Sharing the riches
Coal of Africa Limited is committed to helping preserve and protect the local environment, as well as developing the communities in which it operates, as Andrew Pelis found out from chief operations officer Riaan van der Merwe.
South Africa has long held an enviable reputation for its richness in minerals and ores, which have made a strong contribution to the history and development of the country. Today, there is a new player in the coal mining sector, armed with strong investors, an experienced team and a clear strategy, ensuring that more people will be able to enjoy the benefits of South AfricaÔÇÖs natural resources.
ÔÇ£Our duty of care to our neighbours is linked to our operational business objectives and is an integral part of our approach to environmental and corporate responsibility,ÔÇØ explains chief operations officer Riaan van der Merwe.
Johannesburg-based Coal of Africa Limited is primarily focused on the acquisition, exploration and development of thermal and metallurgical coal projects in South Africa. The company has its origins in Western Australia, where its forerunner Golden Valley Mines was incorporated almost 30 years ago.
By 2005, the business had sought a listing on the Alternative Investment Market (AIM) in the UK, a move designed to help expand its shareholder base. A further listing on the Johannesburg Stock Exchange (JSE) towards the end of 2006 afforded the company an opportunity to expand its interests in South Africa through a series of acquisitions.
Already on board by this time was metals processor the Nimag Group of Companies, which comprises three subsidiaries engaged principally in the manufacture and distribution of nickel magnesium alloys, ferro-silicon magnesium alloys and metal fibres.
As a result of its strategic acquisitions, Coal of Africa has moved its focus from being a gold, platinum and base metals exploration company to becoming the coal mining and metals processing business it is today.
A strong investor base has also helped the company to attract a top team of mining experts. Just over a year ago, van der Merwe joined the team as chief operations officer after many years with Anglo Coal, part of the Anglo American group. ÔÇ£The team we have in place has a very entrepreneurial spirit,ÔÇØ van der Merwe comments. ÔÇ£We tend to focus on broader issues. I enjoyed working for Anglo, but the new prospect offered by Coal of Africa looked exciting and I felt it was time for a change. It has been a great opportunity to get involved in a smaller space and to be part of growing a new company.ÔÇØ
He explains that the companyÔÇÖs focus to date has been largely around exploration as it establishes a firm foothold in a competitive marketplace. ÔÇ£We are a company exploring and establishing coal projects around South Africa and most of the prospecting rights were already in place before I joined the company in August last year.
ÔÇ£Several of the prospects had been explored in the past and the coking coal project at Vele (in the Limpopo province) was previously examined in the 1980s. There are many opportunities available but South African law on mineral rights has changed, so it is essential that you have met certain criteria before you can be granted the right to mine,ÔÇØ van der Merwe explains.
The Vele project will be developed in two phases. The first, which will commence upon the granting of a new order mining right, will be based on a modular coal treatment plant with the ability to deliver in the order of one million saleable tonnes (yield dependent) of coking coal per annum. It is expected that all initial production will be sold to ArcelorMittal South Africa, which will use the coal at its steelworks in Vanderbijlpark, in the Gauteng province. The second phase is anticipated to increase production to a total of five million tonnes of coking coal per annum
ÔÇ£The letter of intent signed with ArcelorMittal South Africa proposes an initial off-take agreement of between 2.5 million and five million tonnes per annum from our coking coal projects,ÔÇØ explains van der Merwe. ÔÇ£The pricing is based on the win-win principle of ArcelorMittal South Africa saving on the shipping cost of importing coal from Australia, and Coal of Africa saving the cost of railing and loading coal from a port.ÔÇØ
At a proposed production rate of 10 million tonnes per annum, Coal of AfricaÔÇÖs operations could improve South AfricaÔÇÖs balance of payments by R20 billion per annum through import replacement and export earnings.
Setting up the business has of course relied heavily on the support of Coal of AfricaÔÇÖs investors. Van der Merwe feels they have been fortunate with costs. ÔÇ£We are not yet at the cash generation stage and have mainly invested capital for exploration and development. Our biggest expenditure has been on our first operational site, the Mooiplaats Colliery, where we have invested over R600 million so far, largely on mining equipment, a coal processing plant, shaft access and facilities on-site.ÔÇØ
The colliery successfully railed its first load of ÔÇÿleanÔÇÖ coal in September 2009 to the developing port of Matola in Mozambique. Although the mine is currently mining the lower grade ÔÇÿleanÔÇÖ coal, the target is to intercept and mine high-quality bituminous coal by early 2010.
At present, the company has just 22 employeesÔÇöa surprising number at first glanceÔÇöhowever, as van der Merwe explains, there is a focus on outsourcing. ÔÇ£We apply very high exploration standards and safety management at the heart of our operational strategy,ÔÇØ he says. ÔÇ£We have to ensure that we have the right skills and equipment available at all times. This means we are very careful in the selection of sub-contractors.
ÔÇ£WeÔÇÖll grow over time and manage that process but we have a view not to ÔÇÿover-corporatiseÔÇÖ ourselves with too much bureaucracy, which is something I am very sensitive to,ÔÇØ he continues. ÔÇ£We want to be able to make decisions as close to the face as possible so that we have a working environment that is exciting, affording growth potential to our staff.ÔÇØ
Environment is a key word in every sense. Referring to the Vele site, van der Merwe says that the company takes its environmental responsibilities very seriously. ÔÇ£The mine is close to the Limpopo River and we are committed to spending R500 million over 30 years to ensure the highest levels of environmental and social performance. We believe that by applying responsible management in all aspects of mining, it is possible for the mine, eco-tourism and communities to co-exist for the benefit of all parties and in response to the development needs of the region.
ÔÇ£WeÔÇÖve been very careful with the assessments, and our process design has taken into account the environmental impact,ÔÇØ he continues. ÔÇ£Essentially, this will be both an open cast and underground mineÔÇöwe have the opportunity to develop part of the mine underground, which means we have less impact on the agricultural environment. With this planning, we will now affect only eight per cent of the existing agriculture.ÔÇØ
The company has also taken measures to lessen the visual impact of the mine, replacing a dragline (used in mining the overburden) with trucks and shovels. ÔÇ£We have opted for a more expensive but less visible mining method, taking into consideration the needs of our neighbours in the area,ÔÇØ comments van der Merwe. ÔÇ£We have also looked very closely at noise reduction, air quality, soil and land use, paleontology, effects of blasting colours that blend into the bush, less intrusive lighting design, and scientific water management methods to lessen the impact on the environment. We have used flora and fauna specialists to advise us regarding these two important aspects. We have also looked very closely at the socio and macro economic issues in the area.ÔÇØ
Given the low skills level in the region, through its skills development plan, Coal of Africa will provide training to the community through learnerships, vocational skills training and an adult basic education training programme. The company recently launched the Thovhele Toni Mphephu Ramabulana Bursary Fund in the Limpopo province, which was established to encourage more students to study courses at tertiary institutions, equipping them to consider a career in mining.
Coal of Africa is also fully committed to the countryÔÇÖs Black Economic Empowerment programme. Different groupings will own up to 28 per cent of the business, empowering it at corporate level.
The company is fostering development in the areas where its projects are located. ÔÇ£We always look to source labour from the areas we are working in and offer skills development. The Vele project will have a major knock-on effect for local business, and externally conducted studies have indicated that it will create up to 28,000 direct and indirect job opportunities,ÔÇØ says van der Merwe.
Given the significant potential for job creation, the future mine will be a major contributor to the growth of the South African economy and will also support the South African Department of Trade and IndustryÔÇÖs drive to increase value of exports as a contribution to GDP.