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Cementation Group
* R millions Background Murray & Roberts acquired Cementation Africa and Cementation Canada in July 2004 and integrated Cementation Africa with the Group’s RUC branded operations in South Africa. Together with RUC Cementation in Australia, these companies form the Cementation Group. Cementation is the world’s leading underground mining con trac tor with operations in the established mining markets of South and Southern Africa, North and South America, Australasia and Asia. In December 2009, Murray & Roberts extended its fledgling presence in Chile with the establishment of Cementation Sudamérica to participate in planned expansion of under ground mining in the country and region, and supplement the established raise drilling operations of 50% owned local company, TerraCem. The Cementation Group is leveraging its combined global capacity to access new markets and significant opportunities that the individual operations may not have been able to undertake in their own right. Market environment Global demand for natural resources rebounded during the year, driven primarily by China, which resulted in a resurgence in commodity prices. The operations in South Africa, North America and Australia secured new contracts and continued work on large long term operations that provided a buffer during the economic downturn. In South Africa, Murray & Roberts Cementation experienced no further contract terminations. However, no significant new contracts have come to market and this signalled a cautious approach, particularly by platinum producers which had resorted to rights issues during the recession to restore their statements of financial position before embarking on new capital projects. The company was shielded from the impact of the downturn largely by its long term operating contracts with Aquarius Platinum South Africa. Cementation Canada secured a number of new projects in a more buoyant gold market. In the USA, the company was re-awarded a contract on the Hecla 4 shaft which commenced operations after being deferred in 2009. The economic recession following the global financial crisis took a heavy toll on the Australian resources sector. RUC Cementation suffered from the ongoing termination or deferral of mining projects during the first half of the financial year, including a major three year mine development contract at Burnakura for ATW Gold Corporation which had been awarded earlier in the year. The company focused much of its business development on activities further afield and was rewarded with the award of large international contracts in Hong Kong, Indonesia and Mongolia.
Leadership The Cementation Group is co-ordinated out of London by Peter Adams as chairman and Richard Pope as financial director. Each subsidiary operation is independently managed with specific responsibility for a defined geographic market. Henry Laas is managing director of Murray & Roberts Cementation, the South African based operation which serves the African market and holds much of the Group’s specialised technical and equipment capacity. Roy Slack is president of Cementation Canada, responsible for the North and South America markets from its base in North Bay, Ontario, Canada. Mike Nadon is president of Cementation USA, based in Salt Lake City, Utah, United States. Cementation Sudamérica is based in Santiago, Chile. Barry Upton is managing director of RUC Cementation, which serves the Australian and Asian markets from its base in Kalgoorlie, West Australia. Cementation Africa South Africa is the primary market of Murray & Roberts Cementation. The company has a contract mining portfolio with Aquarius that has grown steadily over the past two years to about 55% of its revenues and is expected to record further growth in the new financial year. The contract for underground mining at the Kroondal and Marikana platinum mines was successfully renegotiated during the year and the current operations have a remaining life of eight years. An underground mining contract at the Kwezi Project for Aquarius was awarded during the year and, like Kroondal, will be renegotiated annually. The mine development contribution to overall revenue is 35% and remains an important portfolio. Work continued on the Karee 4 shaft project for Lonmin with the installation of underground infrastructure between reef horizons and access shafts. Shaft sinking at the Thembelani 2 shaft for Anglo Platinum will be completed in the new financial year and the project will progress to off-shaft development work. The South Deep capital development project for Gold Fields progressed well and a contract was secured to deepen the ventilation shaft from 2 700 metres to 3 000 metres below surface. Work commenced successfully at BHP Billiton’s Wessels manganese mine in the Northern Cape on a mine development and shaft project. The mining services contribution to overall revenue declined to 10% due to the impact of the economic downturn. As a consequence, the company had idle capacity in its fleet of large diameter raise drilling machines, some of which were relocated to Australia for use on ventilation shaft projects at operating mines. New opportunities in this portfolio are expected to materialise towards the end of the new financial year. Murray & Roberts Cementation is a significant company in the domestic mining sector. Its mine engineering division adds considerable value to clients and the company through its focus on design, feasibility studies and related engineering services.
