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AEL eyes Australian market for growth

AECI CEO Mark Dytor

AECI CEO Mark Dytor

Photo by Duane Daws

29th July 2014

By: Natasha Odendaal

Creamer Media Senior Deputy Editor

  

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JOHANNESBURG (miningweekly.com) – AECI’s explosives arm AEL has branched out into Australia as it teams up with undisclosed customers for the supply of explosives into this new market.

An AECI office had been established in Brisbane, while preparations were under way to ship a bulk emulsion plant from South Africa to an operating site in Bajool, Queensland, over the next few weeks.

Speaking at the group’s interim results presentation, in Woodmead, on Tuesday, CEO Mark Dytor said the company had broken ground on the site, with earthworks and site preparation well under way.

The traditionally Africa- and Asia-focused developer, producer and supplier of commercial explosives, initiating systems and blasting services for the mining and infrastructure markets would start trial blasts before the end of the year, AEL MD Schalk Venter indicated.

AEL would then be ready to produce and supply explosives to an established, sizable Australia-based customer base from 2015.

Dytor believed AEL had hit a “sweet spot” in terms of ammonium nitrate supply, as a global ammonium nitrate surplus had softened prices to the benefit of AEL’s customers.

With existing customers on board – and the signing of a memorandum of understanding imminent – this new market was believed to be secure for the next five to seven years.

The group had also secured commitment of ammonium nitrate supply from Australian producers.

AEL would now focus strategies for the development of its operations in the Australian market in the medium- to long-term and grow its market share, with continued expansion beyond South Africa derisking the company.

AEL had faced several challenges over the past year, as commodity prices weighed on AEL International’s Indonesian operations, with many smaller thermal coal mines having been mothballed.

The performance of Kaltim Prima Coal (KPC), AEL’s largest customer in Indonesia, remained solid; however, overall explosives volumes for the six months to June 30 declined 7.4%.

AEL had successfully acquired, for $23-million, a 42.6% minority share in PT Black Bear Resources Indonesia, which had commissioned, in February, an ammonium nitrate plant.

The plant achieved a run-rate of 87% and qualified ammonium nitrate solution was being produced and supplied to KPC.

Meanwhile, South Africa’s labour challenges had hampered AEL’s local performance as the platinum industry emerged from a five-month strike that had shaved over R150-million off the company’s operating profit.

Despite this, the Southern African business performed solidly and explosives volumes improved 1.2%, owing to growth in the iron-ore mining sector.

AEL’s South African unit was currently undergoing extensive restructuring, aimed at regaining traction and delivering improved results over the next few years, with 2015 marked as the deadline for the division to bounce-back to acceptable profitability levels.

AEL Africa, which serviced customers across a range of mining sectors, as well as the infrastructure sector, in Botswana, the Democratic Republic of Congo (DRC), Ghana, Tanzania, Zambia, Zimbabwe and several other African countries, had posted 5.1% growth in explosives volumes.

This emerged as AEL established new explosives manufacturing plants in Burkina Faso, DRC and Egypt.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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