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February 2015

MINING & MINERALS

FREIGHT & TRADING WEEKLY

SAFE CHOICES Nautic Africa’s Govender

on keeping oil rigs secure

global challengesUNDER PRESSURE...

LOGISTICS ... THE GAME CHANGER

A TURNKEY SOLUTION for the mining industry in Africa

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SAFE CHOICES

TURNKEY SOLUTIONS

UNDER PRESSURE

logistics the game-changer

GENERAL NEWS

3

moz and tanzania the countries to watch7

investment scaled down13

rail success demands co-modal approach

LOGISTICS

9

eyes on moz gas opportunities12

transit cargo boosts rail18

4

2

14

TECHNOLOGY UPS PRODUCTIVITY

20

SISHEN — A WELL-OILED OPERATION

10

CONTENTS

February 2015 Mining & Minerals 1

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2 Mining & Minerals February 2015

Opportunities for exporters servicing Africa’s mining

sector will always exist but it is in the growing oil and gas sector where the real possibilities lie.

While countries like Nigeria and Angola have been pumping oil for years, there has been renewed interest in recent times. The major gas finds off the coast of Mozambique and Tanzania are sparking particular interest and experts maintain that Africa’s oil and gas story is just beginning.

“The oil and gas industry on the continent is definitely growing and that brings major opportunities for South African businesses willing to operate in these markets which traditionally may not have been on our radar,” says Keith Govender, chief services

and support officer for Nautic Africa.

The Cape Town-based shipbuilding and maritime solutions business has seen major success servicing the oil industry in Africa, predominantly supplying support and security vessels for oilrigs.

It is a very specific market though, says Govender, where the pressure to deliver is high and the room for error zero.

“Understanding the African operating environment is important for exporters to ensure they are delivering a product that meets the specific market needs and requirements,” explains Govender. “We realised very quickly that we needed to design a vessel that had a multi-purpose function as this was an essential requirement in the oil

and gas sector. Security of vessels and crew was another major concern that had to be addressed.”

Finding customised solutions for these African conundrums is what ensures longevity in the market place.

“It’s a market that requires diligence and patience along with the ability and willingness to invest,” he says.

At Nautic Africa this has gone a long way in pushing up sales. “Our ability to deliver solutions-based products with on-the-ground service and support is what has made the difference.”

Even more so in the tough competitive world that is oil and gas.

For the Nautic Africa team meeting the needs of the oil and gas industry meant finding a ballistic protection system for vessels that

would ensure the safety and security of both the crew and the vessel while at the same time developing fast deployable interceptor vessels that could respond quickly to situations at sea.

Liesl Venter

Having identified a niche market for boats to service and protect oil rigs operating off the African

coast and to deal with the growing threat of piracy, Nautic Africa has in the space of less than six years grown into arguably the continent’s leading specialist shipbuilding and maritime solutions company.

It’s all about being mission specific, says Keith Govender, Nautic Africa’s chief services and support officer.

“A boat is not a boat is not a boat. It is about being able to deliver turnkey vessel solutions. There is not a one size fits all approach at Nautic Africa,” says Govender.

The company currently serves Nigeria, Ghana, Namibia, Malawi as well as the local South African market – and there is talk of a second factory.

It is all about African products being built by an African company for an African operating environment.

“Africa has for a long-time been the recipient of what the rest of the

world deemed they required – but that is fast changing,” said Govender. “African countries know what they need and want and are actively going out there to source that.

“Our clients come back because they know they are getting quality. African waters are rough and unpredictable and the products servicing this environment need to be able to stand the test of time.”

At the same time it’s a market that demands excellent after-sales service. In Africa a deal is not done just because the product has been exported.

“In our case that means having good maintenance programmes as well as the necessary training programmes in place. Our clients are all revenue-generating organisations. If their operations stand still they are losing money – and as a support service to that industry we have to be on top of our game and ensure that there is as little downtime as possible. We have partnered with local companies to ensure that our clients have the best possible service long after the boat has left Cape Town.”

Servicing and protecting Africa’s oil rigs

Oil and gas sector offers major opportunity

We realised very quickly that we needed to design a vessel that had a multi-purpose function as this was an essential requirement in the oil and gas sector.– Keith Govender

“

www.ftwonline.co.za SHIPPER PROFILE

A Nautic Africa boat used to service and protect oil rigs operating off the African coast.


Liesl Venter

With mine productivity dropping to new lows in 2014, mining companies have been

taking long hard looks at the big contributing factors in an effort to get the industry back on track.

The costly role of logistics in Africa, however, has been hard to ignore and in some cases the decision to close shop has been far wiser than trying to find cost-effective logistical solutions that will allow the commodities to be moved off the continent.

“Mining houses across the world are not immune to volatility,” says Paul Runge, managing director of Africa Project Access. “There are some very real issues at play, with the weaker commodity prices and increased production costs being two of the biggest issues. In Africa logistical issues add significantly to the cost.”

He says in the case of Mozambique, where big mining houses have just about sold up all of their interests in what was initially expected to be very lucrative coal-mining, logistics played a definite role.

“Huge amounts of coal would have to be moved out, the transport system is very unreliable and the ports at present just don’t have the capacity to do so. Another factor is the annual monsoon season that requires very good infrastructure to be put in place to withstand the

heavy rains,” said Runge. “Taking into account the logistics infrastructure required and the cost in light of the drop in the coal price, it becomes understandable that companies have decided to opt out.”

Runge says often each particular project must be looked at individually. “In the case of Mozambique, Rio Tinto decided to pull out but is now making big noises in Guinea in what will be just as difficult a project in terms of logistics. It’s about whether the investment into the logistics makes economic sense in the long run.”

According to Lars Greiner of Greiner Mendi Associates, there

are definite minimum infrastructure requirements before any project can kick off. “Logistics is a big factor and plays a contributing role to the success of any project - especially in Africa where mines are often remote and where infrastructure in terms of roads, rail and ports is often lacking.”

Runge says with the major oil and gas finds on the continent it is getting harder to divorce this sector from traditional mining and there seems to be a willingness to invest in the necessary logistics for these two commodities.