Cementation Canada
In Canada, the Nickel Rim South project is an Xstrata Nickel operation near Sudbury, Ontario that comprises two shafts and over 10 000 metres of lateral development tunnelling. The mine went into production late in 2009 with Cementation Canada continuing underground construction of new mine infrastructure. Cementation Canada was the first contractor to be engaged in the potash boom in Canada with the award of the Potash Corporation of Saskatchewan’s Picadilly project, located on Canada’s east coast near Sussex, New Brunswick. The project involves sinking two shafts in water bearing ground. The concrete shaft headframes have been erected and the surface plant construction is nearing completion. The concurrent sinking of both shafts has commenced. Underground development work has continued at the Diavik Diamond Mine in the Canadian Arctic near Lac de Gras in the Northwest Territories, along with some production drilling. This contract involves ramp and lateral tunnelling and has included work in permafrost and under the lake. It is a remote project accessed by air and in the winter by ice roads.
Cementation Canada is also the market and technology leader in large diameter hard rock raise boring in North America. Cementation USA is carrying out the Resolution shaft project near Phoenix, Arizona, a major project for Rio Tinto controlled Resolution Copper that includes sinking a shaft of 8,53 metres in diameter to a depth of 2 133 metres. After being on hold during the downturn, the Hecla 4 shaft project for Hecla Mining in northern Idaho commenced operations during the year. Cementation engineering is designing the shaft works and crews are currently excavating access drifts and underground hoist rooms for the internal shaft sinking project. Cementation Canada was recently awarded three gold projects. Crews are on site at Apollo Gold’s Black Fox Mine near Matheson, Ontario and Northgate Mineral’s Young-Davidson Mine near Matachewan, Ontario. Both projects are in North Eastern Ontario and involve First Nations Agreements. Black Fox Mine is transitioning from open pit to an underground operation and scope of work includes underground development and raise boring. The Young-Davidson project is an EPC contract to deepen an existing shaft and develop a new production shaft by raise boring.
Kitikmeot Cementation Mining & Development (KCMD) has been awarded the development program at Newmont’s Hope Bay Project in Nunavut, north of the Arctic Circle. KCMD is a joint venture between Cementation Canada and Inuit partner Kitikmeot Corporation of Cambridge Bay, Nunavut. Cementation Sudamérica The Cementation Group was selected by Chilean state mining entity, Codelco, as a preferred contractor for the shaft design packages at the Chuquicamata copper mine in Chile – a development that marks the start of greater synergy between the mining contracting operations. The group was selected as a result of its experience in the design, engineering and installation of large capacity hoisting systems. Cementation Sudamérica was established in 2009 at the request of Codelco, to bring international mining experience to Chile and particularly to facilitate the transition of the significant Chuquicamata mine from open-pit to underground. The company has a 10% noncontrolling local partner and is undertaking design work on the project for Hatch. It has submitted prequalification documents for the shaft sinking and development work which will commence later in 2010.
