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Cluster:
Mining
solutions (explosives)
While
the year 2000 proved disappointing for
African Explosives (AEL)
in terms
of financial results, it was marked by a number of positive strategic
and operational developments. Significant progress was made on key issues
related directly to AEL's stated objectives and defined growth strategy.
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Graham Edwards
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Penetration
in Africa
With
established operational assets in South Africa, Ghana, Zambia, Tanzania
and Botswana, AEL continued to focus its African growth strategy
on new business opportunities in other countries on the continent.
It extended its market penetration in West Africa, winning new contracts
with the Morilla Gold Mine in Mali and the Siguiri Gold Mine in
northern Guinea. Main existing contracts in Ghana were also renewed.
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As a result, the company
is establishing a new modular bulk emulsion manufacturing facility in Mali
to service new contracts and to supply surrounding potential markets in
other West African countries. The new plant, with a planned production capacity
of up to 1 000 tons of emulsion per month, is scheduled to come on
line towards mid-2001.
In
East Africa, AEL secured new contracts with the Williamson Diamond Mine
and the Bulyanhulu gold project in Tanzania. This means that the company's
plant in northwestern Tanzania, originally established to meet the bulk
explosives requirements of the Geita gold mining project, is expected
to reach single-shift capacity early in 2001, a year after its official
opening.
In
Zambia, privatisation of the mining industry in mid-2000 triggered further
revitalisation of the explosives business, representing new opportunities
for AEL. The company is also exploring various expansions in some 20 other
countries in East, West and North Africa.
International
exports
AEL
has been actively engaged in developing its export potential in South
America. In both Chile and Peru, product trials are under way as a prelude
to a planned entry into the Chilean and Peruvian initiating systems markets.
Future business resulting from these initiatives would represent a significant
link between Africa's leading producer of explosives on the one hand,
and the fastest growing explosives market in the world, on the other.
AEL
continues to pursue other options for expansion of its products and services
elsewhere in the world and alliances with other international explosives
companies are being sought for this purpose. Such interaction will enable
the business to become more integrated into the global explosives industry.
Development
of international electronic detonator markets
Significant
progress was made in AEL's quest to consolidate its position as the world's
leading supplier of electronic detonators. The company's electronic detonator
business has grown steadily, with volumes at end 2000 more than 60 per
cent above the level at the beginning of the year.
In
2001, an intensive initiative to assess international markets will be
sustained. Specific product development has been undertaken for this purpose
and various product trials, specially tailored for conditions in relevant
export markets, are under way.
Improved
internal efficiency
This strategic leg
is concentrated on such aspects as ongoing procurement of technically
advanced plant, processes, products and services; higher quality and better
safety levels; and greater industry rationalisation.
It is pleasing that
AEL succeeded in maintaining its position as Africa's leading explosives
producer, notwithstanding difficult trading conditions in the explosives
and allied industries. In the process, a number of meaningful developments
included:
-
improvements
in product quality, particularly in capped fuse;
-
further
improvements in safety performance with excellent safety statistics
at all sites, including Ghana, Zambia and Tanzania;
-
achievement
of on time, in full (OTIF) delivery to customers, above 98 per cent.
2000
performance
Sales
continued to grow but profits declined due to markedly higher input costs
that could not be passed on in full to the market because of competitive
forces. The price of ammonia, the major cost component for all explosives
manufacture, more than doubled between the beginning of 1999 and the end
of 2000. The second biggest input cost, that of diesel, is currently at
record highs.
Overall
sales rose by more than 2 per cent, helped by the increasing proportion
of sales denominated in US dollars.
The
new operation in Tanzania contributed a full year's sales and a break-even
trading position; AEL's patience in Zambia was rewarded and during January
2001 debts outstanding since the privatisation of ZCCM were collected
in full. Sales into the DRC were at a low level, but the company remains
well positioned to exploit any upturn in the market. Sales were lower
in Ghana and Zimbabwe, although AEL maintained market share.
Opportunities
to rationalise the cost base continue to be pursued and underlying savings
in excess of R30 million were realised during the year.
Solutions
focus
AEL
is increasingly focused on providing innovative blasting solutions for
the mining, quarrying and construction industries. Divisions such as the
specialist Blast Consult advisory team, together with value-adding services
consultants and trainers, partner with customers to tailor-make solutions
required for specific blasting problems.
Another
meaningful blasting solution at an advanced stage of development is AEL's
Threshold Blasting method. This technology, backed by the company's expertise
and products, has the potential to revolutionise mining by providing continuous
24-hour blasting, as opposed to conventional cyclical operations.
The
way forward
Against
this background, AEL faces with confidence the challenges of 2001: continuing
development of technical and service capabilities to deliver solutions
to all customers; acceleration of the strategic thrust into electronic
detonators; continuing expansion of operations both in Africa and
further afield; ongoing improvement of technology, quality and safety;
and reduction of costs and non-value-adding services.
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