT, Remaining Extent and Portion
1 of Terblanche 155 MT, Septimus
CoAL/ 156 MT
MC Mining
10033 MR 3,994 13/09/2017 14/12/2023 12/09/2047 Voorburg 503 MS
Ancaster 501 MS, Cavan 508 MS,
10034 MR 4,902.84 13/09/2017 14/12/2023 12/09/2047
Cohen 591 MS, Jutland 536 MS
Sources: MC Mining data room
Notes: * Date on which the EMPR is approved under Section 39(4) of the MPRDA.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 89
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Greater Soutpansberg Project FINAL
6.6.2 Environmental approvals
SRK understands that:
- Individual EMPRs were approved at the end of 2023 for the Mopane and Generaal projects as
part of the granted mining rights, as described in Table 6.2.
- WULs are not currently in place for the GSP as the projects are in an exploration phase.
Should the project proceed beyond the exploration phase, MCM should investigate alternative
options for the water supply and submit a WUL application to DWS.
- Waste permits are not currently relevant as the projects are in an exploration phase. The
probability of requiring a waste management licence will be based on the anticipated mining
activities. This will need to be verified once more technical information is available for the
projects.
6.6.3 Social and Labour Plan
SRK understands that the SLPs associated with the mining rights for the Chapudi Project have not
yet been approved. SLPs have been approved for Mopane and Generaal.
6.6.4 Environmental and social management
MCM has an environmental policy that is used to guide its environmental management activities
(MCM, 2021a). It is assumed that drilling contractors are required to adhere to the Contractor
Management Pack (MCM, 2018) and that exploration is being undertaken in line with the
exploration Environmental Management Plan. No environmental monitoring is currently taking
place as there is no current exploration active.
Water is a critical issue in the area due to the low rainfall and high evaporation rates and competing
water demands from farmers. It is essential that the potential water sources are carefully studied to
determine the sustainability of water supply and identify potential alternatives for future mining
activities (Venmyn Deloitte, 2016). Competition for water between mining and local
communities/operations can result in negative publicity if this risk is not managed at the onset. Due
to the locality of the project in a water scarce area, this risk is material and the likelihood of this risk
being realised in the future is high if the eventual operation impacts on water availability for
surrounding water users.
The area is rich in cultural heritage and therefore mining is likely to impact on some aspects of
cultural heritage. This could result in reputational damage if an updated and extensive heritage
impact assessment is not undertaken adequately. This risk is material if the eventual operation
impacts cultural heritage resources. The likelihood of this risk could be mitigated to low if adequate
and extensive heritage study is undertaken and the resultant mitigation measures are adhered to
ahead of the construction phase.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 90
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Greater Soutpansberg Project FINAL
6.6.5 Environmental liabilities and closure provisions
MCM holds current rehabilitation financial guarantees of ZAR10,882,257 for GSP as of December
202322. SRK understands that the amount covers the current environmental liabilities of the GSP
exploration sites. However, the costing does not provide details of the underlying assumptions
inherent in the cost estimate.
Current closure provisions totalling ZAR10,882,257 might be sufficient to cover the current liabilities
of the exploration sites. However, with regards to GSP projects in pre-feasibility study stages (such
as the Chapudi Project), SRK recommends that a life-of-mine closure cost estimate be developed
according to the LOM plan and aligned with the closure objectives and requirements for the
projects. Should mining commence, SRK would expect the mine closure costs to be in the same
order of magnitude as the coal assets per the identified comparable transactions. Therefore, SRK
considers the expected closure costs to be reflected in the multiples that acquirers have paid for
the coal assets.
6.7 Risks and opportunities
Geological risks pertain to the continuity of the coal seams and their quality in the lesser explored
parts of the GSP. Although the presence of coal is known in all the sub-projects, this has not been
proved sufficiently by exploration to declare Coal Resources for all areas, nor is the ability of the
coal to be beneficiated to coking coal product confirmed in all areas. Further exploration through
drilling and analysing the coal will reduce this risk. As such, in the valuation exercise using
comparable market transactions, this is considered when choosing an appropriate multiple.
22 MCM SA Guarantees-202312 (1 1), December 2023
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 91
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Other considerations FINAL
7 Other considerations
7.1 Coal market
SRK has reviewed the coal market prices and notes the South African Richards Bay benchmark
thermal coal price is currently 60% lower than its all-time high of ZAR4,599/t in June 2022
(Figure 7.1). The Richards Bay thermal coal price has stabilised around ZAR2,000/t since
November 2023.
Figure 7.1: Richards Bay thermal coal price
Source: Index Mindi, World Bank
Notes: Coal (South Africa), thermal NAR netback assessment f.o.b. Richards Bay 6,000 kcal/kg from 13 February 2017;
during 2006 to 10 February 2017 thermal NAR; during 2002–05 6,200 kcal/kg (11,200 BTU/lb), less than 1.0% sulfur, 16%
ash; years 1990–2001 6,390 kcal/kg (11,500 BTU/lb).
In determining a Market Value for MCM's coal assets, SRK has considered the following:
- In reviewing the 2023 financial results for the Uitkomst Colliery, the achieved price (US$142/t)
was 30% lower than the API4 average price of US$204/t for the same period. This is because
the achieved price includes low-grade middlings coal.
- Vele Colliery is a potential SSCC and thermal coal producer that could be sold into the export
market and shipped through the coal terminal in Mozambique.
- The Makhado Project will potentially produce 20% coking coal and 20% thermal coal with a
total yield of approximately 40% of ROM production. The intention is to sell the coking fraction
to a local steel producer while the thermal product will be exported through the coal terminal in
Mozambique.
- South Africa is traditionally an exporter of only thermal coal and therefore has no market
quoted benchmark coking coal price.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 92
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Valuation FINAL
8 Valuation
8.1 Valuation methodology
The objective of this section is to provide BDO with:
- a Market Value estimate for MCM's Coal Resources (i.e. those outside the current LOM
schedule)
- SRK's opinion regarding the Market Value of MCM's Coal Resources with associated
exploration tenure.
SRK has not valued MCM or its corporate subsidiaries as the beneficial owners of the Mineral
Assets.
In determining the appropriate parameters for valuation purposes, SRK has considered the
assessments that might be made by a willing, knowledgeable and prudent buyer in assessing the
value of MCM's projects. SRK has relied on information provided by MCM, as well as information
sourced from the public domain, SRK's internal databases and SRK's subscription databases.
