Diversification has been key to the success of the strategy followed by mining consultants VBKom, writes Leon Louw.
Your company VBKom has followed a diversification strategy ever since you and four other mining engineers from the University of Pretoria decided to start your own mining consultancy 10 years ago. What was the initial focus of the company?
When we developed the business plan for a mining consultancy house, our initial focus was on opencast mining services specifically. Although all five of us had a strong underground background, we felt there was a big gap, and a big demand, especially in Africa, for consultants in the opencast environment. Our research suggested that most of the mining companies in Africa used Australian or Canadian contractors and consultants for surface projects. On the other hand, the underground space in Africa was well known and well covered by South African underground expertise, with years of experience in deep-level mining. So, we were initially known as opencast specialists. Over the years, however, we have diversified operationally and geographically, and ironically, underground mining has become a key component of our wide range of offerings.
The company started out in 2008 — probably the worst time for any mining-related venture to see the light, bearing in mind the near meltdown of the global economy. VBKom made it through those tough times; what has been the extent of the recovery since then?
The year 2008 was extremely difficult, but we made it through the worst downward cycle in the past 10–20 years. Soon after the 2008 slump, there was an upward cycle again, followed by another downward cycle that started in 2013. Although not completely unscathed, these downward cycles strengthened the organisation and we are excited about the next few years. Last year, we experienced our third-best year ever, and hopefully this year will be even better. We started seeing an upswing in March and April last year. The most encouraging trend is that our traditional clients are looking at exploration projects again. This gives us a lot of scope and courage for the new year and will enable us to embark on more long-term planning for the future.
You really drove the diversification strategy hard. What other services did you add to what you initially set out to do?
In 2009, the company added a project management and project support service to the operation. We identified and appointed an experienced project manager. Most mining houses do have in-house project management teams; however, we offer them support and focus on the less attractive activities like gathering data to enable the project manager to keep his or her finger on the pulse.
Over time, we started employing industrial engineers and today, we have a very strong industrial engineering team, which are system and process driven. To streamline procedures, we use this expertise, combine it with our mining and technical knowledge, and in that way optimise mining processes. We do a lot of simulation work in that space. It is attractive for our clients — not only to understand the theory of the mine design but also to see the design in action. A 3-D view enables us to understand where the bottlenecks are and where can we improve the process. In addition, we added a strong financial modelling product. So, although our angle is very strong technically, it is backed up with a robust business-driven approach. In other words, we aim to improve the overall business, not only the technical aspects.
You mentioned earlier that there is a renewed interest in exploration. Does this include South Africa?
The past few years have been really tough for geologists and exploration companies with close to zero exploration opportunities. But there has been an upsurge in exploration activity recently, especially in South Africa, where companies have not been investing in exploration for a long time. The focus is mostly on the iron and manganese ore bodies in the Northern Cape. An interesting project that we have been involved with is Gauteng-based Adelaide Ruiters Mining and Exploration’s (ARME) Zandheuvel phosphate mine close to Saldanha Bay in the Western Cape.
What about the rest of Africa?
There are many opportunities in West Africa, especially in Nigeria. We are hopeful for a few projects in Nigeria, where the government has been driving diversification away from oil. I hope we can increase our presence in Nigeria over the next few years and we intend opening an office in West Africa soon.
The rest of West Africa is very attractive. This region remains a key part of VBKom’s diversification strategy. Our operation is well established in the Southern African Development Community (SADEC), and we foresee a lot of activity in these two geographical areas in the next five to 10 years.
Growth in the mining industry has been stifled for several years; has that prompted you to venture into the rest of Africa?
Not really. Although we are South African, and most of our business takes place in South Africa, we had an African vision from early on. We started feeling the pinch after Marikana in 2013, though, and knew that our South African exposure and niche offering (opencast mining) made us vulnerable — we realised that we had to diversify. But Africa was always part of our plans. Soon after we established the company, we undertook projects in Zimbabwe, the Democratic Republic of the Congo (DRC), Mozambique, and Zambia, and we are still involved in these countries. Since then, we have added several other African countries to our portfolio. VBKom is currently involved in 30–40 projects across Africa.
In which African countries does VBKom have it biggest footprint?
Copper and cobalt in the DRC and copper in Zambia, although not on the same scale as in the DRC. We are also involved with a few projects in Namibia and Botswana, and in Mozambique we are looking at gold, ruby, industrial minerals, and coal projects. There are many discussions about projects in Mozambique, and there are many new opportunities.
What is your opinion of automation, mechanisation, and technology? How will it play out in the next few years?
Technology and mechanisation are fundamental to the South African mining industry. The mining industry has been slow in accepting new technology. The downward cycle, however, has forced many mining companies to seriously start looking at technology, and accept that they will have to change.
With the massive amounts of data, I think the biggest opportunities in terms of technology are to manage this data more effectively and gain more intelligence and knowledge from it. This will enable a company to manage the business more efficiently.
Companies are integrating loose-standing projects so there is one platform with integrated information that they can use to make informative management decisions. There is also a strong focus on safety and how to employ technology to ensure safe practices.
We have moved past the theoretical practice of technology. The question is now, what will technology do to my bottom line? If I do invest in technology, how will it affect my costs? How will it improve my outputs in terms of the product?
What will the effect of technology and automation be on Africa, its development goals, and the continuous efforts to create jobs?
The reality is that our number one goal in Africa should be to create employment. There is a fine balance between using new technology and safeguarding jobs. For me it does not make sense to replace people with machines on the African continent. Maybe in other places in the world. In Africa, we should look at communities and creating jobs for these communities, and at the skills mining projects will be able to develop. The mining industry is well positioned to create jobs and they have a social responsibility to do that. From a strong Western, capitalist angle, technology has its place. But Africa is uniquely positioned as the centre point between the west and the east. There is a big opportunity for development and it starts with the basic stuff, basic job creation — so we need to develop projects that can create jobs.
What, in your view, are the major challenges in Africa?
In the past few years, the big constraint, without a doubt, was a clear shortage of investment. There is just not enough money that flows to the mining industry to take the projects forward. Hopefully, we will see a change this year. In good times, the investors return. The other big challenge is the lack of appropriate skills in Africa.
Manie, you have had a long career in the mining industry; what were special highlights for you?
After obtaining a degree in mining engineering from the University of Pretoria, I worked underground at Vaal Reefs in Orkney, before moving to an opencast mine at Samancor. I spent time in Germany where we built and commissioned a processing plant and I used that knowledge two years later when I assisted with the development of a silica processing plant close to Delmas. The biggest highlight was the six years I spent working on diamond projects in the Richterveldt in the Northern Cape, where I developed an exploration project, got involved in production development, and eventually became general manager at the mine.