Optimum coal value

SA Mining November 2009 48
Optimum coal value
The fourth largest SA coal exporter, 56% black-owned Optimum Coal, is in the process
of transforming. Its coal portfolio is rapidly expanding and its strategy to diversify is far
beyond conception. Laura Cornish spoke to CEO, Mike Teke and COO, Henry White
about Optimum Coal’s current status and forward-looking growth.
Having acquired the massive Optimum Collieries from
BHP Billiton Energy Coal SA (BECSA) in June last year, it
took Optimum less than a year to pay off the debt.
For a privately owned large-scale mine developer, it continues
to classify itself as a cash generator, on the lookout
for new assets and ready to develop new and upgraded
projects, or to acquire additional assets.
As evidence of this, it recently increased its stake in the
Optimum Collieries contiguous property, Koornfontein,
from 5% to 19.2%. The Koornfontein operation owns
1.5mtpa of Richards Bay Coal Terminal (RBCT) entitlement.
An underground operation, it mines the 2 seam currently
but is looking to mine 4 seam to increase its resource by
55mt.
It has good infrastructure, including washing plants and
a rapid load-out facility.
Additionally, Optimum Coal also bought a 9% stake in
diversified mid-tier miner, Metorex and a 26% stake in junior
platinum player, Afarak Platinum – all these transactions
were completed this year.
Optimum Coal’s total RBCT coal export entitlement is
6.5mtpa.
All photographs: On site at Optimum Colliery.
“While coal will always remain our core primary focus,
I am keen to become a larger resources player, extending
further into the PGM sector specifically, but not diamonds
and gold,” says Teke.
The company is currently investing billions of rands developing
a number of projects – all at various stages.
Capital expenditure will remain at a peak until 2011,
after which the company’s investors and shareholders will
realise the fruition of their monetary
and participatory input.
Optimum Coal has a vast
number of shareholders
– the most notable, however,
are its two empowerment
trusts
– the BBBEE
Optimum
Employee
Benefit

Trust (holding 12.5%) and the BBBEE
Optimum Community Trust (also a
12.5% shareholder).
Despite the heavy investment in
its project portfolio, the company
declared an R120m dividend, with
the key aim of capitalising the trusts
to the benefit of the surrounding communities
and Optimum Coal’s loyal
employees. “When our capital expenditure
programme comes down,
the full intention will then be to see
greater cash flow to our employees
and shareholders,” Teke points out.
The CEO, who previously worked
for Impala Platinum, says its opera-
Mike Teke.
tional success lies behind its model of
three foundation principles – safety; tonnes; and costs.
The first cornerstone of the business – safety – is every
bit as important as tonnes produced and cash generated.
Asiphephe or ‘let’s be safe’ is a training programme started
this year which all employees and contractors now have
to undergo.
Training is an essential part of any successful mining
company, Teke notes.
Optimum Coal’s total RBCT coal export entitlement is
6.5mtpa.
THE OPERATIONS
Optimum Collieries – located in Mpumalanga near the Hendrina
power station – is a large-scale, three-seam open-cast,
and, more recently, underground operation.
The 15mtpa run of mine (ROM) complex is underway
with two expansion projects, and possibly a third in the
near future.
With nine draglines on site – ‘complex’ defines its large
scale size – to the extent that it also uses two major mining
contractors – Moolmans and Sentula’s MegaCube, as well
as a local contractor to undertake some ancillary
open-cast mining activities.
Henry White.
OPTIMUM STATISTICS
Screen feed 15.15mtpa
Eskom supply 5.5mtpa
Export & inland supply 6mtpa
BOSHMANSPOORT
The first of two major expansions at Optimum Collieries is
the Boshmanspoort underground project.
With a capital expenditure budget of R600m (excluding
mining equipment) – the mine will access the 2 seam to
provide 4mtpa (ROM).
49 SA Mining November 2009