The VALMIN Code (2015) outlines three generally accepted valuation approaches:
1. Market Approach
2. Income Approach
3. Cost Approach.
The Market Approach is based primarily on the principle of substitution and is also called the Sales
Comparison Approach. The Mineral Assets being valued are compared with the transaction value
of similar Mineral Assets under similar time and circumstances on an open market (VALMIN Code,
2015). Methods include comparable transactions and option or farm-in agreement terms analysis.
The Income Approach is based on the principle of anticipation of economic benefits and includes
all methods that are based on the anticipated benefits of the potential income or cashflow
generation of the Mineral Asset (VALMIN Code, 2015). Valuation methods that follow this approach
include DCF modelling, capitalised margin, option pricing and probabilistic methods.
The Cost Approach is based on the principle of cost contribution to value, with the costs incurred
providing the basis of analysis (VALMIN Code 2015). Methods include the appraised value method
and multiples of exploration expenditure (MEE), where expenditures are analysed for their
contribution to the exploration potential of the Mineral Asset.
The applicability of the various valuation approaches and methods varies depending on the stage
of exploration or development of the Mineral Asset and hence the amount and quality of the
information available on the mineral potential of the assets.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 93
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Valuation FINAL
Most Mineral Assets can be classified as either:
- Exploration Project: properties where mineralisation may or may not have been identified, but
where a Coal Resource has not been identified.
- Advanced Exploration Project: properties where considerable exploration has been
undertaken and specific targets have been identified that warrant further detailed evaluation,
usually by drill testing, trenching or some other form of detailed geological sampling. A Coal
Resource Estimate may or may not have been made, but sufficient work will have been
undertaken on at least one prospect to provide both a good understanding of the type of
mineralisation present and encouragement that further work will elevate one or more of the
prospects to the resource category.
- Pre-development Project: properties where Coal Resources have been identified and their
extent estimated (possibly incompletely) but where a decision to proceed with development has
not been made. Properties at the early assessment stage, properties for which a decision has
been made not to proceed with development, properties on care and maintenance and
properties held on retention titles are included in this category if Coal Resources have been
identified, even if no further Valuation, Technical Assessment, delineation or advanced
exploration is being undertaken.
- Development Project: properties for which a decision has been made to proceed with
construction and/or production, but which are not yet commissioned or are not yet operating at
design levels.
- Operating Mines: mineral properties, particularly mines and processing plants that have been
commissioned and are in production.
Table 8.1 presents the various valuation approaches for the valuation of Mineral Assets at the
various stages of exploration and development.
Table 8.1: Suggested valuation approaches according to development status
Valuation Exploration Pre-development Development Production
Approach Projects Projects Projects Projects
Market Yes Yes Yes Yes
Income No In some cases Yes Yes
Cost Yes In some cases No No
Source: VALMIN Code (2015)
In general, these methods are accepted analytical valuation approaches that are in common use
for determining Market Value (defined below) of Mineral Assets, using market-derived data.
The Market Value is defined in the VALMIN Code (2015) as, '… in respect of a mineral asset, the
amount of money (or the cash equivalent of some other consideration) for which the Mineral Asset
should change hands on the Valuation Date between a willing buyer and a willing seller in an arms-
length transaction after appropriate marketing wherein the parties each acted knowledgeably,
prudently and without compulsion.' The term Market Value has the same intended meaning and
context as the International Valuation Standards Council's (IVSC's) term of the same name. This
has the same meaning as Fair Value in RG 111. In the 2005 edition of the VALMIN Code this was
known as Fair Market Value.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 94
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Valuation FINAL
The Technical Value is defined in the VALMIN Code (2015) as '… an assessment of a Mineral
Asset's future net economic benefit at the Valuation Date under a set of assumptions deemed most
appropriate by a Practitioner, excluding any premium or discount to account for market
considerations.' The term Technical Value has an intended meaning that is similar to the IVSC term
Investment Value.
In summary, the various recognised valuation methods are designed to provide an estimate of the
Mineral Asset or project value in each of the various categories of development. In some instances,
a particular Mineral Asset or project may comprise assets, which logically fall under more than one
of the previously discussed development categories.
8.2 Basis of valuation
MCM has developed cashflow models for its Uitkomst Colliery and Makhado Project and has
provided these to BDO and SRK.
In the case of Vele, plant modifications have not been completed and as a consequence, the Vele
coal products cannot be optimised. The potential SSCC product cannot be adequately recovered
and is currently lost to slimes and discards. At the current low coal prices, the thermal coal product
that can be produced from the Vele plant is not economic. As such, mining has temporarily
stopped. Therefore, SRK agreed not to use an income approach and has adopted a Market
Approach using comparable market transactions.
In the case of Uitkomst and Makhado, SRK has reviewed the underlying technical inputs to the
models and provide recommendations to BDO to make adjustments to various technical inputs and
cost assumptions. These recommendations have been modelled by BDO and as a result, in
consultation with BDO, it has been agreed that an Income Approach would not be appropriate to
value Makhado and Uitkomst. This is because the values derived from a DCF approach are lower
than those derived from a Market Approach and BDO and SRK consider it more appropriate to
value it on a highest and best use basis.
In estimating the Market Value of MCM's Mineral Assets as at the Effective Date, SRK has
considered various valuation methods within the context of the VALMIN Code (2015). SRK has
used comparable market transactions as the primary valuation method. To support the comparable
market transaction valuation of the Coal Resources, SRK has used a peer group analysis and the
yardstick method as a crosscheck.
8.3 Previous valuations
The VALMIN Code (2015) requires that an Independent Valuation Report should refer to other
recent valuations or IERs undertaken on the mineral properties being assessed. SRK completed a
valuation on the MCM Mineral Assets in June 2022 and in March 2024. SRK's ISR formed part of
BDO's IER, which was provided to MCM shareholders and commented on the 'fairness and
reasonableness' of a proposed transaction.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 95
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Valuation FINAL
8.4 Valuation of the Coal Resource
8.4.1 Summary of Coal Resource estimates
MCM's Coal Resources that are adjusted for valuation purposes and are classified as adjusted
GTIS Coal Resources in this valuation exercise total 8,314.1 Mt (attributable 6,289.2 Mt), which
accounts for around 96% of the total GTIS Coal Resource of 8,653.3 Mt (attributable 6,559.1 Mt).
The adjusted GTIS Coal Resource estimates are presented in Table 8.2.
