Mining review
As noted in the Chairman’s statement, the
challenging environment experienced in
the first half of 2010 by Black Wattle our
direct mining subsidiary, continued into the
second half of 2010. Although Black Wattle
continued to mine opencast coal, buy-in coal
was stopped and overall production was
limited as a result of a shortage of railway
trucks in the second half of the year. This
together with the strong South African Rand
and lower market prices had a material effect
on Black Wattle’s profitability.
As we continue into 2011, the effect of these
factors has been mitigated by the significant
improvement in market prices and the
commencement of mining of higher quality
opencast reserves.
Production
Although production through the washing plant
increased in 2010, with total run of mine production
of 1.46 million metric tonnes for the year (2009:
1.26 million metric tonnes), overall monthly
production through the washing plant decreased
from 135,000 metric tonnes in the first eight
months of 2010 to 94,000 metric tonnes in the
last four months. As stated above, this decrease
in production was a direct result of a shortage of
railway trucks in the second half of the year.
As noted in our previous annual report, Black
Wattle’s remaining opencast permissions were
granted in February 2010. This represented an
important landmark in the mine’s development
and, going forward, gives Black Wattle the
ability to mine strategically and more flexibly its
remaining reserves.
In addition to its existing reserves, Black Wattle
has concluded an agreement to purchase run
of mine coal from an opencast reserve of coal
contiguous to Black Wattle’s existing opencast
mine. The reserve, which is expected to make up
approximately half of Black Wattle’s overall monthly
production is made up of high quality run of mine
coal with a lower average stripping ratio and a
higher yield than the reserves we mined in 2010.
We are pleased to report that mining of this reserve
commenced at the end of last year and overall
production is steadily being increased. Much of the
new reserve comprises very low phosphorous coal,
which we can sell at a premium into the domestic
metallurgical industry and delivery of this coal is not
reliant on the performance of the rail provider as
the coal is supplied by road transport.
Markets
International coal prices remained relatively stable
in 2010 in comparison to the extreme volatility
seen in the international coal market in 2009. The
average weekly price of Free on Board (FOB) Coal
from Richards Bay Coal Terminal (API4) remained
in a range of US$85.00 to US$95.00 per metric
tonne for the most of 2010. However, over the
same period, the South African Rand continued to
appreciate by over 10% against the US Dollar. This
is in addition to the 21% appreciation of the Rand
experienced in 2009. In addition to the downturn
in the Rand denominated international coal price,
domestic prices continued to decrease in 2010
resulting in a reduction in prices in all our domestic
steam coal markets.
Going forward into 2011, the international coal
price has significantly improved with the price
of FOB coal from Richards Bay Coal Terminal
increasing to approximately US$120 per metric
tonne at the time of writing this report. In addition,
the domestic price has increased over 12% from
the prices we achieved in 2010. Our ability to
diversify our product will allow us to sell to markets
which give the highest return and we look forward
to taking advantage of this as production from our
new opencast reserve increases in 2011.
Shareholding
As noted in the Chairman’s statement, we are
very pleased to report that Vunani Limited has
concluded the purchase of a 37.5% shareholding
in Black Wattle. We are proud of our longstanding
commitment to Black Economic Empowerment
in South Africa and we see this transaction with
Vunani as the first of many we will do together in
South Africa. Vunani Limited is a publicly listed,
black owned and managed company.
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 required
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 95 percent
of employees to date have received training in
hazard identification and risk assessment in their
work areas.
A medical surveillance system is also in place
which provides management with information used
in determining measures to eliminate, control and
minimise employee health risks and hazards and all
Occupational Health hazards are monitored on an
ongoing basis.
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 have been distributed to all mine
employees and long term contractors on the mine.
- A Job Safety Analysis form has been introduced
to ensure effective identification of hazards in the
workplace.
- 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 given to all levels of employees, line
management, Head of Departments, contractor
representatives and contractor employees.
