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Londani Coal – Excellence as standard

It is no secret that South Africa is blessed with an abundance of natural resources, but for all its reserves of gold, diamonds, uranium and iron ore, it is difficult to dispute that by measure of importance that coal is king.

 

With vast reserves of coal and a rich coal mining heritage stretching back over a century, the country has a powerful relationship with this crucially important mineral that has facilitated industrialisation in every corner of the globe since the 19th century.

The numbers speak for themselves: South Africa is a top-seven global coal producer responsible for 9% of the world’s total coal exports, having produced over 258 million tons of coal in 2019 for both the export and inland markets. Employing close to 100,000 direct workers, the industry generates substantial foreign exchange income for the South African national coffers and, most importantly, provides the vast amounts of energy needed to power South Africa’s economy.

The essential nature of coal mining has proved lucrative for the miners with the skills, professionalism, and strong leadership needed to operate mining companies to meet the energy-hungry demands of international and domestic markets.

To be successful, you have to know which market you are aiming at – inland, export, or both. Delivering to the export market is a hugely complex undertaking, logistically speaking, requiring an effective, efficient corporate structure and a knowledgeable, experienced team with the necessary technical expertise. The risks are substantial, but so too are the rewards,” explained Mehmet Selim Kaymak, CEO of Londani Coal.

Elaborating on this further, Londani’s COO, Etienne Jooste, continued: “We serve the export as well as inland coal markets. Whilst a high proportion of our production is designated for the high-quality sized coal export market, predominantly for Asia, Europe and West-Africa, we are increasingly focusing on servicing selected clients within the inland market. To be successful in the current world economic climate, there is a fine balance that needs to be maintained between export and inland sales.

Our current inland market, which we aim to develop more, is mainly focused on thermal coal for electricity generation, feed stock for the liquid fuels and chemical industry, local manufacturing as well as food producers. We recently concluded two termed supply agreements with local blue-chip companies in the metallurgical space with the aim on an increased long-term supply agreement.”

Since it was established in 2006, Londani Coal has grown to become one of South Africa’s most highly regarded, dynamic small-cap miners, built upon foundations comprised of strong financials, a capable and experienced 380-strong workforce, and a first-rate corporate structure designed to both maximise operational efficiency and excellence, and facilitate innovative practice.

From its Head Office in Middelburg, Mpumalanga, Londani Coal is in touching distance of Nndanganeni Colliery, located 23km east of Middelburg in the Witbank/Middelburg coalfields. The complex consists of two open-cast mining pits with an on-site DMS processing plant.

Londani’s star has certainly risen in recent years following the 2017 recommissioning of Nndanganeni Colliery, and yet the company has not been spared from the challenges facing the industry which, while essential to South Africa’s prosperity, has found itself increasingly squeezed from all sides. Changing attitudes towards use of fossil fuels and the rise of renewables, combined with slowing demand for commodities in recent years, has resulted in a 15% net decline in industry investment over the past decade. And then there is the COVID-19 crisis which has wrought chaos across the world and decimated global trade.

Being a small-cap mining operator, carries both advantages and disadvantages under such economic conditions. Thanks to its size and structure, Londani Coal possesses the agility and nimbleness required to be flexible at short notice – a highly advantageous attribute for any business seeking to meet the fast-changing demands of the current volatile coal market, and one not possessed by larger traditional industry players.

On this, Selim and Etienne explained: “In the current economic climate, flexibility to adapt products and a quick turnaround time on decisions while delivering at expected customer requirements are key. Being a junior miner, we strive to provide products and services aligned with world-class standards.

The said standards are entrenched in our company culture and operating methodologies and reflects in all facets of business including operations, safety and legal compliance. We place a high focus on safety and health of our employees, suppliers and stakeholders. Ultimately, it is our license to operate.

On an operational level, we have optimised our mining and resource management processes to minimise coal losses and focused on efficient mining methods that resulted in significant coal gains compared to geological models.”

In the face of such instability and large, erratic price fluctuations that, for the time being, at least, seem to characterise the ‘new normal’ post-COVID-19 world, Selim has instilled a “back to basics” principle that is entrenched throughout Londani’s operating model.

With the objective of maintaining team focus on critical areas of the business and ensuring that operational and senior management personnel are close to the coal face where value is generated, this strategy is in essence one which streamlines operations, optimises internal efficiencies and improves safety on-site. Doing more with less translates to a lower cost per ton of coal produced and ultimately an improved bottom line – a difficult goal in an industry so capital intensive as mining, but certainly an achievable one.

Investment in its workforce and the utilisation of cutting-edge technologies are at the heart of this drive and as Etienne has observed, the company is reaping the rewards as a result:

We have expanded on our team of highly experienced individuals which were selectively sourced to fit in with our company culture to best support our business model objectives and executing our proven operating methodologies. We will continue to strive to retain and attract the best skills available in our operating market.”

He expanded further: “With regards to technology, on the safety front, active vehicle tracking, and camera monitoring has provided us with much needed info to prevent safety infringements and also to be much more pro-active. On the other hand, investigation of incidents, with the aid of the said technologies, has aided a lot in identifying root causes and to install permanent corrective actions or measures to prevent incidents.

On production and measuring, we make active use of fly over surveys and by partnering with the industry leaders in the field, measuring, images and 3D modelling has aided a lot in reporting on and planning of our operations to extract full value and to make our operations as efficient as possible. Realtime data is used in our costing models, where each aspect of the operation can be quantified and qualified.”

In an environment of such instability and uncertainty, making medium to long-term plans is fanciful, although there is one objective going forward for Selim and Londani Coal that he is unerringly focused on achieving growth.

Thanks to its sound financials, reputation for excellence and world-class capabilities, there is a strong appetite for growth within Londani, that is primarily centred around increasing its current coal reserves and adding new and lucrative projects to its existing portfolio. Being the capital intensive industry it is, over the coming 18-months and more, Londani Coal intends to augment ongoing organic growth as well as exploring opportunities for joint ventures and partnerships that will allow the company to expand its footprint and lift its operations and production capacity to the next level.

We are market-proven, and the foundations that we are built upon are strong. So long as we maintain ourselves, opportunities will present themselves regardless of market conditions,” concluded Selim.

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