MC MINING LIMITED - MC Mining enters into US$9.94 million Unsecured Convertible Promissory Note Funding Arrangements

Decision framework

Current stance: Filing Neutral

Evidence from the filing

• The company has secured US$9.94 million in funding through a Promissory Note Program, providing necessary liquidity to advance the construction and commissioning of the flagship Makhado hard coking coal project.

  “The proceeds of the Promissory Note Program will be applied principally towards the continued construction and commissioning of the Company's flagship Makhado hard coking coal project in the Limpopo Province of South Africa (the Makhado Project) as set out in more detail below.”

• The funding is provided by existing major stakeholders, Kinetic Development Group (KDG) and Eagle Canyon, signaling continued confidence and financial alignment from the company's primary shareholders.

  “MC Mining Limited (ASX/JSE: MCM) (MC Mining or the Company) is pleased to announce that the Company has entered into binding agreements with each of Kinetic Development Group Limited (KDG), the Company's controlling shareholder, and Eagle Canyon International Group Holding (Hong Kong) Limited (Eagle Canyon), a significant minority shareholder of the Company”

• Shareholders representing over 25% of voting shares have indicated their intention to vote in favour of converting the debt into equity at a fixed conversion price of US$0.2089, reducing future cash outflow risks.

  “In this connection, MC Mining is pleased to confirm that it has received voting intention statements from shareholders representing in excess of 25% of MC Mining's voting shares that they presently intend to vote in favour of all resolutions put to shareholders seeking approval to permit the conversion, in lieu of a cash payment of the same amount, of the total amount due and payable to KDG under the Promissory Note Program on the Maturity Date into new MC Mining shares at the conversion price of US$0.2089”

• The transaction was overseen by an Independent Board Committee (IBC) to ensure governance integrity, providing assurance to minority shareholders regarding the terms of the capital arrangement.

  “The negotiation, evaluation and recommendation of the Promissory Note Program has been overseen, on behalf of the Board, by an Independent Board Committee (IBC) constituted for that purpose, comprising Dr Steele West (Non-Executive Director, as Chairman of the IBC) and Mr Mathews Senosi (Non-Executive Director, as a member of the IBC), each of whom is independent of KDG, Eagle Canyon and their respective affiliates.”

• The 12-month maturity profile creates a near-term refinancing or conversion pressure, limiting the company's financial flexibility if the Makhado Project faces further commissioning delays.

  “Each note will mature, and be repayable in full (to the extent not converted in accordance with its terms), on the date that is twelve (12) months from the date funds were first received by the Company from the relevant investor (Maturity Date).”

• The requirement for shareholder and regulatory approvals for the conversion mechanism introduces execution risk, as the company must secure sufficient support to avoid a liquidity-straining cash repayment.

  “The investor's right of conversion is conditional upon, among other things, the receipt by the Company of all necessary shareholder and regulatory approvals”

• The notes carry a floating interest rate of the Reserve Bank of Australia's medium business loan rate plus a 3.00% margin, compounded monthly, adding an expensive carrying cost if the debt is not converted.

  “Interest will accrue on the outstanding principal amount of each note at a rate equal to the aggregate of (i) the Reserve Bank of Australia's publicly quoted outstanding business loan rate for medium business, and (ii) a margin of 3.00% per annum, compounded monthly in arrears based on a 365-day year.”

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