First Makhado coal off-take agreement secured

Date: 01 November 2018 By: Andries van Zyl

MC Mining confirmed the conclusion of their first off-take agreement for hard coking coal at their Makhado Project just north of the Soutpansberg this week.

In a press release issued on Tuesday, the mining company said that the coal purchase agreement was reached between a subsidiary of theirs, Baobab Mining and Exploration (Pty) Ltd (Baobab), and Huadong Coal Trading Center Co (HDCTC), a Chinese state-owned enterprise and a subsidiary of the Chinese Forestry Group Corporation.

According to the three-year take-off agreement, the Makhado Project will have to supply a minimum of 400 000 tonnes of hard coking coal per annum to the HDCTC. That is more than half of the Makhado Project’s annual production of 800 000 tonnes of hard coking coal. Apart from the expected 800 000 tonnes of hard coking coal annually, the Makhado Project will also produce between 900 000 and 1 000 000 tonnes of export-quality thermal coal. “The agreement confirms the quality of the Makhado hard coking coal and international demand for the product and represents another significant step in the development of the Makhado Project, which will generate significant employment opportunities in the Limpopo Province,” reads MC Mining’s press release.

Under the terms of the agreement, the first supply of hard coking coal is due 18 months after construction of the Makhado Project commences and is subject to several conditions. This includes Baobab’s confirming by 1 April 2019 that it has secured enough funding for capital, mining and operations at the Makhado Project, extendable by 12 months. Another condition is the commencing of site works at the Makhado Project by 30 June 2020. The deal is also subject to the two parties’ obtaining all the necessary internal and regulatory approvals.

According to MC Mining, it is envisaged that the coal will be sold free-on-board at the Matola Terminal in Maputo, Mozambique. It is anticipated that the balance of Makhado’s coking coal production (not sold to HSCTC) will be sold domestically.

“The signing of the first hard coking coal agreement is a significant step for Makhado, reaffirming its world-class coal qualities and international appetite for this type of coking coal,” says MC Mining CEO Mr David Brown in the press release.

Brown says that South Africa is a traditional producer of thermal coal with no significant hard coking coal being produced currently, which results in producers’ having to import the commodity. “Makhado’s coking coal has the necessary attributes to replace some of these imports, whilst the development of the project will generate employment opportunities in the Limpopo Province and make a positive contribution to the national balance of payments,” says Brown. “We are currently progressing negotiations with other potential domestic customers for the balance of the Makhado hard coking coal, positioning MC Mining as South Africa’s pre-eminent producer of high-grade metallurgical coal,” says Brown.

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Andries van Zyl

Andries joined the Zoutpansberger and Limpopo Mirror in April 1993 as a darkroom assistant. Within a couple of months he moved over to the production side of the newspaper and eventually doubled as a reporter. In 1995 he left the newspaper group and travelled overseas for a couple of months. In 1996, Andries rejoined the Zoutpansberger as a reporter. In August 2002, he was appointed as News Editor of the Zoutpansberger, a position he holds until today.

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