“The picture is also slightly different in that one does not need the same kinds of resources. For gas, for instance, one does not need an effective rail system,” says Runge, who maintains that logistics in the long run will be the game changer in the African mining sector.

“Get the logistics right and you stand some chance of success. Get it wrong and there is no way you can

succeed,” he says, be this traditional mining or oil and gas.

But spending on logistical requirements is costly.

“Building the necessary infrastructure is one thing, but when you take into account the economic environment in which many of these mines are operating then it becomes questionable,” says Duncan Bonnett of Whitehouse & Associates. “Commodity prices have dropped and analysts are forecasting that prices will not recover within the next three to four years. Investing in the evacuation of these minerals is costly in light of higher input and operational costs – with the very real possibility of lower returns. As a result companies are becoming

less and less willing to invest in the infrastructure.”

Logistics will be the game-changer in African mining sector

Get the logistics right and you stand some chance of success. Get it wrong and there is no way you can succeed.– Paul Runge

“There are definite minimum infrastructure requirements before any project can kick off.– Lars Greiner“

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– Liesl Venter

Mining is not for sissies.

Price volatility, geopolitical

turmoil, rising costs, declining grades and a general lack of access to financing are just some of the issues companies have to contend with.

According to Duncan Bonnett of Whitehouse & Associates, this is true across the world and not only in the unpredictable African environment where lack of infrastructure, security and political unrest add further challenges.

“The industry is facing several problems, most notably the drop in commodity

prices,” he told FTW.

The latest mining report by Deloitte Touche Tohmatsu Limited (DTTL) reiterates this.

“Growth prospects for countries like China and India remain uncertain, Japan is struggling

with a mountain of sovereign debt

and a rapidly aging population, and instability

in the Russian border areas and the Middle East is raising concerns.

Stakeholders around the globe are becoming increasingly vocal in their demands from the industry. Prospects for many commodities remain weak, particularly for coal and iron ore,” reads the report titled ‘Tracking the Trends 2015’.

“Commodity prices for the key base metals and minerals such as coal, iron ore and copper have dropped significantly – probably to the levels they were around 2008,” says Bonnett. “And

while some may argue that these prices were quite high and the current drop should not impact too significantly, the fact is that production costs have risen exponentially since 2008. So the extraction cost is very high and the commodity price is low which means margins are being squeezed very tightly at the moment.”

And indications are that it’s not going to pick up any time soon.

The DTTL report advises

that if mining companies hope to emerge from the downward cycle in a stronger position than they entered it, they will need to increase mining intensity and focus on reducing capital, people and energy intensity. This will require them to adopt innovative technologies used in other industries in a measured and risk-intelligent way and increase the use of information technology.

There will be a definite requirement for companies to become more adept at balancing short-term investor expectations with long-term business imperatives.

“There is no doubt that mining companies operate in complex geographies where they face increasing challenges in responding to regulatory and compliance requirements,” says Philip Hopwood, DTTL global mining leader. “At the same time, they have an imperative to adapt to changing market conditions, adopting new innovations as they seek to produce more for less cost in a world where volatile market conditions are the new normal, and geopolitical conditions are increasingly impacting economic decision-making.”

Mining industry under pressure globallyProspects for many commodities remain weak

The extraction cost is very high and the commodity price is low which means margins are being squeezed very tightly at the moment.– Duncan Bonnett

“

Countries across Africa are increasingly demanding

more from mining houses than just the employment of a few locals and some investment in the communities and areas around the mines.

According to Duncan Bonnett of Whitehouse & Associates, there is a creeping sense of nationalism being detected with governments demanding higher royalties, taxes and investments from those mining resources on their shores.

“It is completely understandable why governments are putting the pressure on companies, calling for more local participation and

wanting higher tax returns for their resources, but at the same time this is increasing the operating costs in Africa significantly.”

In light of lower commodity prices many mines are not in a position at present to train and invest in upscaling local communities to meet local participation laws, while the lack of infrastructure continues to raise the costs of moving commodities from mines to ports. Investing in these resources from a private sector point of view does not necessarily always make sense.

“Africa’s stranded resources remain a problem,” says Paul Runge of Africa Project Access.

He says less spending by private companies on infrastructure is expected in the coming months as costs are cut to a bare minimum.

“Budgets in many cases are not just shrinking but downright disappearing,” he said.

Countries with vast resources but no infrastructure are going to have to work hard to convince mining houses to come up with the funds required to move commodities or invest in the necessary infrastructure themselves.

Botswana is one such example where vast amounts of coal have been found but without a railway line it becomes difficult to see this

as a feasible operation. While the government has declared its intention to build a railway line to the Port of Walvis Bay, questions around funding remain unanswered.

“Companies are being pushed from all sides – not only do they have to move beyond hiring secretaries and security guards, meaning very real investment in the training and upskilling of staff, but they are also having to inject money into the infrastructure of countries, including finding ways of generating the necessary power required for their operations,” said Runge.

Stranded resources remain a problem for Africa


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6 Mining & Minerals February 2015FTW2915SD

T here’s a strong insurance warning for exporters moving minerals, raw materials and mining

products in Africa – skimp on security and you risk having your claims rejected.

Deteriorating infrastructure, theft, hijacking and lax border controls all contribute to a high-risk environment and mitigating this risk is essential, says Hugh Reimers: director of Eikos Risk Applications.

Various levels of risk are involved in the transportation process and companies have developed innovative solutions to mitigate the risk during the shipment process, he added.

“Copper, for example, is shipped in various forms, some of which present a higher risk than others. Copper ore is less of a problem as it still needs to be smelted and processed. However, copper blisters or ingots present much more of a security risk as these are already in a solid metal form and can be

readily sold without any further processing. Cobalt, another example, is incredibly valuable in any form, which makes it a very high-risk commodity.”

All of this needs to be taken into account.

Transporters frequently travel in convoy to provide security in numbers but there have been instances where trucks have been separated quite frequently by men dressed in SAPS uniforms and they then become vulnerable to hijack or theft, says Reimers.

