Ingwe will be world's best, Seedat promises

27th May 2005 By: abdul cook

The benchmark coal-mining company of the world is the ambition that BHP Billiton president energy coal Mahomed Seedat has for Ingwe Colliery, BHP Billiton’s largest energy-coal asset.

Seedat, who succeeded in making world-beaters out of the aluminium operations he managed for BHP Billiton, is now on the way to doing the same with his new energy-coal charges.

He was appointed president energy coal on January 1 this year, a great coup for BHP Billiton’s Johannesburg office, which was always glaringly short of a domiciled head of what the group refers to as a customer sector group (CSG), one of the seven business-unit pillars on which the world’s largest mining company is built.

Now that the important CSG-pres-idency status has been afforded to South Africa, Kwazulu-Natal-born Seedat’s responsibilities embrace not only this country’s 56-milion-ton-a-year Ingwe Colliery, but also the geographically-spread company’s three-year-old 12-million-ton-a-year Hunter Valley coal operation in Australia; the 14-million-ton-a-year New Mexico Coal operation in the US, which supplies coal to two power stations; and the 30-million-ton-a-year mine in Colombia, which BHP Billiton owns in joint venture with Anglo Coal and Glencor.

Seedat has already begun using the modus operandi he applied so successfully to take BHP Billiton’s aluminium operations into the top spot.

He has already begun convincing Ingwe’s 7 500 employees that increased performance will be the key that opens the door to optimal investment and growth for Ingwe.

Recounting to the early aluminium situation, he recalls that there were once 3 000 people at Bayside aluminium, at a time when global benchmarks pointed to less than 1 000 being required.

Today there are about 3 000 at BHP Billiton’s greatly-expanded Hillside and Mozal smelters, and some 900 people at Bayside. Collectively, these also generate over 20 000 indirect jobs to those who provide goods and service to the smelters, which are today universally- acknowledged as the global front-runners.

His message is that the same good fortune that befell aluminium can befall Ingwe, provided the energy-coal company succeeds in becoming world-class.

A global benchmarking process is already being consolidated at Ingwe, following the despatching of personnel to wherever global best practice is being achieved.

Already one Ingwe dragline is operating within a hair’s breadth of the world-best practice in its class and a few others are yapping at the heels of the top benchmark.

Lamentably, there continue to be other instances of sub-standard performance, some equipment still operating at 40% below global par and overall labour productivity 50% below global-best-practice levels.

Being reconsidered by Seedat’s team are Ingwe’s ten layers of management hierarchy, which Seedat is intent on reducing to five, in line with what he found worked well with his former aluminium charges.

“These layers are related to the history of the mining business and the lack of systems.

“The more systems put in, the fewer the number of layers required and the more personnel at the lower levels are empowered,” he tells Mining Weekly in an exclusive interview.

Commenting on Eskom’s plan to spend R93-billion on additional power capacity in the next five years – two-thirds of which will be spent by the utility itself and the remaining third by independent power producers (IPPs) – he points out that this not only presents an enormous opportunity to supply additional coal to Eskom, but also to sell coal and then buy back electricity from IPPs, the electricity bought being used by BHP Billiton operations in the region.

He calculates that the plan to build more power-generation capacity in South Africa is the equivalent of around five new Duvha power stations or some 50-million tons of additional coal.

Of Ingwe’s current 56-million ton-a-year production, 30-million tons a year is sold to State-owned power utility Eskom and the remaining 26-million tons a year exported.

Other priorities Seedat’s second most-important priority is to identify brownfield opportunities, an area, he says, in which Ingwe again has the potential to feature prominently, along with BHP Billiton’s Australian, US and Colombian operations.

Also, by providing increased volumes of higher-margin export coal, Ingwe stands to benefit from making full use of its Richards Bay Coal Terminal export entitlement.

Seedat’s third priority is to take advantage of greenfield opportunities, which, he says, abound in Australia, Asia, US and South America, as well as other parts of the world.

His fourth and last priority is related to BHP Billiton’s business relationship with China and whether it should continue to interface with China as a supplier of coal or whether it should actually invest in opportunities within China.

As president, Seedat is held responsible for maximising energy-coal’s earnings before interest and tax (ebit), ensuring firstly that existing operations are run optimally through chief operating operators on three continents; ensuring secondly that appropriate brownfield, greenfield and merger-and-acquisition opportunities are grasped; and thirdly that all marketing opportunities are pursued.

Right now BHP Billiton is going through an extended business cycle; the prices of the commodities it sells are sky high and the cost-cutting exercises initiated during the merging of BHP and Billiton are bearing fruit.

To its great advantage, coal remains a cheap source of energy against rising oil and gas prices and persisting nuclear caution.

The reality is that there are few cheaper electrification-extension options for the developing world.

Moreover, to counter negative environmental perceptions, steps are being taken to find ways of using coal in a way that are environmentally-sensitive, BHP Billiton being one of the enthusiastic contributors to the US’s billion-dollar FutureGen initiative, which aims to make coal a far more environmentally-acceptable product.

Such is the determination to rid coal of its environmental baggage that consideration is also being given to joining other similar customer-linked initiatives in Australia and Europe, aimed at enhancing coal’s image in the energy market.

Seedat’s sense is that technological advance will result in cleaner coal becoming a reality and coal’s low cost, coupled to environmental friendliness, expanding coal’s share of the energy market.

He points out that what oil is to Saudi Arabia, coal is to the US and that there is enormous upside if coal can clean up its act.

“The reality is that there is just so much coal around that its benefits as an energy source for the generation of power simply cannot be overlooked,” Seedat emphasises.

