Productivity in Anglo American’s coal business in South Africa is 50% below that of Anglo’s coal business in Australia.
As a result, Anglo American CEO Mark Cutifani is pulling out all the stops to improve the South African coal business’ productivity – but constraints include the fewer days worked and the different South African roster, along with South Africa’s logistical limitations and the use of continuous miners rather than longwall mining equipment.
“We’ve gone through a process of benchmarking and we know where the opportunities are,” says Anglo American Coal CEO Seamus French, who has headed Anglo Coal in both countries since consolidation of the thermal and metallurgical coal businesses at the start of the year.
Production of export thermal coal from Anglo’s South African mines increased 6% to 4.3-million tons on productivity improvements at the Greenside, Goedehoep and Kleinkopje collieries in the six months to June 30.
Rio Tinto’s former regional GM for America, Themba Mkhwanazi, who also has Australian experience, has been appointed CEO of Anglo’s Coal South Africa business.
His appointment, which became effective in the second quarter of this year, follows the retirement of Godfrey Gomwe.
Anglo’s primary coal focus in South Africa is on its longest-life mines that have the best margin potential.
These are the Zibulo, Greenside and Goedehoop collieries, says French, who adds that the biggest single difference between the company’s South African coal mines and its Australian coal mines is the unlimited upside that the Australian mines possess because of available Australian infrastructure.
While Anglo’s Australian mines are roughly equidistant from three major coal-export ports, the company’s South Africa mines are restricted to their export allocation at only one port, the Richards Bay Coal Terminal (RBCT).
As a consequence, the company has to be far more selective about its improvement efforts.
“Unless we can get significantly more access at RBCT, we’re limited in terms of the upside potential, which means we have to reconfigure the portfolio around our logistics limitations,” French explains.
Cutifani is confident that 50% of the gap between high Australian coal productivity and low South African productivity in the thermal coal business can be closed by upping the operating model and improving skills – but closing the other 50% is largely dependent on days worked, which South Africa needs to reform as an industry in order to remain competitive.
“On top of that we’ve just got to keep an eye on infrastructure,” Cutifani adds.
Under French, Anglo’s Australian metallurgical coal business has seen a 30% reduction of personnel.
“We’ve seen the positive impact in met coal. It’ll take 12 to 18 months for the same sort of improvements to begin showing through in thermal coal in South Africa,” says Cutifani.
The way in which productivity has improved at Anglo American Platinum’s Mogalakwena platinum mine in South Africa has made the company confident that it can do the same in coal.
“We’ve seen it in South Africa at the Mogalakwena platinum mine – that an individual leader can make an enormous difference very quickly. It’s a 12-month type programme,” says Cutifani, in reference to Richard Cox taking the helm at Mogalakwena and lifting production 23% to record levels in the six months to June 30, on upped mining productivity, better head grade and improved concentrator throughput.
While, in Cutifani’s words, big inroads can be made in operating practices and skills development to make a significant improvement in productivity in South Africa, local managers are likely to find the issue of fewer work days a year a challenge.
Anglo is already three-quarters of the way through implementation of an improved working model at certain South African operations.
Across its entire diversified portfolio, Anglo is on track to achieve a 15% return on capital employed in 2016.
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