4 MINING REVIEW AFRICA | SEPTEMBER 2017

• COVER STORY

ELB EnginEEring SErvicES

The lack of new mining projects coming on stream continues to impact the engineering sector which has been and remains in survival mode as a result. While ELB Engineering Services (ELB) CEO Dr STEPHEN MEIJERS acknowledges that ELB is feeling the strain of an ongoing recession, it is focusing on ensuring that its existing business model supports its balance sheet to preserve revenue generation, writes LAURA CORNISH.

Strategic business model guarantees steady revenue

“It has become necessary to continuously review our business model to ensure we are financially secure. It is an

area that needs on-going focus throughout the duration of this recession,” Meijers starts.

“Although we are unable to control external events, we can control our business model to ensure it continuously supports our balance sheet. This remains a focus for the business and underpins the strength of the entire ELB Group.”

Within the engineering services business, Meijers outlines three pillars that contribute to protecting its balance sheet: new business, which has the ability to provide

sufficient man hours for staff; incoming cash flow; and profits, generated from successful project execution.

New businessThe lack of new business emanating from traditional mining market avenues saw ELB diversify into new sectors about two years ago. This has subsequently seen it successfully deliver projects in the fast moving consumer goods (FMCG) industry, predominantly in food and beverage. The company has since undertaken and completed a number of projects in this field for blue chip companies including Unilever and Givaudan. ELB is also

providing services to Nestlé South Africa on three of their sites which have been supporting local industry for the 101 years they have been operating in South Africa.

“ELB recently completed a fire pump station in Madagascar, as well as a water treatment plant in Nigeria for Givaudan.” ELB also has ongoing upgrade projects for Givaudan at its SA factory in Alberton.

“Our diversification strategy has to date worked exceptionally well and we will continue prioritising this focus and moving away from our reliance on minerals and metals,” Meijers notes. This business approach has further seen ELB open an office in Cape Town to take advantage of the industrial and FMCG sectors that are prominent in the region. The CEO also expects to take on new work in the power sector, specifically for biomass projects that are gaining momentum in the region.

“The ability to forecast business in the southern Africa region is becoming more difficult and is predominantly driven by the minerals and metals downturn as well as the lack of confidence to invest in capital projects due to governmental insecurities.” Nonetheless, ELB’s forward-looking pipeline encompasses two significant, large-scale

One of the new stackers ELB has delivered for the Black Rock Mine Operations

MINING REVIEW AFRICA | SEPTEMBER 2017 5

COVER STORY •projects for two state-owned utilities, although neither of them has moved into execution for well over two years.

“The company has been involved with the Ngodwana Energy biomass project (REIPPP 4) for the last three years. Eskom and the DOE (Department of Energy) have committed to signing the PPA (Power Purchase Agreement) which would lead to financial close and execution start-up, but have yet to take this final step in moving the project forward. We remain confident that this process will be concluded.”

ELB’s pipeline also includes the design and installation of an overland conveyor for Asanko Gold’s gold project in Ghana. To date the front end engineering design has been completed with an optimisation phase now in process.

Fortunately, ELB has an exciting portfolio of existing projects which includes Vedanta Zinc International’s iconic Gamsberg zinc project, at Black Mountain Mining in the Northern Cape. The company is in the final phases of engineering and procurement (with 90% of procurement items completed). ELB’s project specifically comprises three main packages – the delivery of water from the Orange River to the process plant, an 11 kV overhead power line and the processing plant. “We are progressing well on site on all three fronts and we look forward to seeing first product delivered in H1 2018 in line with Vedanta’s schedule.”

The company is also completing its contract for Assmang’s Black Rock Mine Operations, also in the Northern Cape. Black Rock Mine Operations is operated by Assmang Proprietary Limited and is jointly owned by African Rainbow Minerals Limited and Assore Limited. This entails the supply of two stackers and a new train loading system – both are in the final commissioning phases.

A new clinker out-loading system for PPC’s cement plant in Zimbabwe is in fabrication and construction start-up as well. “Our first project for PPC was in 1922 and, impressively, we have not gone longer than two or three years without being involved in one of their facilities. This is a strong example of successful repeat business and demonstrates the client’s confidence in and reliance on our engineering capabilities,” Meijers highlights.

ELB recently completed the refurbishment of a 300 mm hard rock

portal scraper reclaimer for Petra Diamonds’ Cullinan Diamond Mine, 25 years after it first commissioned the machine. It has been handed over to the client and is operating successfully.

Furthermore ELB reconditioned and rebuilt two manganese tipplers for Transnet’s Port Elizabeth manganese terminal. The client confirmed the tipplers have been operating trouble free since handover.

“As long we can continue to bring new projects into the business, we will employ the right people and maintain our high quality performance which will ensure sustainability and, most importantly, a constant cash flow.”

Cash flow risksCash flow in a business can be equated to food for the human body – neither can survive without it. “And as I’ve mentioned already, this is the area we continue to place a lot of emphasis on – making sure that we have sufficient cash flow coming into the organisation. This is however becoming more difficult as companies are unable/unwilling to meet cash flow demands on a monthly basis. As a result,

we are seeing that clients are, in certain circumstances, coming to expect that their contractors assist in financing their projects. This is not a healthy practice for our industry and is one of the biggest risks we’re seeing at the moment.” Our business model simply cannot afford to finance customers.

Meijers says ELB is also seeing an increase in commercial disconnect towards the last 25% of project execution. In the past there was sufficient experience within client project teams to resolve challenges but with an increasing lack of skills there has consequently been an increase in legally-based discussions.

ProfitIn the event that ELB sees new business coming in which allows it to finance the execution of the project, through the correct cash flow model, and the company does this according to the expectations of its clients, then profits naturally flow. “We choose to chase the execution of projects and ensure they are done properly to secure our profits. As a result, our company has developed an ‘exceptionally’ strong grouping of expertise, experience and business processes which allows us to be effective and efficient in delivering project execution.,” Meijers concludes. MRA

www.elbengineering.co.za

“ As long we can continue to bring new projects into the business, we will employ the right people and maintain our high quality performance which will ensure sustainability and most importantly, a constant cash flow,” Stephen Meijers

Portal scraper reclaimer at Petra Diamonds’ Cullinan mine

PPC’s Colleen Bawn project in Zimbabwe

ELB supplied a new train loading system for the Black Rock project as well

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Issue 9 September 2017

I am of a strong view that Anglo American, South32, Glencore and other multinationals in

SA see value in operating assets in this country,”

Personality P6

Strategic business model guarantees steady revenue

WEST AFRICABoom, boom, boom!

INDUSTRY INTELHealth & Safety P55

MAINTENANCE& REFURBISHMENT

An imperative

Mike teke, former president of the Chamber of Mines

SpECIAlNIGERIA MINING WEEK focus