MC Mining (LSE:MCM) (the new name of Coal of Africa) has announced it has signed a sale and purchase agreement for the coal that will be produced at its Makhado coal project in South Africa. The first phase of the mine is expected to yield 3 million tonnes of recovered coal, which should result in about 2 million tonnes of ROM coal to be sold, after undergoing initial processing. This will be shipped to the Limpopo plant resulting in a final product of 570,000 tonnes of (export quality) thermal coal and 540,000 tonnes of coking coal (which currently still trades at approximately US$200/t). The sales of the thermal coal will be linked to the API4-index, and that type of coal was trading at in excess of US$90/t as of the end of last year.
The next step for MC Mining will be to secure the eyed $20M in debt funding to initiate the 9 month construction period. With the offtake agreement signed, lenders should be much more comfortable to provide the debt on more acceptable terms.
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The author has no position in MC Mining. Please read the disclaimer