Most insurers require that the insured, their contractors and hauliers make sure that each valuable load is protected with a range of armed

guards, escorts and tracking devices. In addition the driver of the truck carrying the load is required to be in contact with the control centre at all times so that if a problem arises it can be resolved as soon as possible.

Unfortunately, says Reimers, extra security comes at a premium and some exporters are often

tempted to exclude this expense in an effort to cut costs. “But cutting back on insurance cover can leave the company exposed.

“Adequate security and insurance cover while transporting goods

throughout Africa, and especially in South

Africa, is vital.”

‘Don’t skimp on insurance cover’

Most insurers require that each valuable load is protected with a range of armed guards, escorts and tracking devices.– Hugh Reimers

“

February 2015 Mining & Minerals 7FTW2944SD

A frica has some big challenges to overcome in the mining

sector – least of them the current low commodity prices.

“There is a lot of wait and see going on at the moment,” says Paul Runge, managing director of Africa Project Access. “Africa has tremendous mining and resources potential, but many of these resources are stranded and need major investments in transport and infrastructure to move them out. The unfavourable economic situation and the lack of clarity with regard to the bureaucratic environments in which they are operating do not help the situation much.”

According to Runge, this will see fewer projects taking off in the coming months.

According to Duncan Bonnett of Whitehouse & Associates, there are some big mining challenges at present in Central Africa.

“There are major iron ore

deposits in this region all the way up to Sierra Leone and Senegal but there is no infrastructure. We don’t expect to see this take off anytime soon. At the same time regional politics are at play and that is adding to the hesitation to become involved in this mining.”

On the other hand, Bonnett said, there were several projects expected to take off in the Congolese copper industry which was doing quite well despite the drop in the copper price.

“There are one or two big projects expected to come on line in the next few months. The biggest challenge here remains the lack of power, especially for the smaller smelters in the region for whom it is just not cost effective to run diesel operations. The bigger smelters need at least twice the amount of electricity they are currently receiving.”

Bonnett said output could be increased by at least 50-100% if the power issues were addressed.

Both Bonnett and Runge say the countries to watch over the next few years remain Mozambique and Tanzania.

“It’s not just the large gas finds and the coals, but an array of other minerals, including

large resources of graphite,” said Bonnett.

Both experts agree that if African governments want to boost mining they will have to find ways of improvinginfrastructure, delivering the necessary power supply and reforming mining codes to attract investors.– Liesl Venter

Mozambique and Tanzania the countries to watch

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Liesl Venter

It is not all doom and gloom in the mining sector, with several projects still on the go across the continent.

Ruth Butcher, director of business development for Beyond Africa Logistics Consultants, says now more than ever logistics service providers need to keep up to date with developments to ensure they are able to access

the opportunities out there.“The mining sector has

definitely seen a decrease in activity but that does not mean it has come to a standstill,” said Butcher. “Countries like Zambia are still investing in their mining and in East Africa there are also many opportunities that can be exploited by local logistics operators.”

African expert Duncan Bonnett of Whitehouse & Associates agrees, saying

that while the drop in the copper price has

affected operations, activity in Zambia is still strong.

Countries like Ethiopia in East

Africa are also working hard to increase their mining activity and have invested heavily in power supply systems and other infrastructure.

According to Butcher, it is all about being innovative in one’s approach while also having a presence in the various regions where mining is still active.

“There is no doubt that the operating landscape in the mining industry at present is very competitive and therefore it is essential that one is on top of one’s own game at all times and informed about the developments in the different countries.”

She said logistics into Africa had in recent times become more about innovation and the ability to deliver solutions in challenging environments.

“In the mining sector at present this is truer than ever before in light of the pressure and challenges it faces on the continent.”

Zambia still investing in mining

It is all about being innovative in one’s approach while also having a presence in the various regions where mining is still active.– Ruth Butcher

“


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Catering to the needs of the mining industry

Africa appears to have woken up to the urgency of rail,

particularly in the mining sector.“This has resulted in more

investment in rail and we are starting to see projects being completed that will make a major difference to the movement of commodities,” says Lars Greiner, managing director of Greiner Mendi Associates.

One such line nearing completion is the Lobito railway line that will link Angola and the DRC while a new railway line in Mozambique has been up and running for some time.

But experts agree that for rail to succeed there needs to be

more than just an investment in infrastructure.

Kriba Naiken, managing director of Quattro Freight and director of Quattro Logistics Solutions, says it is not simply about putting the infrastructure down and cargo moving off road

onto rail.“We have to

look at supply chains in their entirety and understand their requirements and then apply the best solutions,” he said.

This is far more of a co-modal approach than the intermodal approach so far.

“It is far more of a collaborative approach between all the various entities to find

the best supply chain for the product based on the trend of the year. This requires a more holistic view,” he said.

For rail to truly become an active player in moving commodities across Africa it must be far more f lexible than what is currently the case.

“As an industry we need to work towards a model where we can implement supply chain solutions based on the latest market intelligence. Being f lexible and agile is crucial to being competitive globally,” says Naiken.

Like Greiner, Naiken says there is no doubting the hunger railways have for getting cargo or the role it can play in moving goods cost effectively.

“Our railway model and the

way we use rail, however, needs to be one that understands the market better and is able to react quickly to changes – locally or globally.”– Liesl Venter

For rail to truly become an active player in moving commodities across Africa it must be far more flexible.– Kriba Naiken“

Rail success demands co-modal approach

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Liesl Venter

Moving minerals from road to rail has been slow going in South Africa.

A variety of reasons are at the heart of this – ranging from uncompetitive pricing structures to the unreliability of delivery.

Not to mention the lack of infrastructure.

It is no secret that the state of a country’s transport infrastructure determines the performance and growth of its economy.

In South Africa both road and rail infrastructure have been declining.

Various experts – including Professor Jan Havenga of the Centre for Supply Chain Management at the University of Stellenbosch – have been arguing for more cargo to move to rail, calling for an intermodal system where both road and rail play a significant role.

Yet the market share being grabbed by rail is low and many argue the successes being achieved are nothing more than the expected volume increase in the commodities being moved and have nothing to do with lower volumes on road.