SA Mining November 2009 50
While all of the necessary infrastructure
required to operate underground
will be completed and commissioned
in January next year, first coal was
extracted just six months after initially
preparing the area.
“Mining and building concurrently
is challenging, but successful in terms
of funding the project,” says White.
The project will have a 12 to14
year lifespan as a board and pillar operation,
and range in depth anywhere
between 35m and 100m.
Because of the waste to coal ratio
and the Klein Olifants River running
through the area, the decision to go
underground was necessary.
The company’s policy is to outsource
all physical underground
mining activity, and local contractor
CoalCor was appointed to handle all
physical mining activity.
KWAGGA NORTH
“This open-cast project is a ROM tonnage
replacement project – which
will only require the transfer of mining
equipment to operate,” White
explains.
What will initially be a one-dragline,
two-seam operation will ultimately be
a four-dragline operation mining about
8mpta (ROM). Life of mine (LOM) is
expected to be between 14 and 15
years.
The project will be developed in
three phases – of which the first is
already complete, including box cut
and related infrastructure.
Phase 2 – currently in progress until
June next year - includes the acquisition
of additional surrounding farms,
as well as the relocation of a small
community and graveyard.
Phase 3, which will commence in
July/August next year, will extend the
entire necessary logistics infrastructure,
including conveyors, tipping
points, etc.
Valued at R720m, the Kwagga
North section will be ‘ready to run’
in June 2011.
OPTIMUM COAL’S WATER
TREATMENT PLANT
Typical with large open-cast mines
(10 000ha of disturbed land to date at
Optimum Colliery), is the accumulation
of affected water.
“A decision was made about two
years ago to construct a water treatment
plant to re-process our water,
and the final evidence will be next
April when the plant is wet-commissioned,”
says White.
A test period will follow, taking anywhere
between three and six months
to complete to verify that the water is
clean enough for consumption.
The objective is to sell all the
re-processed water to the local municipality.
Costing R600m, the 15Mℓ/day
plant will look after Optimum Coal’s
water needs for the next 20 years.
White does, however, mention that
evaluations are already underway to
determine if one plant will be sufficient
going beyond 20 years.
“Unlike most other coal operations,
our water is not acidic, but contains
dissolved salts (sulphates), which are
easier to treat,” White adds.
BROWNFIELD DEVELOPMENTS
VLAKFONTEIN
Situated in the Ermelo coal fields, Vlakfontein
is a 55mt (in-situ) open-cast
thermal coal deposit with the potential
to be a 3mtpa (ROM) colliery.
Two thirds of the coal produced will
be for export, and the remainder for
local power generation.
Exploration drilling has now been
completed, and geological model updating
will run until June next year.
The intention is to commission the
project towards the end of 2011, or
beginning of 2012, says White.
As a truck and shovel operation, the

mine will span between 12 and 15 years, its construction
through to commissioning is expected to cost R700m.
51 SA Mining November 2009
OVERVAAL
Next to Coal of Africa’s Mooiplaats Colliery and the Camden
power station in Mpumalanga, the 203mt (in-situ) thermal
deposit has the potential to produce 3mtpa (ROM) as
an underground (100m – 180m depth) operation.
It has relatively thin seams when compared with conventional
coal mines, but will be mined using the common
board and pillar mining method. The final phase of exploration
is nearing completion.
MPEFU AND NEKEL (LIMPOPO)
Far down the pipeline, these two Limpopo-based projects
are still early-stage prospects. The speed at which they will
be developed is largely dependent on how the infrastructure
in the area is built up.
White already confirms that each prospect is a ten-yearplus
mining project.
The 160mt Mpefu thermal coal project, or 66mt coking
coal deposit, will be an open-cast and underground
operation: 13 holes of a 40-hole drilling programme have
been completed.
Optimum has a 51% stake in Nekel, a deep coal deposit
with coking coal potential.
An exploration drilling programme is currently being
prepared, and information gathering is in progress with the
Council of Geoscience.