|
As noted in the Chairman’s statement, 2008 was a record year for Bisichi in
South Africa. Our direct mining asset, Black Wattle, enjoyed its most profitable
year ever. It is important to stress that most of this profit was made in the
second half of 2008. This was as a result of open cast mining coming on line in
April 2008, when we were able to improve production and quality at Black Wattle
Colliery even as international commodity markets started to collapse. We will
continue to see the value of the opencast operation contributing strongly to
Black Wattle’s profitability in 2009.
Production
The effect of open cast on yield, quality, and profitability has been immediate
and continuous. Total run of mine production in 2008 was 1.31 million metric
tonnes, but the trend for the second half (when the open cast was in full
commercial production) was closer to an annual production rate of 1.5 million
metric tonnes. Given the reliability and flexibility of the open cast
operations, we have been able to increase production to a regular 130,000 metric
tonnes per month.
During 2008, the number of underground shifts was reduced from three to two. We
expect, after nearly five years in operation, that the continuous miner section
will come to the end of its operational life in 2009. Any reduction in tonnage
from the closure of the continuous miner section will be made up from the open
cast section and the potential buy in of coal.
An intensive capital investment programme was carried out at the washing plant in
2008. In addition to increasing productivity and efficiency at the plant, the
investment programme will also expand the capacity of the washing plant to
170,000 metric tonnes per month. This expansion is scheduled for completion in
the second quarter of 2009. The enhanced plant will give us the opportunity to
increase production from our own operations or to purchase coal from nearby
operations which do not have their own coal washing facilities.
Markets
2008 witnessed one of the most volatile periods in the international coal market
in decades. At the beginning of 2008, the average weekly price of Free on Board
(FOB) Coal from Richards Bay Coal Terminal (API4) stood at nearly US$100.00 per
metric tonne. By June 2008, this had increased to US$140.00 per metric tonne,
peaking at over US$180.00 per metric tonne by August. By the end of the year,
the API4 price had fallen to US$75.00 per metric tonne. API4 currently trades at
about US$61.00 per metric tonne.
In late 2007, we fixed our export coal price until the end of 2009 for the
majority of our export coal with one of the the world’s largest commodities
traders. While the bulk of our export volumes are covered by this fixed price
contract, there will be some incremental volumes sold on a spot basis which will
reflect the new international prices.
Domestic prices benefited from the sharp rise in international coal prices and we
achieved significant price increases in 2008. These prices are now beginning to
reflect the downturn and we anticipate having to reduce our prices for our
domestic steam coal product. As a result of the collapse in global steel prices,
the ferrochrome industry has effectively ceased production in South Africa. As a
consequence, we do not anticipate supplying large volumes of low phosphorous
coal to the ferrochrome industry in 2009.
Health, Safety & Environment (HSE)
Black Wattle is committed to creating a safe and healthy working environment
for its employees, and the health and safety of our employees is of the utmost
importance. In addition to the requisite personnel appointments and assignment
of direct health and safety responsibilities on the mine, a system of Hazard
Identification and Risk Assessments has been designed, implemented, and
maintained at Black Wattle.
Health and Safety training is conducted on an ongoing basis. Supervisors and
about 60 percent of employees up to date have received training in hazard
identification and risk assessment in their work areas. A medical surveillance
system is in place which provides management with information used in
determining measures to eliminate, control and minimalise employee health risks
and hazards and all Occupational Health hazards are monitored on an ongoing
basis.
A Health Safety and Environment Manager was recently appointed. The key
performance targets of the HSE Manager are:
- To eliminate, control and minimise the risk to all employees at Black
Wattle.
- Effective management and control of contractor activities at Black Wattle from a
HSE perspective.
- Develop, implement and monitor the Risk and Change Management process.
- Ensure compliance of HSE system to legal and other requirements.
- Develop, implement and maintain together with management team a HSE strategy to
ensure continual improvement of the company’s HSE performance.
- Develop, implement and maintain an investigation system to determine the
immediate and underlying causes of incidents.