South Africa, however, does boast one significant rail success story.

The Sishen-Saldanha railway line, also known as the country’s ore export line, has proved that rail can work successfully when all the stakeholders in the supply chain are committed to the same outcome.

Every year some 58 million tons of iron ore and two million tons of manganese are moved from the mines in Sishen in the Northern Cape to the Port of Saldanha in the Western Cape – a distance of more than 800km.

The single heavy-haul line, designed with crossing loops so that trains travelling in opposite directions can pass, sees the cargo moved daily in what can best be described as a smooth, well-oiled operation.

Experts agree the success of this rail line, where the average length of a train is 342 wagons, is thanks to the buy-in of the entire supply chain.

Robert van Rooyen, terminal manager for Transnet Port Terminals at the Port of Saldanha, says operations are geared towards receiving the ore trains.

A rail offloading area where two tipplers are at work is situated at the entrance to the port. Two wagons are tipped simultaneously, dumping 200 tons of iron ore at a time. The trains are not decoupled and are shunted into the offloading area in the most efficient manner possible, moving as fast as possible.

“The rate of offloading is around 8000 tons of ore per hour,” says Van Rooyen. “And every 90 seconds we tip 200 tons of iron ore in this fully automated system in order to turn wagons around as quickly as possible.”

According to Kumba Iron Ore, one of the largest iron ore producers in Africa and the biggest user of the railway line, the success of the Sishen-Saldanha line is thanks to the ongoing integrated planning and cooperation between the public and private sectors in the country.

Also, at the mines in the Northern Cape operations have been put in place to load wagons as quickly and as efficiently as possible. It only takes two hours to load a set of 114 wagons.

“It really is about working together,” says Van Rooyen.

“Everyone works towards the same goals. Our plans were to increase our capacity significantly but in conversation with our customers these plans have been downscaled. We will ultimately be able to handle 82 million tons at the port and along the railway line but our immediate aim is to move to 74 million tons per annum as that is all that is required.”

It is part and parcel of the line’s success, says one commentator. “It is a completely collaborative approach and if we want to see more cargo moving to rail this is going to have to be replicated. It cannot just be the rail and port operators that come to the party

but also the cargo owners all working together towards the same goal. Only then will we begin to really see cargo move onto rail.”

This is reiterated by Havenga who says that in the South African environment it is crucial that real investments in port and rail networks are made but also “that we see far greater collaboration than ever before if we want to remain competitive in the global market”.

Shifting bulk long haul freight to rail has to be a priority but this will only come about if the service on offer is reliable and efficient and there is collaboration along the supply chain.

Industry buy-in makes Sishen a well-oiled operation

Every year some 58 million tons of iron ore and two million tons of manganese are moved from Sishen to the Port of Saldanha. Photo: Mining Media Club South Africa

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Liesl Venter

Local logistics companies are keeping a close eye on developments in Mozambique as gas finds

hold the promise of significant growth potential.

According to Hashim Ismail, CEO of Semwat Transport, with Australian and American mining magnates in the process of establishing themselves in Mozambique, South African companies should be monitoring the situation.

“There are major opportunities for southern African service providers as these gas finds are going to change the mining landscape of the region significantly,” Ismail told FTW.

And this is good news for an industry faced with low commodity prices, increased costs and a volatile labour situation.

“Last year iron ore was trading at an average of around $180 per ton. Currently it is trading at around $62.30 per ton.”

This he said had major knock-on effects on the industry servicing the mining sector.

“And to exacerbate matters China,

which consumes 70% of all sea-borne iron ore produced worldwide – trading in excess of 1.3 billion tons per year – has announced plans to cut its growth target to 6-7% this year, its lowest in over ten years.”

Ismail said in light of these factors the growing interest in the Mozambican gas finds was understandable.

“As traditional mines work hard to minimise their overheads, control production cost and manage debt, the opportunities presented in the gas sector will make a difference to the industry.”

Ismail said Semwat was also working extensively in the Botswana market where the decline in commodity prices was seemingly not halting mining ventures.

“Following the signing of a joint venture between the Botswana company BCL and Allan Hochreiter in August 2014 they

have announced that they will be re-treating about 100 million tons of mine tailings and 45 million tons of smelter slag at the Selebi Phikwe mine to the south of Francistown to

recover nickel, copper and cobalt. Semwat has already delivered some

machinery over the past few weeks to this site and we expect

to be doing more in

the near future.”

Logistics operators eye Moz gas opportunities

We are working extensively in the Botswana market where the decline in commodity prices is seemingly not halting mining ventures.– Hashim Ismail

“


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Commodity price uncertainty will continue to affect mining

operations in 2015 with many big projects expected to see significant slowdowns or even be put on hold.

According to Duncan Bonnett of Whitehouse & Associates, the mining industry across southern Africa is not out of the woods yet after a difficult few months in which commodity prices have dropped significantly.

“And it’s the key base metals and minerals that have been affected the most,” he told FTW. “The price of coal, iron ore and copper has dropped while at the same time the production costs have seen an increase. Margins across the board are being squeezed in the sector.”

As a result Bonnett said less funds were being channelled into exploration and development of new mines, while projects were either being

shelved or put on hold for the time being.

“There are definite areas where projects are still taking place but there has been a scaling down of the investments and so the timelines have been extended and the deadlines are further away.”

Bonnett said with commodity prices having dropped by 30-40% in some cases and analysts forecasting that prices will not recover in the next three to four years, there is also less inclination by mining houses to invest in infrastructure.

“In Africa of course the situation is compounded as there is already a lack of infrastructure and investing in the necessary facilities to move resources is not feasible in this current economic environment,” he said. “Another key cost that has to be taken into account at all times in Africa is power.

Companies are having to contend with these increased costs and so you are seeing mining houses starting to sell off shares in projects in Africa that are just not viable in the long run.”

Paul Runge of Africa Project Access says keeping costs down will be the key focus in the next year.

