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Surviving the recent world economic recession had its advantages – particularly for those who were willing to change their business model and strategy. Trollope Mining Services did just that, and the benefits are paying off, writes Laura Cornish.

Up until 2008, opencast mining contractor Trollope Mining Services (TMS) was thriving on the back of a single client, and a single commodity – coal.

“It was the recession that made us realise that our business model needed to change. Four years down the line, we are a different company, and have almost doubled in size as result of strategic decisions we made,” explains TMS MD, Guy Hopkins.

Diversifying

Today, TMS is substantially diversified, with 10 opencast contracts across the platinum, gold, andalusite and coal sectors. Its workforce headcount stands at 1 100 – of which over 800 are operators.

“Diversity is the key to ensuring your risk is widely spread and not confined to any single area,” Hopkins adds. “Because the nature of most coal mining is largely opencast, it remains a key area of our business and always will do. Our target into the near future is for coal to constitute no more than 60% of our total business.”

TMS is due to complete the last two coal contracts (with Xstrata Coal) it retained during and after the recession, shortly. Once these are completed, every contract on its books will be newly awarded since 2008.

According to Hopkins, the other key diversity component is geographic location. “Our short to mid-term focus now is to follow our clients across border, which until now, has been restricted to South African project work only.”

The company is currently tendering on a number of contracts in Africa, and hopes to secure an established presence within the next three years.

And even though the company lacks experience outside its local borders, Hopkin’s African experience is extensive. The ‘trick’, he explains, is to secure just one project, which puts a foot in the door and enables the learning curve to start. And it appears Botswana and Namibia are TMS’s primary targets.

Securing additional work outside of South Africa means one thing – greater growth.

“This past month we moved 3.2 million cubes of earth, which means we are operating almost at full capacity. New project work in Africa would require us to grow our fleet (of 400 units). Our intention, for now, is to remain a mid-tier contractor and not take on larger scale equipment. Our dump trucks vary in size from 40 to 100 t.”

Joint ventures

Hopkin’s has recorded substantial experience in the construction industry over his work career, and admits that the industry has achieved numerous successes thanks to strategically established joint venture agreements.

“Joint venture agreements in the mining sector have yet to be fully exploited, tested and implemented, but it is something I am familiar with and would like to explore,” Hopkins notes.

Delving into new, but familiar areas

Playing in the mining space requires long-term thinking, and that is exactly what TMS is doing. “We could buy bigger machines and tender on bigger contracts or we could delve into new business areas, which we have set our sights on. We would like to mine our own coal operations.”

In line with this vision, the company already owns a mining right to a small coal property in eMalahleni, together with few prospecting rights. It is also applying for additional prospecting rights.

Hopkins explains that the plan is for the company to mine its first reserve – 800 000 t – which should take no more than 18 months. The major challenge is learning about and conforming to all the regulatory compliance issues associated with mining, such as attaining the correct licences, environmental procedure documents and off-take agreements. Mining itself is in essence TMS’s core business.

An environmental management programme is the last outstanding requirement necessary to start mining, which Hopkins believes TMS could be ready for in the next eight months to one year.

The company even owns its own small 100 000 tpm wash plant, which it acquired from Sasol Mining as a test plant.

“Alternatively, we may look to purchase prospecting rights, prove up a reserve and resource, and sell them, with greater values, to interested buyers.”

Sidebar: Business model policy

Contracts: Hopkin’s preference for contracts ranging between one and three years in length. This is the best way to ensure the company is protected from having to incur escalation costs if payment is settled on upfront and fixed for the contract period.

Replacement: Hopkin’s likes his core plant’s availability to be between 92% and 95% at all times. Based on this, the company’s policy to replace its machines after their first life, which can be anywhere between 12 000 and 20 000 hours.

Managing debt levels: To ensure the company is able to maintain its debt levels, its growth overall aspirations are not too big, and are sustainable – between 10 and 20% for the next while. Stabilisation is not a bad place to be sometimes, and can be healthy for a company for certain periods.

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