Table 8.2: Gross in situ Coal Resources (100% basis)
Total
Coal Measured Indicated Inferred Total
Status Interest attributable
Asset (Mt) (Mt) (Mt) (Mt)
(Mt)
Uitkomst Operation GTIS 15.2 4.0 7.1 26.4 84% 22.1
GTIS 387.3 254.0 116.2 757.5 507.6
1
Makhado Development Fripp Farm 92.0 75.4 42.3 209.7 67% 140.5
Adjusted
295.4 178.6 73.9 547.8 367.0
GTIS
GTIS 146.8 426.9 218.9 792.6 792.6
LP1136 PR2 7.6 69.9 51.0 128.5 128.5
Care and
Vele Contractor 100%
maintenance 0.461 0.460 - 0.921 0.921
ROM
Adjusted
138.7 356.4 167.9 663.1 663.1
GTIS
Advanced 200.3
Mopane GTIS 109.4 125.0 36.2 270.7 74%
exploration
Advanced 301.3
Generaal GTIS 407.2 407.2 74%
exploration
Advanced 6,399.
Chapudi GTIS 6,399.0 74% 4,735.3
exploration 0
658.8 809.9 7,184. 8,653.3 6,559.1
GTIS Resources
6
558.8 664.0 7,091. 8,314.1 6,289.2
Adjusted GTIS Resources
3
Source: MCM Annual Report (MCM, 2023); Makhado Colliery BFS (Minxcon Projects, 2022).
Notes:
1
A village is situated on this farm over the defined Coal Resource and therefore has been excluded.
2
Vele prospecting right LP1136 PR has expired.
8.4.2 Actual transaction
On 1 November 2023, an investor group known as Goldway Capital Investment Ltd (Goldway)
offered to acquire the remaining shares in MCM not already owned by Goldway. On 22 April 2024,
Goldway completed an acquisition of a 35.6% stake in MCM.
Table 8.3 shows the transaction details that imply a value for the attributable Coal Resource of
ZAR1,115.2 M.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 96
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Valuation FINAL
Table 8.3: Actual transaction details as at 22 April 2024
Exchange rate
ZAR:A$
Transaction value of 35.6% A$23.30 M 12.33 ZAR287.25 M
Implied equity value at 100% A$65.26 M 12.33 ZAR804.69 M
Attributable Coal Resource 6,289.2 Mt 6,289.2 Mt
Unit equity value per tonne Coal Resource A$0.0104/t ZAR0.128/t
Implied enterprise value at 100% A$90.4 M 12.33 ZAR1,115.2 M
Unit enterprise value per tonne A$0.0144/t ZAR0.1773/t
Sources: S&P Capital IQ Pro
8.4.3 Comparable transactions
In context, since the departure around 2021 of the major mining companies from coal mining in
South Africa, the intention has been to no longer invest in coal. As such, while there has been a
change in ownership, there has also been limited new investment. The trend among major coal
miners of scaling down their operations in South Africa is a result of numerous factors, not least of
which is the current global focus on environmental, social and governance (ESG) compliance,
which is driving behavioural change in investor and institutional interest. Commercial imperatives
within the global mining sector to ensure enhanced ESG compliance have also increased in recent
years.
Despite this, SRK has selected comparable market transactions as the primary valuation method to
establish a Market Value for MCM's Coal Resources. SRK carried out a search for publicly
available information on market transactions involving similar coal projects in southern Africa. SRK
has not considered transactions from other geographic regions as coal type, coal quality,
infrastructure and local market conditions can all differ vastly and as such are not comparable.
Based on its analysis, SRK has considered 35 transactions involving assets within South Africa
that occurred since 2007 leading up to the Effective Date of this valuation (Appendix A). SRK
considers this a good representative sample of transactions that included some of the asset
currently held by MC Mining such as Chapudi and Vele. Further to this, each transaction was then
indexed according to increasing confidence of coal mineralisation and stage of development. This
is graphically illustrated in Figure 8.1.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 97
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Valuation FINAL
Figure 8.1: South African coal transactions classified
Source: SRK analysis, S&P Capital IQ Pro
Notes: A total of 34 transactions were sorted according to the level of Coal Resource confidence based on stage of
development.
The transaction values (ZAR/t gross in situ resource) were then normalised using the Richards Bay
export coal price as a proxy index to reflect the values in the current South African coal market at
the Effective Date of this valuation. The coal price was indexed to the October 2024 average of
ZAR1,858/t.
The statistics of the population of market transactions are summarised in Table 8.4.
Table 8.4: Comparable market transaction statistics
Low Medium High
Count 10.00 6.00 19.00
Minimum (ZAR/t) 0.04 0.24 1.22
Maximum (ZAR/t) 3.05 3.59 23.41
Average (ZAR/t) 0.98 1.36 4.84
Median (ZAR/t) 0.34 0.56 3.33
25th percentile 0.07 0.46 2.42
75th percentile 1.85 2.22 4.39
Source: SRK analysis
Importantly, while transaction multiples are widely used in valuation, they rely on the assumption
that the reported Coal Resources or Coal Reserves have been appropriately reported and can be
taken at face value. The method assumes that differences in reporting regimes, between different
Competent Persons, resource classification, coal recovery and adopted cut-off grades (which may
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 98
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Valuation FINAL
change between assets and/or companies) do not materially influence the implied multiple. The
method implicitly assumes total recoverability of all coal tonnes, as reliable and accurate data are
generally not disclosed or available around the time of most transactions or for all companies.
Importantly, SRK's implied value calculations are for the purposes of our valuation and do not
attempt to estimate or reflect the coal likely to be recovered as required under the JORC Code
(2012).
SRK's analysis of the implied resource value multiples is based on the reported Coal Resources
involving mainly South African thermal products but also includes a few transactions of
metallurgical coal assets. SRK also recognises that the reasonable prospects for eventual
economic extraction (RPEEE, with the meaning as defined in the JORC Code) based on depth of
coal seams, likely stripping ratios, and structural complexity impact the implied transaction
multiples. Therefore, informing our opinion of the Coal Resource of MCM's assets, SRK has
considered coal confidence, coal resource estimation differences, coal type and reasonable
prospects for eventual economic extraction. SRK also notes that several of the transactions
considered included Coal Reserves (supported by a LOM schedule).
In selecting appropriate multiples for Inferred, Indicated and Measured Resources, SRK has
chosen from the Low, Medium and High subsets (Table 8.3), respectively. Further to this, in each
of the subsets the technical aspect of the coal type is considered in selecting a multiple within the
subsets' range. As an example, coal with poor qualities and low recoveries implies a multiple at the
low end of the range within a subset. Therefore, for all the Inferred Resource at GSP, SRK has
selected a preferred multiple of ZAR$0.04/t (Table 8.4 and Table 8.5), which is the minimum of the
Low subset of the transaction data.
When selecting an appropriate transaction multiple for Uitkomst and Vele, SRK has considered
them as operating and on care and maintenance, respectively. As such, the selected multiple
captures the value of all the plant and equipment required to operate the site net of all expenses
that may include remediation. In the case of Uitkomst, SRK has selected ZAR3.40/t as the
appropriate multiple for the Measured Resources which is slightly above the median of the High
subset of the transaction data.
