South African junior miners had 7% of the local coal market, but were growing in numbers and production, mineral advisory firm XMP consulting senior coal analyst Xavier Prévost said at the Junior Coal Mining Conference held in Melrose, Johannesburg, in May.

He noted that, as of 2012, South Africa had 34 junior coal miners. He further added that there were many challenges in the industry and that these companies and those that wished to enter the industry needed to under- stand coal so that their companies could be successful.

One such challenge was pointed out by Emerald Green director Grant Wishart, who said that junior miners had to rely on external available expertise and that they would have to evaluate the reserves, as most of the quality reserves had been mined by larger coal miners, resulting in junior miners mining on fringe reserves.

“Junior miners also do not have in-house expertise, whereas larger coal companies have in-house expertise and their geo-logy departments are stronger, compared with those of junior miners. It is important for junior miners to understand the fundamentals of the reserves because if the geology is wrong, it could be catastrophic,” he stated.

In terms of reserve fundamentals, Wishart said South Africa did not have a mature exploration sector, compared with those of Australia and Canada.

He advised junior miners to choose experts carefully and to hire geologists who had practical experience.

It is also important to not overbudget or overcommit on a project or a contract, as miners may not produce their targeted tonnage.

Further, Wishart said that depending entirely on contractors for projects was unnecessary if a mining company already had experienced personnel.

“It is currently the best season for junior miners. If you have a good mining plan, with reason- able reserves and expertise, it is good to be a coal supplier for State-owned power utility Eskom,” Wishart said.

Compliance is important and junior miners need to ensure that they have water-use licences and follow all safety, health, environmental and quality procedures.

Diverse investment management firm Russellstone Group’s coal trading division Coalvest director and coal trader Nhlanhla Madalane believes that South Africa has sufficient coal reserves, but the challenge is to find a viable way to mine them.

Junior miners also face challenges pertaining to exploration, mining, rehabilitation, markets and logistics, as well as production, credit and finance risks.

He noted that traders could assist junior miners, as they had access to domestic and import markets.

“The trader assumes risk, such as credit risk, and can access credit facilities and make mine development and exploration funding available. They can get involved as equity partners with mines,” he said.

Emerald Green director Myles Sinclair said accounting is a language of business and advised junior miners to keep creditors informed and to be honest with them about all financial aspects of the company.

“Keep the crucial lines of communication, such as email, tele-phone and the Internet open. Beware of large contracts. Also, if a business is run from a trust, it should tread carefully in terms of using available money. Use only what is needed. In terms of personal expenses, do not put any through the company’s funds. It is illegal and will deflate the business value, should selling be an option in the future,” he warned.

Coal mining and beneficiation company Kuyasa Mining CEO Ayanda Bam noted that another challenge facing junior miners was that many of them could not obtain funding to start coal projects, which resulted in their selling of the mining licence.

“There is little movement to achieve the goal of transforming the economy. “Getting stability in the coal mining industry is going to become difficult. However, for the funding and provision of the technical skills we have solutions, such as the Industrial Development Corporation that could help,” he stated.

However, Bam said most bodies were not prepared to fund projects and ensure that those who received licences would develop their projects and receive support.

He said that junior coal miners were restricted in the local market and that it was difficult to succeed in the coal industry, as the best assets had already been mined out.

Meanwhile, Bam noted that another issue in the industry was retaining black personnel at a senior level, as they were in high demand and, consequently, overpriced.

“To get black personnel operational in many industries, we need to do more than just give them licences. “There is a serious lack of skills in the coal mining industry and there has to be an intention to address this without there being handouts,” he stated.