Various systems to enhance the current HSE strategy have been introduced as
follows:
- In order to improve hazard identification before the commencing of tasks, mini
risk assessment booklets were rolled out to all mine employees and long term
contractors on the mine.
- In order to improve the current reporting practice of incidents on the mine,
Initial reporting of incidents booklets were handed out to all employees and
contractors.
- In order to capture and record investigation findings from incidents, an
incident recording sheet was introduced to line management and contractors.
- Hazard Identification and Risk Assessment training was presented to line
management, Head of Department’s and contractor representatives.
- A HSE ‘contractor pack’ was introduced to all contractors working on Black
Wattle.
- A weekly labour return form was introduced to all contractors.
- A Plan, Do, Review system for all Heads of Department was introduced to
encourage managers to take ownership of HSE matters.
- In order to effectively control jobs over weekends that require additional risk
assessments to safely perform tasks, a weekend work register was introduced on
the mine.
Environment Management Programme
Under the terms of the mine’s Environmental Management Programme approved by the
DME, Black Wattle undertakes a host of environmental protection activities to
ensure that the approved Environmental Management Plan is fully implemented. In
addition to these regular activities, Black Wattle regularly carries out
environmental monitoring activities on and around the mine, including evaluation
of ground water quality, air quality, noise and lighting levels, ground
vibrations, air blast monitoring, and assessment of visual impacts.
Community Support and Social Development
Black Wattle is an active participant in the Steve Tshwete Municipal Area, the
locality where many of the mine’s employees reside. Black Wattle regularly
provides municipal services to our surrounding community, including waste
removal, road repair, transport, provision of winter fuel supplements, and
emergency water supply assistance.
Black Wattle has continuously provided ongoing support to the local Evergreen
Primary School, including the construction and maintenance of a perimeter fence,
the electrification of main school buildings, the construction of offices and
repair of school facilities, and support for the employment costs of additional
school staff.
Procurement
In compliance with the Mining Charter and the Mineral and Petroleum Resource
Development Act, Black Wattle has implemented a BEE-focussed procurement polic
which strongly encourages our suppliers to establish and maintain BEE
credentials. At present, BEE companies provide approximately 66 percent of Black
Wattle’s equipment and services. We closely monitor our monthly expenditure and
welcome potential BEE suppliers to compete for equipment and service contracts
at Black Wattle. Black Wattle also sells much of its coal products to empowered
companies as evidenced by our long term sales agreement with a BEE company for
the purchase of our discard product which is then sold to the national power
utility Eskom.
Employment Equity
Black Wattle is committed to achieving the goals of the Employment Equity Act.
Presently, over 13 percent of Black Wattle’s workforce is female, which includes
women working as artisans and mining equipment operators. Black Wattle’s
Workplace Skills Plan and Annual Training report has been approved by the Mining
Qualifications Authority.
Skills Training
Black Wattle has constructed a computer- equipped training centre which
supports the mine’s Adult Basic Education and Training (ABET) programme,
provides HIV/AIDS education and carries out other continuing education
programmes for the mining workforce. A Training Manager has been appointed to
lead training activities on the mine.
People
In April 2008, Luis Pinel was appointed General Manager of Black Wattle. Luis
has made a substantial contribution to Black Wattle’s performance during the
year. Luis has made a number of key senior appointments on the mine, including
that of Nic Bessenger as HSE Manager. Nic Bessenger’s key role on the mine is to
manage all HSE functions as well as safety related training activities.
Prospects
I cannot emphasise enough the value of having a profitable and fully operational
mine in the current environment. Many developing mines have been delayed or
stopped altogether because of lack of finance and the collapse in international
commodity markets. While the prices for coal have fallen we prudently fixed the
price for much of our export coal in 2007 until towards the end of 2009.
Furthermore, open cast mining has fundamentally changed the cost structure and
the level of productivity at Black Wattle. Going forward, we are presently
submitting additional applications for open cast permission which will extend
the life and improve productivity at the mine even further. I am confident that
2009 should be successful for our South African operations.
ANDREW HELLER
Managing Director
|