However, in the case of Vele, SRK has selected a lower multiple for the Measured Resource of
ZAR2.80/t to reflect that operations have temporarily stopped while it re-optimises, given the
current low coal price. ZAR2.80/t is near the 25th percentile of the High subset of the transaction
data.
Based on its comparable transaction analysis (Table 8.5), SRK considers the implied value of the
Coal Resource resides between ZAR1,342.1 M and ZAR2,063.8 M, on an attributable basis.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 99
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Valuation FINAL
Table 8.5: Comparable market transaction valuation
Coal Inferred Indicated Measured Total adjusted Implied value Implied value Implied value Total value % Attributable
Range
asset (Mt) (Mt) (Mt) Resource (Mt) Inferred ZAR/t) Indicated ZAR/t) Measured ZAR/t) (ZAR M) owned value (ZAR M)
Low 0.32 0.43 2.72 45.48 38.21
Uitkomst 7.10 4.02 15.25 26.37 High 0.48 0.65 4.08 68.22 84 57.31
Mid 0.40 0.54 3.40 56.85 47.76
Low 0.29 0.38 2.40 798.71 535.14
Makhado 73.90 178.56 295.36 547.8 High 0.43 0.58 3.60 1,198.07 67 802.71
Mid 0.36 0.48 3.00 998.39 668.92
Low 0.26 0.32 2.24 467.83 467.83
Vele 167.93 356.47 138.74 663.6 High 0.38 0.48 3.36 701.75 100 701.75
Mid 0.32 0.40 2.80 584.79 584.79
Low 0.03 0.32 1.60 216.11 159.92
GSP –
36.20 125.00 109.44 270.7 High 0.05 0.48 2.40 324.53 74 240.15
Mopane
Mid 0.04 0.40 2.00 270.32 200.04
Low 0.03 0.32 1.60 11.40 8.44
GSP –
407.16 - - 407.2 High 0.05 0.48 2.40 21.17 74 15.67
Generaal
Mid 0.04 0.40 2.00 16.29 12.05
Low 0.03 0.32 1.60 179.17 132.59
GSP –
6,399.02 - - 6,399.0 High 0.05 0.48 2.40 332.75 74 246.23
Chapudi
Mid 0.04 0.40 2.00 255.96 189.41
Low 1,718.71 1,342.12
Total
8,313.4 High 2,646.49 2,063.82
(ZAR M)
Mid 2,182.60 1,702.97
Source: SRK analysis
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 100
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Valuation FINAL
8.4.4 Peer group analysis
As a crosscheck of the Market Value derived from the comparable market transaction method,
SRK has considered the Enterprise Values (EVs) per defined Coal Resource of similar listed
companies with defined Coal Resources in South Africa.
There are two companies broadly comparable to MCM listed on the ASX – Terracom Resources
Ltd (TerraCom) and Thungela Resources Limited Ltd (Thungela) (Table 8.6). Both companies own
substantial coal producing assets in South Africa but also have investments in coal producers in
Australia. They are considered geographically diversified and better established producers of coal
in South Africa. As such, TerraCom and Thungela can only provide a top end benchmark value for
MCM.
In 2020, TerraCom purchased Universal Coal Plc comprising a portfolio of coal assets in South
Africa. The company owns and operates the Blair Athol coal mine and has several coal exploration
projects in Australia. TerraCom has a reported 3,170.8 Mt of attributable Coal Resources in both
South Africa and Australia.
Thungela is listed on the JSE and owns interests in and produces its thermal coal from mining
operations in the Mpumalanga Province of South Africa, including Goedehoop Colliery, Greenside
Colliery, Isibonelo Colliery, Khwezela Colliery, Zibulo Colliery, Mafube Colliery and Rietvlei Colliery.
Thungela has an attributable Coal Resource of 870.1 Mt. In August 2023, Thungela completed an
acquisition of the Ensham coal mine in Australia which increased its attributable Coal Resource by
941.6 Mt.
As at 18 October 2024, TerraCom and Thungela traded at multiples of ZAR0.61/t and ZAR4.37/t,
respectively. In selecting an appropriate multiple range, SRK has adopted ZAR0.60/t as the top
end of the range represented by TerraCom's EV ZAR/t multiple and selected ZAR0.20/t as the
lower end of the range.
Table 8.6: Peer group analysis
Attributable Coal
Market cap Enterprise Value
Resources and EV ZAR/t
(ZAR M) (ZAR M)
Reserves (Mt)
TerraCom 1,995.90 1,941.50 3,170.8 0.61
Thungela 16,326.20 7,918.20 1,811.7 4.37
Source: S&P Global Capital IQ Pro,
Note: Market capitalisation and Enterprise Value as at 18 October 2024.
Based on this analysis, SRK has adopted the only two peers as the lower and upper range for the
value of MCM. Applying these multiples to MCM's Coal Resources implies a value of between
ZAR1,257.8 M and ZAR3,773.5 M on an attributable basis, as outlined in Table 8.7.
Table 8.7: Peer group valuation
Attributable Coal Adopted metric Implied value (ZAR M)
Resource (Mt)
Low 6,289.17 0.20 1,257.8
High 6,289.17 0.60 3,773.5
Preferred 6,289.17 0.20 1,257.8
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 101
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Valuation FINAL
The low end of this range (ZAR0.20/t) has been selected as the preferred value of ZAR1,257.8 M.
SRK considers the peer group valuation only as a guide because TerraCom and Thungela differ
from MCM in that they have Coal Resources across geographical regions, and both have large
producing coal mines relative to MCM which only produces less than 0.5 Mt/a. TerraCom and
Thungela produce 7.5 Mt/a and 16.0 Mt/a, respectively. This implies that TerraCom and Thungela
would trade at higher multiples than MCM with strong cash flows and are geographically diverse.
8.4.5 Yardstick
To support the comparable market transaction valuation of the Coal Resources, SRK has used the
yardstick method as a guide. This method was first described by MacArthur (1989) specifically for
gold projects and was based on a percentage of contained value ranging from 0.1% and 3.0%.
This method was further described by Baxter and Chisholm (1990) in estimating the value of the
contained metal.
SRK has modified this method for coal projects and has reduced these percentages to better
reflect in situ coal value based on analysis by both SRK and Edison Investment Research (Edison).
Edison's mining sector report in January 2019 showed that for coal company values as a
percentage of spot coal price is significantly less than 0.5% (Figure 8.2).
