“The first phase saw the emergence of our newly-formed company in August 2007 with Royal Bafokeng Capital as the 65% controlling shareholder,” he explains, “although this stake will be reduced to 60% in due course.”
Also incorporated in this first phase was the acquisition of two productive coal mines (the Umlabu and Ilanga mines) for a combined total of R210 million. Completion of Phase One was marked by the official change in the name of the company to SACMH on 20 August 2007, following the listing of the company on the Main Board of the JSE on 31 July 2007.
“Getting the company listed and our majority shareholder entrenched, sorting out the other shareholders and seeing to the establishment of the board, organising the listing, bedding down the acquisition transactions, and then getting all the equipment up and running on the mines, were all critical parts of our first phase strategy going forward,” says Gribnitz.
PHASE TWO AHEAD OF SCHEDULE
“With the set-up phase complete, we moved into Phase Two, which involves reaching our 1.2 Mtpa production target by Q3 of 2008,” he adds. “What has happened,” Gribnitz points out, “is that our Umlabu flagship mine has reached 100 000 tpm, which means that we are already on target, despite the fact that our Ilanga mine is petering out and is scheduled to halt production in January 2008. So we are now profitable, and we want to stabilise this profit situation and then move into the next phase of development,” he reveals.
“As far as plans for future growth strategy are concerned,” Gribnitz continues, “our first call is to take what we’ve got and optimise it; and our second call is to find suitable new deposits, or suitable companies, either to do acquisitions with, or to establish some form of joint venture relationship that makes sense to both parties.” He emphasises that the “next phase” of the SACMH drive to reach 5Mtpa will depend on several factors, the first of which involves expansion possibilities at the company’s Umlabu and Ilanga mines.
At Umlabu, the next planned step is to open up more underground and open cast sections in the next 12 months. “We have one underground section now, and we are looking to open a second one in five to six months’ time. What we are doing is spreading our risk by having small sections diversified between open cast and underground mining – that way, if we have a problem like flooding on the surface, we can continue mining underground,” he explains.
EXPANSION TALKS WITH NEIGHBOURS
“The second factor is that we are in discussion with our neighbours with a view to expanding our operations, including Umlabu and Ilanga,” Gribnitz adds, “and I must point out that we are bordered by some illustrious names.” Subsequent research confirms that the Umlabu mine is literally surrounded by Xstrata coal deposits, and Ilanga has Anglo Coal as its northern neighbour.
“I’m not saying anything,” Gribnitz emphasises, “I’m simply pointing out that we are in a good neighbourhood.”
“Our discussions are on expansion of both the Umlabu and Ilanga mines,” he adds, “and one of them has progressed further than the other. Should those discussions lead to actual negotiations, we believe they could extend the life of mine on both mines quite significantly, and we would look to expand the operation to quite a substantial mining footprint,” he predicts.
“Ilanga was acquired because, although we were after Umlabu, we knew there was a reasonably good chance of us acquiring the lease on the neighbouring coal – we are literally sitting on the boundary” Gribnitz reveals. “The joke is we already own the land – it’s a case of acquiring the mineral rights under our own property – hence the current discussions with certain of our neighbours.” Still on the subject of Ilanga’s future, although the mine is scheduled to halt production in January 2008, SACMH has some plans up its sleeve in terms of keeping the mine up and running. There are other resources which, while not viable at the moment, may prove worthwhile if we put together a careful and clever work-plan,” he suggests. “Meanwhile the negotiations continue.”
Quite apart from expansion of the two existing mines, exploration of new opportunities with neighbours, and the possibility of new properties and new partners, there is a third viable way of increasing production. This involves the introduction of new and improved technology to boost productivity and cost-effectiveness.
“We have been investigating new technology, particularly in terms of lower seam mining, at Umlabu,” Gribnitz confirms. “We are doing very well, and production is moving ahead nicely.”
EXCITING PROSPECT AT KROMKRANS
In another exciting development, a prospecting right has been granted to a subsidiary of the group over various portions of the farm Kromkrans IS 208, which is situated between Hendrina and Carolina, and is close to the Umlabu mine.
This area was drilled by Shell in the 60’s, and the indications are that the coal from those drill results was exceptionally high in quality. One of the complexities in operating from there is the logistics, but SACMH is working on that, and is looking at the planning of an entire logistics chain which would ensure delivery of the coal from the mine to the export harbour.
“We have put a budget aside to drill a few holes, and we have commissioned a drilling company which will run the holes,” Gribnitz reveals. “Once we know what the indicated resource might be and what mining methods would have to be employed, we would start the process of converting to a mining right, which is a priority for us, he adds.
“I can’t give you an idea of resources and reserves at this stage,” Gribnitz confesses, “but I can tell you that we are excited. Indications are that it’s going to be a very, very interesting economic opportunity.”
“To put the overall picture in perspective,” he explains, “if I made no further acquisitions and just had to deal with what I have on my plate now, I believe we could reach that target of 5 to 6Mtpa within the next five years. I must admit that it would be a tremendous job to achieve this goal, but we certainly intend to get there.”
“Looking ahead, SACMH views itself currently as a small miner, and we are working very hard to gain recognition as a medium-sized miner over the next five years,” says Gribnitz. “We would like to become the partner of choice of one of the bigger mining groups looking for a BEE partner or an operator in South Africa,” he reveals.
“As newcomers starting as a coal mining group with a clean sheet, our competitive long-term advantage is the way we are going to conduct ourselves over the next two to five years,” he concludes. “It is this track record which will hopefully help us achieve our ambition.”