- In order to control jobs effectively over weekends
that require additional risk assessments to safely
perform tasks, a weekend work register was
introduced on the mine.
HSE performance in 2010:
- Black Wattle had a 64 percent reduction in the Lost
Time Injury Frequency Rate compared to 2009.
- No new cases of Occupational Diseases Certified
were recorded.
- Zero cases for the Compensation for
Occupational Diseases were submitted.
- Zero machines operating at Black Wattle
exceeded the regulatory noise level.
Environment Management Programme
Under the terms of the mine’s Environmental
Management Programme approved by the
Department of Mineral Resources (“DMR”), Black
Wattle undertakes a host of environmental protection
activities to ensure that the approved Environmental
Management Plan is fully implemented. In addition to
these routine 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.
Black Wattle Colliery has improved its water
management tremendously by erecting a new
pollution control dam as well as upgrading existing
dams in consultation with the Department of Water
Affairs and Forestry.
Black Wattle Colliery Social and Labour Plan
(SLP) progress
Black Wattle Colliery is committed to true
transformation and empowerment within the
company as well as poverty eradication within the
surrounding and labour providing communities.
Black Wattle is committed to providing
opportunities for the sustainable socio-economic
development of the company’s stakeholders:
- Employees and their families, through Skills
Development, Education Development, Human
Resource Development, Empowerment and
Progression Programmes.
- Surrounding and Labour sending communities,
through Local Economic Development, Rural
and Community Development, Housing and
Living Condition, Enterprise Development and
Procurement programmes.
- Empowerment partners, through Broad-Based
Black Economic Empowerment (BBBEE) and
Joint Ventures with Historically Disadvantaged
South African (HDSA) new mining entrants and
enterprises.
- The Company, through ongoing consultation
with stakeholders to develop strong companyemployee
relationships, strong companycommunity
relationships and strong company-
HDSA enterprise relationships.
The key focus areas in terms of the detailed SLP
programmes were updated as follows:
- New implementation action plans, projects,
targets and budgets were established through
regular workshops with all stakeholders.
- A comprehensive desktop socio-economic
assessment was undertaken on baseline data of
the Steve Tshwete Local Municipality (STLM) and
Nkangala District Municipality (NDM).
- The current Black Wattle Colliery Local Economic
Development (LED) programmes were upgraded,
and new LED projects were selected in consultation
with the key stakeholders from the STLM.
- An appropriate forum was established on the
mine and a process initiated for the consultation,
empowerment and participation of the employee
representatives in the Black Wattle Colliery SLP
process.
Procurement
In compliance with the Mining Charter and the
Mineral and Petroleum Resource Development Act,
Black Wattle has implemented a BEE-focussed
procurement policy which strongly encourages our
suppliers to establish and maintain BEE credentials.
At present, BEE companies provide approximately
52 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
Eskom, the national power utility.
Employment Equity
Black Wattle is committed to achieving the goals
of the Employment Equity Act and is pleased to
report the following:
- Black Wattle Colliery has exceeded the 10 percent
women in management and core mining target.
- Black Wattle Colliery has achieved 15 percent
women in middle to top management.
- Black Wattle Colliery has achieved 15.1 percent
women in core mining.
- 86.2 percent of the women at Black Wattle
Colliery are HDSA females.
- Black Wattle Colliery has achieved a
40 percent participation level of HDSA’s
in overall management.
Prospects
Black Wattle is a fully operational opencast mine
with strong management, existing infrastructure
and markets in place. Along with the expansion
of the washing plant and upgrade of the railway
siding, various cost cutting and operational
programmes have been undertaken at Black Wattle
in order to ensure maximum productivity; yield and
profitability. As a result, the group is in a strong
position to take advantage of the improvement in
market prices and the increased production.
Going forward, I am confident that 2011 should be
a successful year for our South African operations.
Andrew Heller
Managing Director
15 April 2011