Sasol Mining
strategic business unit

Total saleable production volumes, in line with customer demand, rose marginally to 49,5 million tons (Mt) (2000: 49,4 Mt). Sasol Mining supplied 39,3 Mt to SSF (2000: 40,5 Mt) and 6,4 Mt to SCI at Sasolburg (2000: 6,2 Mt). Exports accounted for the balance of 3,6 Mt, an increase of 14% on the previous year’s 3,2 Mt.

The higher international coal prices increased the export business’s contribution to operating profit to R235 million. The Twistdraai Export Colliery and coal beneficiation plant are operated to world-class standards with emphasis on improving yields and productivity. Exports remain integral to the company’s growth ambitions.

Improved cost management and productivity  The pursuit of smarter cost containment continues to bear fruit. The unit operating cost increase was contained to 5,6%, which is below the inflation rate. Cost increases were restricted to 3% in the previous financial year. Disciplined cost management has helped to improve the return on invested capital (ROIC) from 5,1% to 15% in three years. Such feats are commendable considering the rand’s depreciation against the US dollar. A substantial portion of mining equipment spares are bought from American suppliers.

The mining operations are striving to achieve a zero unit cost increase. Central to the pursuit of optimised cost management is the willingness to benchmark itself against other collieries. The company recently invited comparative South African collieries to submit definitive data to develop what could become a regular industry-wide benchmarking exercise. Performance indicators include machine productivity, human productivity, cost per ton of production and cost per sales ton.

On the basis of the initial datasets, the collieries, combined, are ranked in the top quartile for productivity and cost-effectiveness. The company intends to participate in an international benchmarking exercise. The objective is, by way of the exchange of best practices, to further raise business and technical performances.

Some performance gains are attributable to higher employee morale, as well as new investments into more efficient coal-mining and handling systems and technologies. Less profitable underground sections at the Secunda Collieries were closed to get the same production output from less sections.

Since implementing renewal, the average tonnage produced by a continuous-miner in one shift has risen by 61,7% in three years. Per-capita productivity has also improved. Taking advantage of natural attrition, the employee complement was reduced by almost 13% during the past three years. In spite of this reduced complement, overall saleable production increased by 6%. This equates to a per-capita tonnage increase of 21%.

Sasol Mining has been pursuing, with increasing success, several new opportunities to enhance the value of its human capital. Besides providing extensive skills training and improved workplace mentoring, the company has enhanced employment policies and financial incentives. Comprehensive career development plans and opportunities are being developed for each employee.

These promising initiatives are being pursued while successfully promoting workplace diversity and employment equity.

Enterprise management system designed  To capture new business optimisation opportunities in line with a wider Group initiative, an SAP-enabled enterprise management system is being designed. The investment in this computer-based system is aimed at improving the management of all information systems. It will also eliminate the barriers between business functions such as the financial, procurement, human resources, planning and production management.

The objective is to evolve from a function-driven organisational system to a process-driven business system. This shift will help to unlock new opportunities across the entire value chain, including the realisation of lower costs per ton. Participation in the promising Group-wide NetGain Material Management initiative is helping to reduce the cost of ownership.

Sharp focus on technology enhancement  Technology support capabilities have advanced significantly in recent years. An estimated 60% of all on-mine costs are directly impacted by engineering and maintenance processes. Bold new measures are being planned to further improve the management of all engineering and maintenance costs.

The underground pillar extraction method has been improved greatly. The new method is safer, more productive and reliable in geologically disturbed areas. The Nevid method (named after the two employees who developed it, Neels Joubert and David Postma) has been tested for more than a year. It is now embedded as the company’s new total-extraction mining method. This method enables production personnel to safely remove 72% of the coal reserves, while limiting severe strata failures and future ground water inflows.

Several new shaft systems are being sunk for Secunda Collieries. Raise boring has been selected as the sinking method to minimise capital cost and construction time. The requirement of a 7,1 m diameter shaft resulted in Rucbor, the contractor, developing a custom-designed reamer head in conjunction with Sasol Mining. The largest shaft previously bored was 6,1 m in diameter, making this a world-first.

Future growth opportunities  The joint feasibility study with Anglo Coal is progressing to plan. The two mining businesses initiated a study in the previous year for the potential co-development of Anglo Coal’s Kriel South reserves near Secunda. These reserves could be mined in future to supply SSF coal at a rate of 9 Mt a year. A final decision is expected during 2002.

Sasol Mining also concluded strategic discussions with Ingwe Coal, another major coal-mining company, and a substantial block of reserves has subsequently been acquired from Ingwe. These reserves are immediately next to the Middelbult operations. This acquisition will contribute substantially to the company’s twofold objective of expanding the Secunda reserves and reducing capital and operating costs.

The newly acquired reserves will at first be accessed directly from existing Middelbult production sections without incurring major short-term costs. This will contribute towards postponing the replacement of existing shaft systems, thereby providing substantial medium-term financial benefits.

The expansion of the promising coal export portfolio is a growth option once Sasol introduces natural gas as a feedstock to its plants in 2004. Sasol Mining is likely to keep supplying SSF at a rate of about 40 Mt a year for the foreseeable future. The Sasolburg operations, however, will be downsized considerably in 2004 to supply an estimated 1,9 Mt a year of coal to SCI’s on-site utilities.

Prospects  The positive profit growth trend is expected to continue in the year ahead, provided the export coal price remains close to its current level. A strong base of skilled and diligent employees will enable the company to excel. Business renewal and the business-enhancement initiatives will remain the main vehicles for improvement.