Figure 8.2: In situ values versus spot prices, selected metals and minerals
Sources: Edison Investment Research, January 2019
SRK analysed the comparable transaction dataset (Appendix A) and calculated the deal value of
the in situ Coal Resource as a percentage of the coal price at the time of the transactions – 90% of
the values lie within 0.002% and 0.386% with a median of 0.130%.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 102
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Valuation FINAL
Table 8.8: Market transaction in situ values versus spot prices
Statistic Value
Minimum 0.002%
Maximum 0.526%
Average 0.137%
Median 0.130%
5th percentile 0.002%
95th percentile 0.386%
Source: SRK analysis
Based on this analysis, using the yardstick method of valuation, the SRK adopted specified
percentages of the coal price are applied to the defined Coal Resources (Table 8.9).
- Measured Resources – 0.267% to 0.400% of the spot price
- Indicated Resources – 0.135% to 0.267% of the spot price
- Inferred Resources – 0.002% to 0.135% of the spot price.
SRK has adopted the Richards Bay thermal benchmark coal price average for October 2024 at
ZAR1,858/t.
Table 8.9: Yardstick multiples
Value range
Resource % of the spot price
A$/t Low A$/t High
Measured 0.267% to 0.400% 4.97 7.43
Indicated 0.135% to 0.267% 2.50 4.97
Inferred 0.002% to 0.135% 0.04 2.50
Source: SRK analysis
Notes: Used average coal price for October 2024 at ZAR1,858/t.
SRK considers this a generic method and problems lie with different types of coals, geographic
markets, available infrastructure and processing yields. As in this case, Inferred Coal Resources at
GSP are expected to have low processing yields and therefore are considered overvalued. As
such, SRK has applied a yield adjustment which brings values broadly more in line with
comparable market transactions. Despite this, SRK has used the yardstick method only as a guide.
Application of these multiples and adjusting for processing yield to MCM's attributable Coal
Resources implies the value of these resources lies between ZAR1,394.0 M and ZAR7,476.5 M.
SRK notes that this value is approximately 2.6 times that of the values implied by its Comparative
Transactions Analysis. SRK considers that the values implied by the yardstick approach are
generic and do not adequately account for the technical attributes outlined previously. Therefore,
SRK has not selected the values implied by the yardstick method and uses it only as a guide to the
likely valuation range (Table 8.10).
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 103
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Valuation FINAL
Table 8.10: Yardstick valuation of Coal Resources
Total Implied Implied Implied Yield adjusted
Total Attributable
Coal Inferred Indicated Measured adjusted value value value attributable
Range value % owned value
asset (Mt) (Mt) (Mt) Resource Inferred Indicated Measured value
(ZAR M) (ZAR M)
(Mt) (ZAR M) (ZAR M) (ZAR M) (ZAR M)
Low 0.26 10.05 75.75 86.07 72.30 43.38
Uitkomst 7.10 4.02 15.25 26.37 High 17.77 19.96 113.35 151.08 84 126.91 76.14
Mid 9.02 15.01 94.55 118.57 99.60 59.76
Low 2.75 446.88 1,467.40 1,917.03 1,284.41 513.76
Makhado 73.90 178.56 295.36 547.8 High 184.95 887.12 2,195.61 3,267.68 67 2,189.34 875.74
Mid 93.85 667.00 1,831.51 2,592.35 1,736.88 694.75
Low 6.24 892.12 689.28 1,587.63 1,587.63 508.04
Vele 167.93 356.47 138.74 663.6 High 420.28 1,770.98 1,031.33 3,222.60 100 3,222.60 1,031.23
Mid 213.26 1,331.55 860.30 2,405.11 2,405.11 769.64
Low 1.35 312.83 543.69 857.87 634.83 253.93
GSP –
36.20 125.00 109.44 270.7 High 90.60 621.02 813.51 1,525.12 74 1,128.59 451.44
Mopane
Mid 45.97 466.93 678.60 1,191.50 881.71 352.68
Low 15.13 - - 15.13 11.20 4.48
GSP –
407.16 - - 407.2 High 1,019.00 - - 1,019.00 74 754.06 301.62
Generaal
Mid 517.06 - - 517.06 382.63 153.05
Low 237.84 - - 237.84 176.00 70.40
GSP –
6,399.02 - - 6,399.0 High 16,014.67 - - 16,014.67 74 11,850.85 4,740.34
Chapudi
Mid 8,126.25 - - 8,126.25 6,013.43 2,405.37
Low 4,701.58 3,766.37 1,394.00
Total
8,314.1 High 25,200.14 19,272.35 7,476.51
(ZAR M)
Mid 14,950.86 11,519.36 4,435.25
Source: SRK analysis
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 104
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Valuation FINAL
8.5 Exploration potential value
Given the valuation methods adopted and the multiples assumed for valuation purposes, SRK has
elected in this instance not to assign any additional value to the exploration potential associated
with MCM's mineral tenures in South Africa.
In all MCM's mining rights, the geology and the extent of the coal mineralisation is well understood.
In SRK's opinion, there is limited potential for the discovery of new coal deposits at economically
extractable depths within the current mining rights. However, additional exploration will be required,
particularly drilling, to increase the confidence and upgrade the GSP Coal Resources from the
Inferred category. This should add value to the current coal assets as the projects advance to
increasing stages of development.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 105
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Valuation summary FINAL
9 Valuation summary
In forming its overall opinion regarding the Market Value for each of the coal assets, SRK has
considered the market-based methods, such as comparable transaction analysis as its primary
valuation method while using peer group analysis and the yardstick approach as secondary guides.
An actual transaction was also considered that involved a consortium of investors acquiring 35.6%
of MCM at an implied value of ZAR1,115 M.
In selecting a range in which the market is likely to pay, SRK considers the actual implied
transaction value of ZAR1,115 M as the low end of the of the range, with the comparable
transaction analysis high of ZAR2,064 M to be the high end of the range. Table 9.1 summarises
SRK's opinion regarding the current Market Value range of MCM's Mineral Assets.
In selecting a preferred value, SRK has considered the selected value range and adopted the
midpoint of ZAR1,589 M as the preferred Market Value as we have no preference for either end of
the range.
On the above basis, SRK considers the market is likely to pay between ZAR1,115 M and
ZAR2,064 M, with a preferred value of ZAR1,589 M for the attributable Coal Resources held by
MCM (Table 9.1).