Creative selling Among the most creative aspects of the company’s marketing is the management of logistics all the way into the power stations; and the sale of carbon credits.

The company is now light years beyond the old dig-and-deliver era and power stations, particularly those in Europe, that need to acquire carbon credits to offset coal-emission transgression, can obtain such credits from the energy-coal CSG, which also uses its back-office structures to organise the financing.

The energy-coal CSG is also taking steps to package other items as well, including biomass, in order to provide a complete service that allows customers to burn coal and simultaneously meet the requirements of the reduction in carbon dioxide emissions, as demanded by the Kyoto Protocol.

Shipping has also been coordinated so that alumina-laden ships – coming into Richards Bay Coal Terminal to offload raw material for the Kwazulu-Natal aluminium smelters – can return filled with energy coal.

The fact that BHP Billiton is a diversified-commodity group has enabled it to make the most economical use of shipping capacity, the multi-commodity and multi-currency trading environment also providing natural hedges that justify the company’s policy of remaining unhedged.

Coal’s contribution
Energy coal currently contributes 5% of BHP Billiton ebit, a percentage well below the large contributions from iron-ore and petroleum CSGs.

While contributing 5% to ebit, energy coal employs 50% of the com-pany’s employees – 17 000, inclusive of contractors, which reflects the challenge, the biggest single employee segment being Ingwe’s 7 500 people.

Initial benchmarking against local and international mines indicates significant opportunities for produ- ctivity improvement.

Despite its relatively-small contribution and high employment level, there is still a strong belief in the growth potential of energy coal, but it will need to present its case well in order to attract additional investment.

Moreover, moving energy coal’s ebit beyond 5% in the short term will be nigh impossible, given the voracious growth of other commodities within the company.

Seedat reports that the feasibility study under way into Klipspruit, the proposed new greenfields South African export mine, is having to be honed to meet the demands of the strengthened rand.

“A couple of years ago it was a fantastic project, but as the rand strengthened to R6 to the dollar, it has become a bigger challenge to make viable.

“That is why it is so important to use world benchmark numbers when setting the parameters of the Klipspruit project.

“South Africa needs to demonstrate that it can operate mines at world benchmark levels and then we can go to the board and project the returns of a Klipspruit operating at world-best levels,” he says.

Right now, however, Klipspruit remains very marginal and that is why a lot more work is being done on it.

The other greenfields contenders, Leandra, would be for supply of coal to both existing and new Eskom power stations, and Naudesbank would be commissioned primarily to replace export tonnage.

Ingwe’s Koornfontein and Douglas mines, with some three-to-five years life of mine remaining, need to be replaced with new mines in order to replace export levels.

Douglas is destined to be amalgamated into Ingwe’s flagship mine, Middelburg, so that its export-coal pillars can be mined in the opencast manner.

In some instances, to maximise economies of scale, there will have to be joint venturing and infrastructure sharing, which is exactly what the Western Complex project envisages, with Anglo Coal and Ingwe establishing a single mine, washing plant and loadout facility instead of duplicating them separately.

Seedat believes that this cooperative approach will have to become more common to maintain the viability of South African coal-mining.

Six-year wait
An interesting aspect of Seedat’s career is that it defied the constraints of the apartheid era, with the help of Anglo Coal.

Because of apartheid, Seedat had to wait six years to receive his government certificate of competency, even though he had passed the examination.

He passed in 1981, but could only formally receive his government ticket in August 1987, when the law changed to permit Indians to obtain such certification.

Anglo Coal, all the while, did not limit his career and took legal responsibility for his engineering work.

That has paid off well with Seedat now flying the South African flag high within the global BHP Billiton constellation.

Full name: Mahomed Ismail Seedat
Position: President Energy Coal, BHP Billiton, since January 2005
Main activity of the company: Mining
Date and place of birth: April 18, 1956, Newcastle
Education: BEng Electrical, University of Durban-Westville, 1979; MDP,Unisa, 1987 PMD, Harvard, 1990
First job: Junior engineer, Anglo American Coal (Amcoal), 1980
Size of first pay packet: R780
First job with present group: Assistant Engineering Manager,Hillside Aluminium
Career history prior to current position: Amcoal, 12 years; Richards Bay Coal Terminal, 2,5 years; BHP Billiton Aluminium Southern Africa, 10 years; Ingwe, 8 months
Value of assets under your control: $3000-million
Number of people under your leadership: 17 000
Management style: Team based
Personal best achievement: My wife and children
Professional best achievement: Present position, expansion of the Hillside Smelter
Person who has had the biggest influence on your life: My late dad
Person who has had the biggest influence on your career: Various but Owen Parnell of Anglo Coal in the early days of my career
Person who you would most like to meet: The Prophet Mohamed(if that were ever possible)
Businessperson who has impressed you most: Jack Welch
Philosophy of life: Live and let live
Biggest ever opportunity: Present position
Biggest ever disappointment: None
Hope for the future: That South Africa and South Africans become world leaders in many aspects, particularly business and sports
Favourite reading: Books on leadership
Favourite TV programme: Friends, Summit TV
Favourite food/drink: Shellfish
Favourite music: Nothing in particular
Favourite sport: Golf
Favourite website: Nothing specific
Hobbies: Restoring old cars
Car: Porsche 928S
Pets: Fox Terrier
Miscellaneous dislikes: Bureaucracy, procrastination
Favourite other South African company: None
Favourite foreign company: GE
Married: Qurashia Badroodeen for 10 years

Children: Fahmeeda, 23; Naseema, 20; Riyaadh, 18; Ismail, 9; Ammarah, 6; Ahmed, 4

Clubs: Johannesburg Country Club