“It is going to be quiet on the mining front and we don’t expect to see any big announcements. With the commodity prices so low

mines are going to be focusing their efforts on keeping costs as low as possible while one will also in all probability see some role-players rethinking their situations and re-strategising.”– Liesl Venter

Commodity price sees scaling down of investment

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Power.That is one of the biggest

challenges facing the mining sector across Africa.

“Mining is power-intensive and Africa does not have enough power,” said Paul Runge, managing director of Africa Project Access. “African governments realise they need to invest in power and so there is a definite drive on the continent and we are seeing more and more power projects under way.”

Duncan Bonnett of Whitehouse & Associates agreed, saying the cost of generating power had substantially increased while many countries faced severe shortages.

He said while the collapse of the oil price would benefit those mines running diesel generators, the bigger problem around power generation was negatively affecting mining in general.

According to Runge one

country that has come to realise the importance of power is Ethiopia. “It is one of those countries that is underestimated but they have invested heavily into hydro dam projects to address their power issues. It is one of the countries in Africa that understands the requirements of what it needs to move forward and is making great strides in creating the right environment.”

He said having taken giant

strides in improving power supply the country would soon be an exporter of power. “That is not saying they don’t have challenges to overcome but they are making fast progress.”

Runge said as a whole East African countries were making great strides. “They are doing a lot from a regional perspective – more so than elsewhere in Africa. These countries have achieved far greater degrees of collaboration than any other region.”

Joy Orlek

Nucleus Africa Logistics has embarked on an expansion and

diversification drive to replicate the success it has achieved in the DRC mining industry in new industries and new markets.

The company’s core business has traditionally been in the DRC. “For the past eight to nine years

we have developed a broad understanding of the complex regulations involved in importing into the DRC, ensuring that paperwork is customs-compliant and helping

our customers to avoid paying penalties,”

director Iain Clark told FTW.

“Off the back of this business growth, we set up a consolidation

warehouse in Johannesburg which acts as the

central hub for consolidations

and full loads into the DRC and other southern African states by road and air. We now offer a full turnkey solution that includes procurement, warehousing, customs clearance, roadfreight, scheduled airfreight, chartered airfreight and ocean transport, including full project management.”

However, in order to maintain supply chain control it’s been necessary for the company to entrench its presence in the key markets in which it operates – and it’s gone on a strategic infrastructure development drive.

“In the past we relied on partners and joint ventures, but have taken a decision to develop those into partly or wholly owned subsidiaries which all have some measure of local ownership,” Clark told FTW.

Nucleus has invested in companies in Zambia and Mozambique and is currently finalising negotiations in East

Africa.“We’re trying to create more

of an in-country presence and to replicate what we offer out of South Africa and establish warehousing and consolidation

hubs in key regions.The Kitwe operation serves

the Zambian Copperbelt and the DRC while its Mozambique office is well placed to service the oil and gas industries in northern Mozambique as well as established mining regions.

“We will be creating a similar scenario in East Africa that will serve Kenya, Somalia, South Sudan Uganda and north-eastern DRC,” he said.

“For Nucleus it’s all about managing the process from start to finish – one point

of engagement for our clients,” said Clark. And that’s the value proposition that it has to sell. “We have the experience and expertise to offer a full turnkey solution,” Clark told FTW.

Last year saw significant growth for the company in different sectors and different geographical areas. “While we cut out teeth in mining we have grown in the oil and gas sectors, construction projects, remote camp and security, and humanitarian aid in Africa. It’s all part of our diversification which is creating new opportunities and a positive outlook for the year ahead.”

Turnkey solution provides full project management

For Nucleus it’s all about managing the process from start to finish — one point of engagement for our clients.– Iain Clark

“

Ethiopia gets a headstart in power race

FTW3119SD

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Airlink Cargo has identified expansion opportunities in the southern African

freight market and sees the mining industry as a catalyst for economic development in South Africa, according to executive manager Alwyn Rautenbach.

The airline currently serves approximately 36 destinations in the region and Rautenbach anticipates more opportunities

stemming from mining exploration and development projects in southern Africa, specifically Mozambique.

The mining industry in Mozambique is currently

undergoing a period of rapid growth, said Rautenbach. The country has an array of mineral deposits, including significant gold and coal reserves, as well platinum group metals,

iron ore, graphite, nickel, titanium and uranium deposits.

Rautenbach says Airlink

Cargo has been kept busy on the route to Tete Province – a coal-rich area in Mozambique – providing a cargo service to mining firms such as global miner Rio Tinto.

And Rautenbach is upbeat about further growth. “Mozambique is a new mining country. All projects there are new and have not reached maturity.

“There are many development projects in the mining industry across southern Africa – providing many opportunities for airfreight,” said Rautenbach.

Airlink targets mining industry growth

Mozambique is a new mining country. All projects there are new and have not reached maturity.– Alwyn Rautenbach“


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China’s growth may have slowed down, but the country’s

interest in Africa remains as strong as ever.

According to project expert Duncan Bonnett, a director at Whitehouse & Associates, there is still a lot of interest in African commodities such as coal, iron ore and copper.

“There are a lot of Chinese companies operating in Africa and they have a very strong presence on the continent still,” he told FTW. “But they are definitely not the only players by any stretch of the imagination and are facing real competition from countries such as India and Brazil.”

According to Bonnett the Chinese presence is stronger in some countries.

“In the DRC and Zambia for instance there are strong Chinese inf luences in the copper

fields and in countries like Zimbabwe they have a very strong presence which is expected to increase in the coming years,” he said. “In countries like Mozambique and Tanzania, however, one sees far less involvement and in fact the presence of the Chinese is quite muted.”

He said expectations were that the Chinese would continue to invest in Africa and remain interested in resources from across the continent.

“There are a number of state-to-state agreements in return for infrastructure in place between African governments and the Chinese,” he said.

Lars Greiner, managing director of Greiner Mendi Associates, who works across Africa says the Chinese have

changed the way they operate in Africa in recent years which could give the impression of the Eastern giant being less involved in region.