In adopting its overall values, SRK considers that any value associated with any exploration
potential of the surrounding tenures has been captured in the value attributed to the Coal
Resources, that were valued using comparable market transactions involving coal projects with
both defined resources and exploration upside.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 106
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Valuation summary FINAL
Table 9.1: Valuation summary of Coal Resources
Attributable Coal Attributable Low Attributable High Attributable Preferred
Coal asset Range
Resource (Mt) (ZAR M) (ZAR M) (ZAR M)
Actual transaction* - - 31.27
Market 38.21 57.31 47.76
Uitkomst 22.1
Yardstick 43.38 76.14 59.76
Selected 31.27 57.31 44.29
Actual transaction* - - 438.04
Market 535.14 802.71 668.92
Makhado 367.0
Yardstick 513.76 875.74 694.75
Selected 438.04 802.71 620.37
Actual transaction* - - 382.95
Market 467.83 701.75 584.79
Vele 663.1
Yardstick 508.04 1,031.23 769.64
Selected 382.95 701.75 542.35
Actual transaction* - - 130.99
Market 159.92 240.15 200.04
GSP – Mopane 200.3
Yardstick 253.93 451.44 352.68
Selected 130.99 240.15 185.57
Actual transaction* - - 7.89
Market 8.44 15.67 12.05
GSP – Generaal 301.3
Yardstick 4.48 301.62 153.05
Selected 7.89 15.67 11.78
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 107
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Valuation summary FINAL
Attributable Coal Attributable Low Attributable High Attributable Preferred
Coal asset Range
Resource (Mt) (ZAR M) (ZAR M) (ZAR M)
Actual transaction* - - 124.03
Market 132.59 246.23 189.41
GSP – Chapudi 4,735.3
Yardstick 70.40 4,740.34 2,405.37
Selected 124.03 246.23 185.13
Actual transaction - - 1,115.18
Market 1,342.12 2,063.82 1,702.97
Total 6,289.2 Peer group 1,257.83 3,773.50 1,257.83
Yardstick 1,394.00 7,476.51 4,435.25
Selected 1,115.18 2,063.82 1,589.50
Adopted value Adopted 1,115.18 2,063.82 1,589.50
Source: SRK analysis, S&P Capital IQ Pro
Notes: * The actual transaction value of ZAR1,115 M has been proportionally allocated to individual assets based on the market transaction values.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 108
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Valuation summary FINAL
9.1 Discussion on valuation ranges
In assigning its valuation range and preferred value, SRK is mindful that the valuation range is also
indicative of the uncertainty associated with exploration assets.
The wide range in value is driven by the confidence limits placed around the size and quality of the
mineral occurrences assumed to occur within each project area. Typically, this means that as
exploration progresses and a prospect moves from an early to advanced stage prospect, through
Inferred, Indicated or Measured Resource categories to Coal Reserve status, there is greater
confidence around the likely size and quality of the contained mineral and its potential to be
extracted profitably.
Estimated confidence of plus or minus 60% to 100% or more are not uncommon for exploration
areas and are within acceptable bounds given the level of uncertainty associated with early to
advanced stage exploration assets. By applying narrower confidence ranges, one is actually
implying a greater degree of certainty regarding these assets than may be the case in reality.
The GSP tenements are exploration assets in the early to advanced stages of assessment.
Therefore, there are significant uncertainties around their attributes. This results in a wide valuation
range. Where possible, SRK has endeavoured to narrow its valuation range. In recognising this
wide range, SRK has also indicated a preferred value for each project.
The preferred value can be the midpoint of the range unless there is a specific reason to choose a
bias to either side of the midpoint, within the range.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 109
Independent Specialist Report on the Mineral Assets of MC Mining Limited
Closure FINAL
Closure
This report, Independent Specialist Report on the Mineral Assets of MC Mining Limited, was prepared by
Shaun Barry
Principal Consultant
and reviewed by
Gerard McCaughan
Principal Consultant
All data used as source material plus the text, tables, figures, and attachments of this document have been reviewed and prepared
in accordance with generally accepted professional engineering and environmental practices.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 110
Independent Specialist Report on the Mineral Assets of MC Mining Limited
References FINAL
References
ASX:MCM announcement dated 30 June 2023. Makhado Project – Significant Increase in Mine Life and Coal
Reserves.
AusIMM, 2011. Monograph 27 – Cost Estimation Handbook, second edition.
Baxter, J L and Chisholm, J M, 1990. Valuation reflections, The AusIMM Bulletin, 3 May 1990, pp 22–26.
Cabanga Environmental, 2017. First (1st) Quarter Water Monitoring Report.
Deloitte, 2016. Independent Competent Persons Report on Coal of Africa Limited's Greater Soutpansberg Projects,
prepared for Coal Africa Limited and Peel Hunt LLP, Venmyn Deloitte, 28 January 2016.
Denge, E, 2021. The Geology and Geochemistry of the Madzaringwe Formation in the Vele Colliery, Tuli Coalfield,
Limpopo Province, South Africa, MSc thesis (unpublished).
Department of Mineral Resources (DMR), 2016. Amendment/Variation of the mining right KZN 30/5/1/2/2/94MR-
Protocol NO 08/2013 to include various properties subject to KZN 30/5/1/2/2/21MR Protocol NOS
659/2005 AND 2072 in the magisterial district of Utrecht.
Department of Mineral Resources (DMR), 2016. Mining Right for the Makhado Project comprising farms Windhoek
847MS, Mutamba 668MS, Tanga 849MS, Daru 848MS, Fripp 645MS, Lukin 643MS and Salaita 188MT.
Department of Mineral Resources and Energy (DMRE), 2021. Notice of intent to issues compliance notice.
Department of Water and Sanitation (DWS), 2010. Licence No.: 21181310/1 issued to Brandywine Valley
investments: Wykom Siding.
Department of Water and Sanitation (DWS), 2022a. Licence No.: 11/V31D/CGI/11517 issued to Uitkomst (PTY)
Ltd – Wykom Siding.
Department of Water and Sanitation (DWS), 2011. Licence No: 07N308/AG/357 issued to Brandywine Valley
Investments: Uitkomst Colliery.
Department of Water and Sanitation (DWS), 2022b. Licence No.: 11/V32B/ACGIJ/11507 issued to Uitkomst
(PTY) Ltd – Uitkomst Colliery.
Elemental Sustainability, 2019. Annual External Water Use Licence Compliance Audit Report compiled for
MCMining Limited Limpopo Coal Company – Vele Colliery.
Elemental Sustainability, 2021a. Uitkomst Colliery – Quarterly Water Monitoring Report 2021 Q3 (September 2021
– November 2021).
Elemental Sustainability, 2021b. Wykom Siding – Quarterly Water Monitoring Report 2021 Q3 (September 2021 –
November 2021).
Elemental Sustainability, 2021c. External Water Use Licence Compliance Audit Report – October 2021.
