Our opinion on the current state of MCZ

MC Mining (previously "Coal of Africa") (MCZ) is a small metallurgical coal-mining company with a single producing mine (Uitkomst). Aside from Uitkomst, the company is developing the Makhado project, the Vele colliery and MbeuYashu. The Makhado project is the company's flagship operation in the Limpopo province. It is an opencast mine with a life of 16 years and the potential to be extended. In January 2019, the company announced the acquisition of surface rights which will make the Makhado project viable. Production is now expected to commence at the end of 2020 and the mine is expected to produce 800 000 tons of hard coking coal and 1 million tons of export thermal coal. This acquisition has changed the prospects for MC Mining dramatically and the share price jumped to 950c as a result in the 2018 year, after which it has been drifting downwards since January 2019 to levels around 154c. The Makhado purchase improves the risks substantially and makes this into a viable investment. The IDC has provided R245m for the project, but a further R530m is still needed. The company owns 69% of Baobab Mining and Exploration which owns the Makhado project. In its results for the year to 30th June 2023 the company reported an after-tax loss of $4,4m compared with a loss of $20,8m in the previous year. The company said, "...depreciation and amortisation decreased by 23% to $2.0 million (FY2022: $2.6 million), share based payment expense increased by 20% to $0.9 million (FY2022: $0.8 million), no impairment expense in FY2023 (FY2022: $14.9 million). Revenue for the Period increased by 91% to $44.8 million (FY2022: $23.5 million) and cost of sales increased by 96% to $41.2 million (FY2022: $21.0 million)". In a report on the 3 months to 30th September 2023 the company reported run-of-mine coal production from Uitkomst up 10% on the same quarter in the previous year and Uitkomst sold 100449 tons of coal during the quarter. The company said, "Thermal coal prices continued to decline, averaging US$109/t in the quarter compared to US$115/t in Q4 FY2023 and US$325/t in Q1 of FY2023. Premium steelmaking hard coking coal (HCC) prices remained elevated, averaging US$258/t in the quarter (FY2023 Q1: US$250/t); and • Available cash and facilities of US$5.1 million (FY2023 Q4: net cash balance of US$8.8 million)". Technically, the share has spiked up between July and September 2022 before falling back again to lower levels. This remains a loss-making commodity share with about R61 000 worth of shares changing hands on average each day, high debt levels and all the risks of mining exploration and development.