“The trends now are that when the Chinese become involved in a project they handle the entire project themselves,” he said. “They have also realised that their strength is not in mining but more in infrastructure so there are seemingly more

agreements with governments to provide infrastructure in return for resources.”– Liesl Venter

China trades infrastructure for resources

Where China has the strongest presence.

www.ftwonline.co.za


W hen a leading South African mining engineering project manager and

equipment supplier set its sights on opportunities in China, its first port of call was The Beijing Axis. This China-focused international advisory and procurement firm, which is part of Imperial Logistics group company Resolve, was tasked with gathering intelligence on the competitive landscape of China and Southeast Asia, from both macroeconomic and mining engineering perspectives, and reporting on the client’s competitors in the region.

Kobus van der Wath, founder and group managing director of The Beijing Axis, comments on the project: “The Chinese mining engineering market is one of the fastest growing in the world. Not only is the country a world leader in terms of reserves and the production of several metals and minerals, but in recent years consumption and processing activities have increased dramatically too. As a result of this, many overseas contractors, engineering companies and consultants in the mining and processing industries – including our

client – are seeking to capitalise on the huge opportunities that China’s domestic mining industry offers.

“We identified past trends, forecastedChina’s GDP growth, traced the dramatic rise in mining investment in China, as well as outlined China’s political outlook and relevant government policies. In order to pinpoint the opportunities, we selected and focused on six minerals relevant to the client’s business scope.”

The Beijing Axis’s analysis also included identifying 14 of its client’s foreign competitors, and providing a comprehensive overview of their China strategy, business scope, ability assessment, and major clients and partners.

“When the project concluded, we had equipped our client with the knowledge to make an informed decision on pursuing prospects in

China,” Van der Wath states. “We discovered, for our client, that one of the key success factors in penetrating the China market is to form strategic alliances with Chinese design institutes. Local design institutes have existing relationships with our client’s target market, and are highly favoured when obtaining and upgrading licences,” he explains.

Another revelation for the client was that when operating in China, it is important to maintain a proper mix of Chinese and international talent. The Beijing Axis has continued to provide services to the client for other products.

Cnr Geldenhuis Road & Van Dort Street, Germiston, 1401, South Africa Contact no. +27 11 677 5000www.imperiallogistics.co.za e-mail: [email protected]

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PITFALLS AND PROSPECTS IN CHINA’S MINING INDUSTRY

Kobus van der Wath

James Hall

M BABANE – With crushed stone and coal the only minerals currently

produced in Swaziland, the recent closure of Salgaocar Swaziland, an iron ore mining firm that the Swazi media predicted would revitalise Swaziland’s mining sector, has also affected the country’s rail transport sector

Swaziland Railway’s

bottom line in 2015 will reflect the mine’s closure.

Maloma Collier is Swaziland Railway’s major local coal client, which from the collier’s own siding at Nsoko exports anthracite

to Richard’s Bay.However, transit cargo has become the

principal source of profitability for the company’s 301km of line, particularly freight

of SA origin moving along the 190km

north-south line from Mananga border

post to Golela

border post, from

where freight is again in SA territory for the 215km trip to Richard’s Bay or the 388km trip further south to Durban. Magnetite from Phalaborwa is a major mining product moved by Swaziland Railway.

Transit cargo, some of which originates in inland countries like DRC and Zambia, will be boosted significantly by the opening of a new railway line from Transnet Freight Rail’s Mpumalanga railhead at Lothair SA to Sidvokodvo. The 146km link is now two years away from completion, with work proceeding on schedule, according to Swaziland Railway CEO Stephenson Ngubane.

Transnet Freight Rail expects to dedicate the Lothair link to

mineral transport, especially coal.Swaziland’s transportation

sector was one of the few portions of the small country’s national economy last year that recorded positive growth. The good

performance of Swaziland Railway contributed.

According to the Central Bank of Swaziland, the transport sector grew by 3.5%. This sufficient if not spectacular increase contrasted with all other sectors

of the economy, which contracted last year.

To meet current needs and in anticipation of a larger locomotive and rolling stock stable required for the new line, Ngubane said: “We have taken delivery of four new diesel-electric locomotives and are taking delivery of 75 freight wagons.”

Transit cargo helps boost Swazi rail

Swaziland’s transportation sector was one of the few portions of the national economy last year that recorded positive growth. – Stephenson Ngubane

“


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Mining will continue to see growth in years to come

but the mineral and metal profile is going to change significantly, according to Lara Smith, managing director of Core Consultants.

“There is an increasing trend in the world towards portability and miniaturisation while there is also a far greater move towards the preservation of energy and the environment.”

Rather than the bulk commodities like iron-ore and coal – or precious metals such as diamonds and gold – it will be the lesser-known components in smart phones, tablets and mobile computers that will become the driving force of the mining industry.

“An 11% compound growth is expected over the next three years in the smart phone industry. To make a standard smart phone at least 13 minor metals are required.”

A standard computer chip is estimated to require up to 60

different metals. A scarcity in any of these commodities and modern life as we know it is threatened.

It is the likes of rhenium, rhodium, lanthanum, europium, dysprosium, thulium, ytterbium, yttrium, strontium and thallium that will dominate the market – all components of a smart phone.

Smith said Africa, with its high reserves of minerals and metals, was well placed to continue to dominate the mining sector.

Minor metals will shape the future of mining

An 11% compound growth is expected over the next three years in the smart phone industry. To make a standard smart phone at least 13 minor metals are required.

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– Liesl Venter

With the African mining industry under extraordinary financial pressure,

mining houses are increasingly looking at modernisation techniques to improve efficiency and increase production.

According to Chris Griffith, CEO of Anglo American Platinum Limited, the drop in global demand for commodities has resulted in the current situation of lower prices putting pressure on the industry not only locally but across the world.

“We have seen the price of iron ore drop from $180 per ton to the current $60 per ton price over the past three years while the copper price has decreased by 10% since the beginning of the year alone,” he said. “Platinum prices have not recovered since the 2008 global economic meltdown. There is no denying that there is financial pressure on mining houses. This is further compounded by labour issues, with strikes hitting the

industry hard last year.”He said in an effort to address

these challenges in a holistic manner the industry was more and more looking towards technology as the answer.

