Management reviews > Review of operations

 

1: Trekkopje Desalination Plant, Namibia, 2: Kopermyn coal washing, Middelburg, 3: Tarkwa CIL expansion, Ghana,
4: Kayelekera Uranium, Malawi.

     
  2009  
Rm  
2008  
Rm  
Revenue   836,8   421,8  
Capital expenditure   15,0   21,1  
Major markets   Sub-Saharan Africa   Sub-Saharan Africa  
Employees   493   565  

  • Acquisition of Keyplan.
  • Resultant revenue growth with good increase in operating profit.
  • Completion of Tarkwa, Kayelekera and Afrisam projects to value of approximately R4 billion.
  • Operations division now operates four minerals processing plants.
  • Capacity building in high growth water management.

Operating environment

Despite a recent improvement in mineral and commodity prices, producers are still finding it hard to secure the required funding to finance projects as investors and financial backers become increasingly risk averse. Projects are being more rigorously evaluated to determine their long-term viability and worst-case scenarios are carefully analysed even where the prevailing commodity price exceeds the threshold costs of mining. While the market has improved in recent months, increased competition for contracts is negatively impacting on pricing – resulting in lower margins on new contracts.

The EPCM environment has been relatively stable with some good potential in the pipeline. E+PC has a solid value proposition with its increased ability to service operations in a diverse range of industries, including water and environmental services.

Safety

The safety awareness programmes and measures at E+PC were strengthened to enhance its safety performance. Two minor office-related incidents caused the DIFR to deteriorate from 0,18 to 0,8. E+PC achieved several significant safety milestones during the year, including:
  • Two Rivers Platinum plant – one year without a disabling injury.
  • Imbani Coal Washing Plant – 16 months without a disabling injury.
  • Kopermyn Coal Washing Plant – two years without a disabling injury.

Performance

E+PC showed good growth in operating profit for the year under review with turnover increasing from R421,8 million to R836,8 million. The acquisition of Keyplan, a water management solutions company, during the period contributed to the strong performance.

During 2009, E+PC completed three significant contracts, namely the Gold Fields Tarkwa CIL Expansion Project in Ghana, the Kayelekera Uranium Project for Paladin Energy Limited in Malawi and the Afrisam cement plant in Roodepoort. E+PC delivered projects to the value of some R4 billon in 2009.

During the year, it won the Medupi coal washing project, extending its working relationship with Exxaro. E+PC was appointed as the EPCM contractor for the MagMinerals Kouilou Potash project in the Democratic Republic of Congo where bridging engineering is currently in progress. The project will be executed over a three-year period. Recently, E+PC was appointed as the managing contractor for the Mozambique to Kendal pipeline and fuels storage facility for Petroline.

Keyplan is currently constructing the Trekkopje Desalination Plant, the largest of its kind in Africa for Areva Resources Namibia and is developing its acid mine drainage projects. Currently E+PC operates the BHP Billiton/Anglo Coal eMalahleni Water Treatment Facility which was designed and built by Keyplan. Further deployment of Keyplan’s unique HiPro Technology is in progress in facilities across South Africa. An acid mine drainage water treatment facility is under construction for the Optima Colliery and E+PC will also provide the operations and maintenance services.

The Operations division which operates and maintains processing facilities built by Aveng has spread its footprint and now operates four minerals processing plants, two water treatment plants (both acid mine drainage) and a sulphuric acid plant.

Objectives

E+PC will continue to focus on its core competencies sustainably growing its ability to deploy technology and deliver value to its clients by accelerating the development of its proprietary intellectual property.

Geographic expansion within Aveng’s footprint inside and outside of Africa will facilitate E+PC’s growth and its ability to diversify its income streams. It will seek to export its value proposition, with existing and new clients, based on its suite of technologies and its proprietary knowledge.

Environmental services as well as water treatment and management services will be key growth drivers locally and internationally. E+PC is also focusing on Group opportunities in the power sector where there is long-term potential.

Outlook

Although the commodity sector is showing signs of recovery, E+PC expects a lag in demand for projects which is only expected to flow through in the first quarter of the 2010 financial year. Several significant projects which E+PC was well placed to win were delayed during 2009. Further growth is expected in the minerals processing industry in which E+PC has core skills, technology and capabilities, including uranium, base metals, gold, coal and auxiliary related services.

Further initiatives and leveraging of synergies with Keyplan in the Environmental Services sector have provided complete solutions to clients in the desalination and acid mine drainage sectors.

Work on hand for the year is in excess of 60% of 2009 revenue, with EPCM type projects in the minerals processing area, the Mozambique to Kendal pipeline and water treatment projects due for award in early 2010 making up the balance.

Frank Saieva
Managing director: E+PC