Elemental Sustainability, 2021d. Annual External Environmental Management Programme – Performance
Assessment Review.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 111
Independent Specialist Report on the Mineral Assets of MC Mining Limited
References FINAL
Elemental, 2024a. Annual update of the quantum for closure-related financial provision for Vele Colliery, Limpopo
Province 2023–2024 for MC Mining Limited, prepared by Elemental Sustainability Pty Ltd, June 2024.
Hancox, P J and Götz, A E, 2014. South Africa's Coalfields – a 2014 Perspective, in Int. J. of Coal Geology,
132:170–254.
Jacana Environmentals cc, 2013a. Greater Soutpansberg Chapudi Project Environmental Impact Assessment and
Environmental Management Programme.
Jacana Environmentals cc, 2013b. Greater Soutpansberg Mopane Project Environmental Impact Assessment and
Environmental Management Programme.
Jacana Environmentals cc, 2014. Greater Soutpansberg Generaal Project Environmental Impact Assessment and
Environmental Management Programme.
MacArthur, N A, 1989. Valuation of Mineral Prospects in New Zealand, in Proceedings of The Australasian Institute
of Mining and Metallurgy, 292(9), pp 19–21 (Australasian Institute of Mining and Metallurgy: Melbourne).
Malaza, N, 2014. Basin Analysis of the Soutpansberg and Tuli Coalfields, Limpopo Province of South Africa, PhD
thesis (unpublished).
MC Mining Ltd, 2020. Vele Colliery Integrated Water and Waste Management Plan, 20 October 2020. Document
number VELE/EMS/E10-IWWMP/2009.
MC Mining Ltd, 2021a. MC Mining Annual Report 2021. Accessed at
https://www.mcmining.co.za/component/jdownloads/send/99-2021/1657-mc-annual-report-2021.
MC Mining Ltd, 2023. MC Mining Annual Report 2023. Accessed at Annual reports - MCMining Limited.
MC Mining Ltd, 2021b. Letter dated 1 June 2021 and entitled: Notification of commencement of activities
authorized in terms of the environmental authorisations ref 12/1/9/2-V3 and DMRE LP 30/5/1/2/2/204MR).
MC Mining Ltd, 2018. MC Mining Limited Contractor Management Pack. Document No. MCM/SSD/E10-CMP/2018.
MC Mining Ltd, 2019. Makhado Colliery Information Memorandum.
MC Mining Ltd, 2022. MCM website, accessed on 19 May 2022
(https://www.mcmining.co.za/sustainability/environment).
Minxcon Consulting, 2017. Summary of technical Review 2017.
Minxcon Consulting, 2017. Independent Competent Persons Report on the Uitkomst Colliery, KwaZulu Natal
Province, South Africa (Uitkomst CPR).
Minxcon Projects (Minxcon), 2022a. Baobab Mining and Exploration (Pty) Ltd, Makhado Colliery Bankable
Feasibility. Study Chapter 9. Environmental and Mine Closure. Report Reference M2021_038a BFS27.
Minxcon Projects (Minxcon), 2022b. Baobab Mining and Exploration (Pty) Ltd, Makhado Colliery Bankable
Feasibility. Report Reference M2021_038a BFS.
Minxcon Projects, 2022. Makhado Colliery Bankable Feasibility Study (Makhado BFS).
No author. Note dated 2020/04/20 saved as '06.04.05.02 20200420_Note for the Uitkomst DD_SLP.pdf. 1pp.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 112
Independent Specialist Report on the Mineral Assets of MC Mining Limited
References FINAL
No author. Note dated April 2020 saved as 06.04.01.06 202004 - Mining Right Renewal Update.pdf. 1pp.
Skyside South Africa (Skyside), 2021. Monthly Dust Deposition Monitoring July 2021. Report reference EN264
41.647 M_MAX.
SLR, 2020. KZN30/5/1/2/2/94MR & KZN30/5/1/2/2/21 MR Addendum NO.1: Mining Right for CoAL: Consolidation
of Environmental Management Programmes: Blue Falcon 232 Trading (PTY) LTD.
Sparrow, J, 2012. Soutpansberg, the Forgotten Basin. Fossil Fuel Foundation of Africa Limpopo Conference
presentation.
Uitkomst Colliery, 2022. Wykom Siding Annual WUL Internal Audit.
Uitkomst Colliery, 2022. Uitkomst Colliery Annual WUL Internal Audit.
VBKOM, 2016. Independent Competent Person's Report for the Vele Colliery operated by Coal of Africa Limited in
the Limpopo Province, South Africa, VBKom Consulting Pty Ltd, 15 January 2016.
VBKOM, 2017. Independent Competent Person's Report for the Vele Colliery operated by Coal of Africa Limited in
the Limpopo Province, South Africa.
Venmyn Deloitte, 2012. Independent Geologist Specialist Report on the Principal South African Operating and
Non-Operating Mineral Assets of Coal of Africa Limited.
Venmyn Deloitte, 2016. Independent Competent Persons Report on Coal of Africa Limited's Greater Soutpansberg
Projects, prepared for Coal of Africa Limited and Peel Hunt LLP.