“There are continued calls for investment and growth in the mining sector but with low labour productivity, increased pressure for more beneficiation and taxes for governments, and commodity price volatility it is not an easy environment.”

Griffith said this did not mean that mining houses

were squeaky clean and had only been on the receiving end of challenges. “We have had a role to play in the current environment that we face –from over-supplying certain

commodities to the poor allocation of capital leading to investors losing confidence and pulling out in some cases.”

But, said Griffith, there was a growing belief in the

industry that the solution going forward was modernisation.

“Through the development of new techniques and the use of innovative technology we

can improve the efficiency of our operations. Mining needs to leap forward 20 years in the next five. We are moving away quickly from the past conventional labour-intensive underground mining methods that were costly to a far more modernised way of doing business,” he said. “We are on a journey that will see mines become far less energy-reliant and labour-dependent in the future in an effort to address some of the very real challenges that we face.”

Griffiths said while the big players in the market were currently leading the modernisation drive there were opportunities for smaller miners also to introduce some of the new technology.

“It is all about developing

Industry looks to technology to up productivity

It is all about developing more mechanised mining techniques that will ultimately ensure better efficiency and lower costs.“


M ining continues to make a large and growing

contribution to emerging economies, delegates attending the annual Investing in African Mining Indaba in Cape Town heard.

According to a new report by the International Council on Mining and Metals (ICMM), mining can account for 60-90% of foreign direct investment in low- and middle-income countries and 30-60% of total exports. Taxes and other fiscal revenues from mining typically bring in another 3-20% of a government’s total revenues.

According to the report, of the 35 countries most dependent on mining all but Australia and South Korea are developing countries. Of the top 70 a total of 63 are low-income countries that stand to expand their national economies through the investment, exports, taxes and employment associated with mining.– Liesl Venter

more mechanised mining techniques that will ultimately ensure better efficiency and lower costs.”

He said already the benefits of this were being seen at mines where Anglo American Platinum had converted from conventional mining methods

to a fully mechanised operation using low profile equipment – and productivity had increased threefold.

“There are plans in the pipeline that will see the introduction of remote-controlled mining equipment, automated robotic equipment

and other technologies that will significantly change the face of mining.”

He said while this would see fewer people employed in the long run the advances made and the cost efficiencies introduced in operations would be beneficial to mining houses in the long run.

Moving away from conventional labour-intensive underground mining methods that were costly to a far more modernised way of doing business.

Emerging economies benefit

www.ftwonline.co.za


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Liesl Venter

E lectricity is by and large the single biggest challenge facing the mining sector in Africa.

And there is no easy solution as power generation in Africa has become embroiled in politics.

According to Richard Morgan, head of government relations for Anglo American, as mining houses are pushed for more beneficiation by governments the reality is that without power the industry cannot operate and no one will benefit.

A study by the World Bank recently found that the demand for electricity from the mining sector was set to increase

significantly in the coming years with estimates of 23 000 megawatts by 2020.

Mining companies are predicted to spend some $3 billion in the same time to supply their own power.

According to Anita Marangoly George, senior director with

the World Bank, none of this electricity generation is shared with national grids. She says with domestic power infrastructure weak and in light of some 60% of the continent

not having power there was much room for mining houses and national utilities to work together.

“The mining industry may argue that this delivery of power is not worth the risk due to the

current environment, but I would argue that the volatility of commodity prices strengthens the case for mines to partner with national utilities and independent power producers to plan for long term power needs together.”

Morgan said it was important for the development of a plan where governments and mining houses could work towards the same goal.

Mark Bristow, CEO of Randgold Resources, reiterated this saying the lack of an integrated plan on how to move

forward and address the situation was part and parcel of the problem.

“We have talked about this for a long time. We must not confuse meetings and conferences with doing things,” he said. “To make it happen we need a plan and it requires all the role-players. We have to appreciate that we require each other as partners – that we as business want to return and create value and governments want to develop countries. We are aligned and that should be the driver.”

Mines should partner with independent power producers

The volatility of commodity prices strengthens the case for mines to partner with national utilities.– Anita Marangoly George “

February 2015 Mining & Minerals 23FTW6888

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Iron ore will not see much of a recovery in 2015 after falling

to its lowest level since 2009 earlier this year.

With the commodity currently only managing to trade at around $60 per ton, market analysts say this is going to be the case for the foreseeable future.

Speaking at the annual Mining Indaba in Cape Town recently Roger Emslie, principal metals and mining consultant for Wood Mackenzie, said there was little to suggest the picture would change during 2015.

“We have to remember that demand is slower and not necessarily lower,” he said. “It is hard to believe but 2015 has

started even worse than 2014 finished. Having commenced January with iron ore prices above the $70-per-ton mark,

the commodity has seen yet another price reduction.”

Iron ore has systematically been losing ground over the past few years, having dropped from highs of $180 per ton.

He said with the iron ore market

remaining oversupplied the price forecast was being set around $70-per-ton for the year.

“It remains difficult to make a positive case for prices in the short term. Chinese steel mills have cut production in recent weeks due to a combination of

weak demand and planned maintenance and this is feeding through directly to iron ore requirements.”

He said with the imminent holidays in China steel production was set to get worse before it got better. “It is a slightly better picture in the second quarter when the Chinese mills are expected to pick up production.”

Asked about the impact of the low commodity price on iron ore producers, Emslie said it was inevitable that more closures would take place. “We

are forecasting more closures and more asset write-downs. As recent announcements show there’s only so far that cost cutting can go before difficult decisions need to be taken concerning the long-term viability of a mine in a structurally oversupplied market.”

He said with China importing some 66% of the global total of iron ore, the Asian powerhouse was controlling what was happening in the market.

With China importing some 66% of the global total of iron ore, the Asian powerhouse is controlling what is happening in the market.– Roger Emslie

“Poor outlook for iron ore

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Liesl Venter

I nvesting in Africa’s gold mining industry is key to unlocking the economic opportunities on the

continent.According to Mark Bristow, CEO

of Randgold Resources, the mining sector is currently in a sorry state thanks to a commodities crash for which most mining houses did not prepare.