RUC Cementation Work has proceeded on the Newcrest Cadia East mine in New South Wales where an Australian raise drilling record was established for the largest diameter shaft at the greatest depth bored in the country. A three year extension of work on the project has been negotiated. A deferred raise drilling project for OZ Minerals in Tasmania was re-awarded later in the financial year and the company also secured a number of new shaft sinking projects across Australia. RUC Cementation is the largest raise drilling contractor in the world with 20 operational raise borers and box hole borer units and it expects to become the leading force in the Australian shaft sinking market in the new financial year. Extending its focus on markets further afield, RUC Cementation has been able to secure a number of large international contracts which mitigated the dearth of work in Australia in 2009 (the Australian mining market rebounded in the second half of the financial year). The company is present in Indonesia and commenced work in February 2010 on a contract for the construction of three raise bored shafts of six metres in diameter and 550 metre depth over three years at Freeport Indonesia on Papua Island. A presence was also established in Mongolia and a contract was acquired for the raise drilling of two shafts to a depth of 1 300 metres at Ivanhoe Mines copper gold project in what is considered to be the finest copper and gold ore body in the world. The company also negotiated a subcontract with Gammon Construction for major shaft sinking works within a new sewerage system. Sustainability Murray & Roberts Cementation has a firm commitment to training and invested R45 million in training and development during the year, focusing strongly on development of the capacity of project managers and supervisors to fulfil the requirements of project delivery. Since January 2009 the company has trained 240 supervisors, and 40 employees have completed the customised Project Management Program at Wits Business School over the past two years. The company has provided support to 16 bursars, 81 learnerships and 21 graduates in the Murray & Roberts graduate development program. The focus on talent management has been strengthened to ensure the attraction, development and retention of key staff. Murray & Roberts Cementation improved its LTIFR to 3,2 (2009: 5,2) and achieved three million fatality-free shifts at the Kroondal Platinum Mine. Regrettably, it suffered four (2009: three) fatalities in four separate accidents at the Blue Ridge Mine and Thembelani and Ezulwini shafts. Subsequent to the year end, five employees died tragically in a major fall of ground accident at the Marikana Platinum Mine 4 Shaft on 6 July 2010. A further fatality occurred on 13 August at the Kroondal Mine. To strengthen the safety and training systems implemented in previous years, the company is preparing to launch the First Choice program which will identify and promote safer behaviour and help to eradicate unsafe behaviour. Murray & Roberts Cementation holds a level 6 BBBEE rating on the dti scorecard and is targeting level 5 in 2011. During the year, Murray & Roberts acquired the 20% non-controlling interest held by AKA Capital in the company and, as a consequence, Reuel Khoza resigned as chairman and Sam Nematswerani as a director. Tim Wakefield resigned as a director to take up an appointment as managing director of Wade Walker, and, on 1 June 2010, Andrew Langham and Freddie Geldenhuys were appointed as directors. Cementation Canada has consistently over the years been recognised as one of Canada’s top employers. The company is a Canadian leader in mine safety and continues to demonstrate that the target of zero injuries is possible on its projects. At June 2010, the North and South American operations had achieved 16 months without a lost time injury. Recruiting is ongoing as both operations and engineering build capacity. The engineering business has grown significantly in the past year and is well established in North Bay, Salt Lake City and Santiago. RUC Cementation increased its workforce to 189 (2009:149) and is likely to record additional growth as the new projects ramp up. While no fatalities or serious injuries were recorded the LTIFR was 6,0 (2009: 2,5) due to two lost time injuries. Prospects
The Cementation Group expects a return to growth in the new financial year as the benefit of significant new opportunities secured in North America, Mongolia and Indonesia begins to materialise. Group operations are pursuing significant shaft sinking opportunities in Australia, India, Philippines and Sweden. Acquisitions to strengthen capacity in Australia and the Americas are under consideration. The South African market, however, remains subdued. Murray & Roberts Cementation started the new financial year with an order book of R3,3 billion (2009: R2,7 billion). The company will continue to work with existing clients in the platinum sector and is currently pursuing several new opportunities. Future opportunities are being targeted in the base metals (manganese and chrome) and coal sectors to offset the company’s exposure to platinum. Having strengthened its capacity in coal mining in recent years, Murray & Roberts Cementation is exploring larger projects in this burgeoning sector. Cementation Canada anticipates continued growth in the USA, based on its safety and productivity successes at Resolution and the start-up of the Hecla project. In Canada, the strong gold market has been key to acquiring new work in Ontario. Marketing will continue to focus on major projects where the company can add value, and emphasis will be placed on building engineering capacity through new teams in the USA and Chile, and increased resources through recruitment in all disciplines.
Cementation Sudamérica will supplement the already established operations of 50% owned local company TerraCem, which currently undertakes raise boring work and will offer shaft sinking mine development and engineering capabilities. It will also form the base for work in other South American countries. RUC Cementation has commenced work on several significant raise drilling and shaft sinking projects in Hong Kong, Mongolia, Indonesia and Australia, which have strengthened its order book to record levels. The company expects to secure additional work from an increasing number of enquiries for large diameter raise drilling and shaft sinking projects. The lateral development market remains very competitive and the company will consider acquisition opportunities to strengthen its position in this sector. The Cementation Group expects a return to growth in the new financial year as the benefit of significant new opportunities secured in North America, Mongolia and Indonesia begins to materialise.
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