With some of the best engineers and geologists at its disposal and guided by a clear long-term business strategy, Lontohcoal is gearing up to become a major coal producer in Southern Africa. Add to this the acquisition of some of the mouth-watering assets in South Africa and Zimbabwe, Lontohcoal is on course to become a significant player in the coal industry in the next few years.
Established only three years ago, this South African coal mining company is going places. With flotation on the Hong Kong stock exchange planned for next year, this young company is destined for great things. Interviewed by South China Morning Post in October, Lontohcoal chief executive Tshepo Kgadima explained that “we are planning an IPO on the Hong Kong stock exchange in the first half of 2011. We are looking to raise $300m-$500m. Our advisors say the company is worth up to $1.5bn.” Samsung Securities (Asia) is advising Lontohcoal on its fundraising options and IPO plans.
Lontohcoal has three main assets in South Africa and one in Zimbabwe. The first is the Kwasa Anthracite Colliery, located on the north east of the town of Piet Retief in the province of Mpumalanga, South Africa. The mine is operational and is being developed to produce 70-80,000 tonnes per month. The second is Hlobane Colliery, situated in the small town of Vryheid in the KwaZulu Natal province of South Africa. This mine will be developed to produce 1.2m tonnes of anthracite per year, making it potentially the largest producer of anthracite in South Africa. The last of the South African assets is Lephalale, situated in the mineral-rich province of Limpopo, South Africa.
The asset in Zimbabwe is in Lubimbi, in Northern Matabeleland. The Lubimbi deposits are particularly important for the South African mining company. Over and above the cost effective methods demanded by open cast mining in this area, the lifetime of the Lubimbi mine is estimated at around 200 years, causing the company to look at long-term operational options. Engineers are currently engaged in scoping studies examining the feasibility of constructing a power plant and a coal-to-liquids plant at the site. When these plans are successfully implemented, not only will this make the company a significant player in the industry, it will mean a lot in terms of infrastructure development and job creation for communities living in the vicinity of the mine.
With a great sense of urgency and a stubborn determination to succeed in a sometimes hostile environment, Lontohcoal has been very busy in Lubimbi. Led by the soft-spoken former investment banker Tshepo Kgadima, the company has accomplished a lot in the past year. “We went on an aggressive drilling and exploration programme in Lubimbi, Zimbabwe, doing more drilling in just three months than had been done on the site in the last 30 years. As a result of this work, we have been able to add over 7.2bn tonnes of coal onto our reserves and resources. Of this, 1.3bn tonnes can be mined by open cast methods, and 35-40 percent of that will be coking coal,” explained Kgadima.
Aware that the biggest challenge facing any new mine is how to get the coal to the end user, Lontohcoal is currently engaged in feasibility studies to quantify the investment that will be required to create a suitable transport infrastructure. The company is budgeting on this work taking around three years. Meanwhile, the company is finalising a transaction to acquire a 51 percent stake in a port concession in Maputo, Mozambique, which will provide storage capacity for 800,000 tonnes of coal. All that is required is to increase the loading capacity on-site. This is the measure of the level of planning done by this emerging miner to become a serious player in the mining industry in the region.
With meticulous planning, Mr Kgadima explains that “in the short term, the plan is to bring the Lubimbi mine into operation and make the first shipment of coal in May 2011. Using the rail link as it is today, the company should be able to transport around 1.5m tonnes a year by truck to the local railway siding at Dete and then by rail to the port at Maputo. By the time we have developed and expanded the mines to produce something in the region of 10m tonnes of coal a year, the railway line should be ready to handle such volumes.”
Lontohcoal’s recent strategy has been to look to the east in response to the economic realities of the 21st century that global future growth lies in Asia. In this regard, the company has established solid partnerships with companies in China and Hong Kong. This is extremely important as the commercialisation of Lontohcoal resources requires partnerships with established companies with requisite financial resources and worldwide networks.
Despite the fact that Lontohcoal is a relatively small emerging miner, it has already accomplished a lot in a short time. It has invested considerable sums of money to develop its assets in South Africa and Zimbabwe.
The company is thinking big and is planning to become a continental player. Mr Kgadima emphasises that since the company’s launch, a number of South African private investors have come on board and that from the beginning of 2010 the focus has moved to wooing Africans to take ownership of the company. “At the moment we have 173 shareholders and their shares are unencumbered, which is a big plus for us as the South African black empowerment experience has been an unpalatable one where shareholders find themselves in a lock-in situation that makes a mockery of empowerment.”
The success of Lontohcoal will not only benefit its shareholders in South Africa, it is turning out to be a vehicle to change the lives of thousands of people in, inter alia, Zimbabwe, South Africa, Mozambique, Zambia and the DRC. The infrastructure that the company is going to help develop in Southern Africa will have a positive impact on the fortunes of many Africans seeking a better life. Lontohcoal will definitely make a worthwhile contribution to the economies of other African countries where it does business.
Although Lontohcoal is a South African company, its vision is to become a major player in Africa in a quest for global conquest. The mission is to create a truly successful African energy company with the motto ‘Energy Supermarket to the World.’ The listing in Hong Kong in 2011 is a crucial milestone in the development of the company. “This is a very important move for us,” says Mr Kgadima. “It will give us access to the Asian investment markets and enable us to raise the $500m funding that we will need to develop large scale anthracite, coking and thermal coal mines. With all the actions we have taken, we believe we have positioned ourselves to become a large-scale mining company in the next few years.”