“This sector experienced a virtually unprecedented boom that peaked in 2011 when the market value of the sector was around $2.3 trillion. Golden opportunities were missed to prepare for the bleak times and no one expected to see the turns resulting in the industry now having a market value half that of 2011,” said Bristow. “Over the past twenty years the industry has

been affected by a very real change in the geographic and risk profile of mining. We have made major progress and the development of the African mining sector has achieved much.”

But, said Bristow, it is important to not lose the gains made in the past 20 years, and despite the current slump in the market it is essential to continue to invest in mining on the continent as it remains the key to unlocking the economic potential of Africa.

“To do that we as an industry need to look at developing long-term visions and strategies. Africa’s future needs the mining sector,” he said. “It is important to note that the commodity prices will remain volatile and we will continue to operate in difficult circumstances, facing challenges such as political instability, the lack of power and

infrastructure. Yet the emergence of Africa as a very real global economic player is tangible and can be achieved.”

Bristow said it was important for governments and private companies to work together.

“Governments need to ensure there are safe and stable political environments while mining houses have to guard against exploiting equity markets at the expense of host countries and act in a transparent and open manner.”

He warned that the next few years would not be easy for the mining sector – especially with most mining countries in Africa reforming mining codes and legislation in an effort to get more of the pie.

‘Mining investment key to unlocking Africa’s economic potential’


‘SA ready for investment’South Africa is ready for

investment and despite increased power cuts and dropping commodity prices the government is set to expand its mining industry.

This is according to mineral resources minister Ngoako Ramatlhodi who told some 7000 delegates during the official opening of the annual Mining Indaba in Cape Town recently that no stone was being left unturned to provide a stable environment for investment.

He said a forum where the government, industry and labour were continuously discussing issues

had been set up and was part of the drive to grow the mining sector.

South Africa’s mining sector has been particularly challenged in the

past 12 months with continuous load shedding and a near-crippling strike that brought the industry to its knees.

Ramatlhodi said the five-month-long strike was not the norm and

he did not expect a repetition. He said despite the current

commodity crunch there were opportunities in South Africa’s mining sector. “The weak commodity prices bring with it opportunities to do business.”

According to Ramatlhodi, the government is working hard to address its infrastructure challenges. Admitting that power generation in particular was a problem he said it was a collective issue that had to be solved through collaboration. “Between mining houses and communities and between mining houses and government is where we must collaborate. This will be the actualisation of a win-win situation born of shared values among role-players.”

Ramatlhodi said he was determined to finalise changes to the Mineral and Petroleum Resource Development bill that was sent back to Parliament last month after the president refused to sign it. He said it was key to unlocking the investment the government was striving for in the

mining sector. “We are also looking to separate the oil and gas industry from this bill and will draft separate legislation for this sector.”

He said the government wished to emphasise regulatory certainty to investors.

“We also wish to close the debate around the development price, as indicated earlier. I want to open the boil now so that there is no come-back on policy issues in the foreseeable future. In the current draft the development price is set at the main gate price and this is being contested vigorously. I want us to bring finality to this issue one way or the other, guided by the policies of government, interaction with the industry and legality.”

The issue, which affects the manner in which the government wants to price strategic minerals, has seen Ramatlhodi seek legal council.

The government wishes to emphasise regulatory certainty to investors.– Ngoako Ramatlhodi“

www.ftwonline.co.za


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Liesl Venter

P lan, plan and plan some more.

That is the advice for anyone wanting to

mine in Africa.According to Gregg Smith,

CEO of Frontier Services Group, the unpredictability of the African landscape makes it a difficult operating environment.

“The importance of planning is essential to successful operations. Many locations are remote and difficult to access and being aware of what can happen is crucial,” he said. “Do not wait until the crisis is upon you to then try and find a solution. We have had requests from companies operating in environments such as Burkina Faso or Libya for logistics

solutions when they are in the midst of a crisis. Finding solutions then is not only expensive but very difficult.”

He said integrated logistical solutions were imperative in Africa. “You cannot look at any one aspect on its own. It all has to be part of a greater well-thought-out plan or strategy that in turn has a back-up plan.”

He said it was not unusual to find people using a host of suppliers in Africa as they tried to move cargo across the continent famous for its lack of infrastructure.

“Recently I spoke to a company moving iron ore 15km from the mine to the port. They had more than 27 trucking companies on their books moving the commodity,” he said. “Not only is this an expensive

and difficult to control solution but it comes back to planning. No real thought was given as to how the iron ore was going to be moved until it had to be moved and so they came up with solutions as they moved forward. This has resulted in the situation they now have.”

Smith said nothing was impossible in Africa and it was

more about finding the right solution in any

particular situation.“In Africa there is no one

size fits all solution or answer to challenges. Each situation has to be looked at individually and addressed from that perspective. It can be done, but it requires careful planning.”

Integrated solutions are key in Africa


Expectations of an oversupply of copper are unfounded

and analysts are predicting a balanced 2015 for the industry.

According to Vanessa Davidson, group manager of CRU Group, this will also be the case for 2016 and 2017 after which the market is expected to move into a deficit.

“We don’t see a huge

oversupply hitting the market caused by different projects commissioned and producing at the same time,” she said at the annual Mining Indaba in Cape Town.

Giving insight into the copper industry, she said price forecasts were difficult to make at present thanks to the volatility of the market but expectations were

that prices would reach a trough in 2015.

“We see a bit of a recovery in 2016 and then we see bounce back starting. By 2017 we should see prices in excess of $7000 a tonne with average prices in 2018 around $8000 a tonne. We are very bullish about this metal in the medium term.”

She said copper producers would have to stand strong for at least one

more year before the market would see significant improvements.

Copper mines have in particular been adversely affected by the lack of power in Africa which has driven up operating costs.

With prices on a downward spiral since the beginning of the year, 2015 is expected to be a tough year for the industry.– Liesl Venter

‘Bullish’ about copper in the medium term

www.ftwonline.co.za


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LOGISTICS THE GAME CHANGER - Now Media › NowMedia › ebrochures › FTW › ...China and India remain uncertain, Japan is struggling with a mountain of sovereign debt and a rapidly