SRK CONSULTING (AUSTRALASIA) PTY LTD 27 NOVEMBER 2024 SB/GMCC 113
Appendix A Comparable market transactions
South Africa comparable coal market transactions
Confidence in Coal Implied multiple Normalised implied
Date Target Buyer Seller
Resource (ZAR/t) multiple (ZAR/t)
07/11/2007 Isicebi Carbon Mining Pty Ltd Comdek Limited Lukale Mining Company (Pty) Ltd and Umnotho Low 0.04 0.14
06/08/2008 Vlakplaats Coal Project Universal Coal PLC Universal Pulse Trading 132 Pty Ltd Low 1.97 3.05
11/09/2009 Waterberg Coal Projects Firestone Energy Ltd Sekoko Resources Pty Ltd Low 0.13 0.53
29/11/2010 Vlakplaats Coal Project Korea Resources Corp Continental Coal Ltd Low 0.79 2.03
29/11/2010 Chapudi Coal Project Coal of Africa Ltd Rio Tinto PLC, Kwezi Mining Pty Ltd Low 0.51 1.31
27/01/2011 Cgynus property Universal Coal PLC Private Low 0.02 0.05
27/03/2012 Grootegeluk West Coal Project Resource Generation Limited Exxaro Resources Limited Low 0.03 0.08
20/10/2015 South Arnot project Universal Coal PLC Exxaro Resources Limited Low 0.92 2.53
07/05/2008 Holfontein coal project Lachlan Star Ltd Coal of Africa Ltd Medium 1.78 0.06
14/07/2009 Vele Project Coal of Africa Ltd Limpopo Coal Co Proprietary Ltd Medium 0.11 0.04
12/12/2012 Firestone Energy Ltd Ariona Co SA Sekoko Resources Pty Ltd Medium 0.10 3.59
02/02/2017 Keaton Energy Holdings Limited Wescoal Holdings Limited Keaton Energy Holdings Limited Medium 1.66 0.43
30/06/2017 Eloff Mining Company (Pty) Ltd Universal Coal PLC Canyon Springs Investments 80 (Pty) Ltd Medium 0.32 0.24
27/11/2017 Eloff Mining Company (Pty) Ltd Universal Coal PLC Manyeka Coal Mines (Pty) Ltd Medium 0.37 2.77
01/09/2018 Eloff Mining Company (Pty) Ltd Universal Coal PLC South32 Limited Medium 0.03 0.57
01/04/2010 Rietkuil Sable Mining Africa Ltd Unknown Company or Entity – 30.0% High 1.36 0.54
23/04/2010 Rietkuil Sable Mining Africa Ltd London Mining Plc – 27.5% High 0.91 3.86
11/07/2012 Moabsvelden Coal Project Thebe Investment Corporation Xceed Resources Ltd High 0.94 2.59
03/02/2014 New Clydesdale Universal Coal PLC Exxaro Resources Limited High 3.12 2.42
27/06/2014 Leeuw Mining and Exploration Proprietary Limited Keaton Energy Holdings Limited JPI Leeuw and Associates Proprietary Limited High 1.48 6.79
28/07/2014 Total Coal South Africa Ltd Exxaro Resources Limited Total S.A. High 3.24 3.48
09/01/2015 Continental Coal Limited (South Africa) Investors group Continental Coal Limited High 1.53 7.89
08/06/2015 Penumbra Coal Mine ICHOR Coal NV Continental Coal Limited High 3.93 4.14
Leeuw Mining & Exploration Pty Ltd/ 9.78
15/02/2016 Bayete Energy Resources (Pty) Ltd Keaton Energy Holdings Limited High 2.02
Amalahle Exploration Pty Ltd
12/09/2016 South African Coal Mining Holdings Limited JSW Energy Limited Shareholders of South African Coal Mining Holdings Ltd High 1.25 4.74
01/08/2018 New Largo project Seriti Resources Proprietary Limited Anglo American High 1.99 2.43
30/08/2018 Mooiplaats colliery Undisclosed MC Mining High 2.98 2.66
12/11/2018 North Block Complex Universal Coal PLC Exxaro Resources Limited High 0.87 3.99
12/12/2018 Tegeta Exploration and Resources Proprietary Limited Project Halo Oakbay Investments Proprietary Limited High 3.11 1.25
22/08/2019 South32 SA Coal Holdings Proprietary Limited Seriti Resources Proprietary Limited South32 Limited High 0.60 4.27
02/10/2019 Mbuyelo Coal operations Investors group ICHOR Coal NV High 12.67 1.22
25/03/2020 Universal coal Plc Terrecom Resources Limited Universal coal Plc High 1.17 23.41
16/02/2021 Wescoal Holdings Limited RBFT Investments Proprietary Limited Wescoal Holdings Limited High 1.26 1.94
09/04/2021 Exxaro Coal Central Proprietary Limited Overlooked Colliery Proprietary Limited Exxaro Resources Limited High 2.19 1.91
Source: S&P Global, SRK analysis
1300 138 991 AUDIT • TAX • ADVISORY
www.bdo.com.au
NEW SOUTH WALES
BDO Corporate Finance Australia Pty Ltd ABN 70 050 038 170 AFS Licence No 247420 is a
NORTHERN TERRITORY member of a national association of independent entities which are all members of BDO
Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO
Corporate Finance Australia Pty Ltd and BDO Australia Ltd are members of BDO
QUEENSLAND International Ltd, a UK company limited by guarantee, and form part of the international
BDO network of independent member firms. Liability limited by a scheme approved
SOUTH AUSTRALIA under Professional Standards Legislation.
TASMANIA
VICTORIA
WESTERN AUSTRALIA
ANNOUNCEMENT 28 August 2024
KINETIC DEVELOPMENT GROUP TO INVEST US$90 MILLION IN MC MINING LIMITED
MC Mining Limited (MC Mining or the Company) is pleased to announce that the Company has
reached an agreement with Hong Kong Stock Exchange (HKSE} main board listed Kinetic Development
Group Limited (KDG) (1277.HK} the terms of which provide that KDG (or its designee) will subscribe,
in two tranches, for a total of 51% of the post transaction issued share capital of MC Mining.
The proposed investment by KDG will not only advance MC Mining's flagship Makhado steelmaking,
hard coking coal project into production, but is also expected to accelerate the broader strategy of
the group to develop its various tenements in the Vhembe region of Limpopo Province, including the
Greater Soutpansberg Projects (GSP) and the Vele Aluwani Colliery (Vele). KDG is an integrated coal
mining and trading group incorporated in the Cayman Islands with extensive operational experience
and expertise, and a successful history of production from its assets that it operates in the
autonomous regions of Inner Mongolia and Ningxia, China for over a decade.
Under the terms of the agreement, KDG will subscribe for an initial 13.04% of MC Mining for an
aggregate consideration of US$12,970,588 and implied price per share of US$0.2089 1 (at the
prevailing exchange rates, AU$0.3083 2 or ZAR3.72.06 1 per share} which subscription shall be effected
no later than 5:00 pm Hong Kong Time on 4 September 2024, subject to the satisfaction of certain
conditions outlined below. The second subscription for the remaining aggregate US$77,029,412 will
be effected within seven (7) business days of the fulfilment or waiver of the conditions precedent
applicable to that subscription including obtaining shareholder approval at an Extraordinary General
Meeting (EGM) and receiving all relevant regulatory approvals.
1 Based on the number of MC Mining shares expected to be to be issued on first closing
2 Financial times cross rates as at 09:30 British Standard Time, 26 August 2024
WEB WWW.MCMINING.CO.ZA EMAIL ADMINZA@MCMINING.CO.ZA
AU Block Atcode. Suite 32tt. level 3, 96 Elizobeth Street, Melbourne. Victoria, 3000, Austtolio Tel •611 9903 n50
ZA Ground Floo<. Greystone Building. Fourv«Jys Gott Pork. Roos Street, fourv«Jys. 2191 Tel •27 10 003 8000
Interim Choir-man Mothews $enosi Interim Managing OT rector & Chief Executive Officer Yi (Chris-tine) He
Non-H.ecutiv• directors An Chee Sin Zhen (Brion) He. Oougtos: Abrohom$
Date: 20-12-2024 07:10:00
Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
