Our opinion on the current state of MCZ

MC Mining (previously "Coal of Africa") (MCZ) operates as a small metallurgical coal-mining company primarily focused on its single producing mine, Uitkomst. In addition to Uitkomst, the company is actively developing several projects including the Makhado project, the Vele colliery, and MbeuYashu. Among these, the Makhado project stands out as the flagship operation situated in the Limpopo province. This opencast mine boasts a projected lifespan of 16 years with the potential for extension.

A significant milestone for the Makhado project was reached in January 2019 with the announcement of the acquisition of surface rights, crucial for its viability. Production at Makhado is anticipated to commence by the end of 2020, aiming to produce 800,000 tons of hard coking coal and 1 million tons of export thermal coal. This acquisition substantially reduces risks associated with the project, enhancing its attractiveness as an investment opportunity.

To support the Makhado project, the Industrial Development Corporation (IDC) has provided R245 million in funding, yet an additional R530 million is still required. The company holds a 69% stake in Baobab Mining and Exploration, the entity that owns the Makhado project.

In its financial results for the six months ending 31st December 2023, MC Mining reported a remarkable 80% increase in revenue. However, the company experienced a headline loss of 145c (US) per share, a significant increase from the loss of 50c in the previous period. Despite challenging international thermal coal prices, Uitkomst Colliery delivered encouraging results, generating revenue of $16.3 million and operating cash flows of $5.1 million for the period.

From a technical perspective, the share price of MC Mining exhibited a spike between July and September 2022, followed by a subsequent decline to lower levels. As a volatile commodity share, MC Mining faces inherent risks associated with mining exploration and development, coupled with high debt levels. On average, approximately R280,000 worth of shares change hands each day, indicating relatively low liquidity in the market for this stock. Investors should carefully consider these factors before making investment decisions.