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MINING | Buffalo Coal
BUFFALO C
Breathing new life into the Aviemore coal m
COAL
mine
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MINING | Buffalo Coal
For several years, Buffalo Coal has been a mainstay in the coal mining town of Dundee in KwaZulu-Natal, a province which is home to a large proportion of South Africa’s coal operations. The publicly-listed mining company owns two coal assets in the region – the Aviemore and Magdalena collieries, although the latter has been on care and maintenance since late 2018. One of the company’s two processing plants as well as the discard dump (for both anthracite and bituminous discard) is also located on the Magdalena Property. Situated in close proximity to the Aviemore and Magdalena mines is the Coalfields complex, a multipurpose hub that contains Buffalo’s head offices, one processing plant and a 160,000 tonnes per month capacity rail loading facility. Coalfields also houses a third-party owned calcine plant which is operated by Buffalo to process its calcine product. From Coalfields, Buffalo ships to domestic and export markets a combination of calcine and anthracite. Buffalo also supplied bituminous coal until the recent closure of the Magdalena mine.
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MINING | Buffalo Coal
“Unfortunately, the Magdalena mine was
estimated four to five years left of reserves at
becoming an uneconomical operation for
the point of its closure, leaving the door open
us and for the mining contractor we had
for a potential return to mining at Magdalena
in place,” says Buffalo’s interim CEO Emma
should Buffalo devise a lower cost mining
Oosthuizen. “In August 2018, they gave notice
method.
that they would not renew their contract. As a result, we ceased our bituminous coal
There is also the opportunity for Buffalo
production at the end of October 2018.”
to process third party products at the Magdalena processing plant, which must be
While the costs of running the mine
maintained on an ongoing basis to prevent
had become too large to justify ongoing
erosion over time. The company is also
production at the Magdalena mine,
looking at selling the Magdalena slurry pond
Oosthuizen notes that there were still an
reserves to third parties and leasing the Magdalena adit to a neighbouring mine in the
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future, so the 2018 closure is by no means
we hope to start up next year when we scale
the end of the road for Magdalena.
down from two sections to one section at
Anthracite only production However, what the Magdalena closure has
Aviemore. Balgray can add another five to six years. Finally, there is potential for a longterm project which can add at least another 13 years,” says Oosthuizen.
done is allow Buffalo to focus wholeheartedly on anthracite production from the Aviemore
In the short term, Buffalo increased
mine - where the company’s long-term life-of-
Aviemore’s current reserves via a process
mine (LoM) exists.
called pillar extraction which allowed the company to extend the mine life to Q2 of
“There are two years left of our current remaining reserves at Aviemore. Then we have the medium-term Balgray project which
2022.
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MINING | Buffalo Hummingbird Coal Resources
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Building towards Balgray
“We anticipate that in the next two months
As Aviemore’s current remaining reserves are
we will complete the public participation
being mined out, with the Q2 2022 deadline
process and submit all the required
fast approaching, Buffalo’s mid-term horizons
environmental approval applications. We
are centred on commissioning the Balgray
expect to have the necessary approvals in
project, which involves opening up the old
place by Q3 of this year. Once we have this
Balgray mine on Mpati hill.
environmental approval can we open up the adit again, start construction and get it ready
The Balgray mine, previously operated by
for mining,” says Oosthuizen.
Anglo American, officially closed down in 1967, but the company believes its revival
In terms of bringing Balgray into production,
could add a further five to six years LoM to
Buffalo aims to do this in two stages next
the Aviemore mine.
year to ensure a smooth transition from the current reserves to the Balgray mine. Buffalo
Buffalo has commenced preparatory work
will need to start-up production at Balgray by
for the Balgray project and is currently
Q4 in 2021 to continue the company’s current
working through the final stages of the vital
production profile.
environmental approvals process, which includes public participation.
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MINING | Hummingbird Resources MINING | Buffalo Coal
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The Aviemore North Adit Balgray also resembles an important stepping stone towards Buffalo’s longer-term plans, as the five to six-year extension to the LoM gives the firm time to pursue its longstanding plans for Aviemore North – a project which involves the build of a new adit at the Aviemore mine. The addition of the Aviemore North Adit could add between 13 to 15 years of LoM, but at a significant capital cost of around R335 million (US$22 million) – a cost which the company would struggle to muster by its own means. “Subject to what the market is doing and if it does improve, it may be possible to raise part of the capital requirement for the Aviemore North Adit project on our own, but we will most likely need some form of funding to realise the full project,” says Oosthuizen.
Clearing debts In the meantime, Buffalo remains laser focused on paying down its existing longterm debts that were accrued during the coal price collapse between 2012 and 2016, when the company took a R200 million loan from Investec and a smaller sum from private equity fund Resource Capital Funds. Following the resignation of former CEO Rowan Karstel in February 2019, Oosthuizen stepped into the role of interim CEO. At that point, Oosthuizen was the CFO of Buffalo – a role she held since October 2018. Based
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MINING | Buffalo Coal
on her impressive track record in finance
“Having said that, we are also putting in place
roles with mining companies, Oosthuizen
plans to extend Buffalo’s overall LoM, so the
has been tasked with overseeing the current
sooner we settle our debts, the sooner we
mining operations with the primary focus on
can commence construction of our Balgray
Buffalo’s debt repayment strategy.
project.” she adds.
this year. Once we’ve done that it will allow us
Building blocks to the future
to operate more freely. Our main priority is
The Balgray project and Aviemore North adit
to maximise our cash flow so we can pay off
resemble the building blocks of Buffalo’s
our debts as quickly as possible.
long-term future in Dundee – a town that
“The plan is to settle our outstanding debt
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is reliant on the coal industry and has seen
of Dundee, Buffalo must continue to focus
its economy damaged and jobs lost from
on financial prudence while progressing its
previous mine closures and downscaling of
medium and long-term targets at Aviemore.
operations in other key industries. In order to deliver the economic stimulus of extending Aviemore’s mine life to the town
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Published by Anderson Murray Media Ltd
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