The Business Year

Rowan Karstel

MOZAMBIQUE - Industry

The Turning Point

CEO, Beacon Hill Resources

Bio

Rowan Karstel was appointed as CEO of Beacon Hill Resources in November 2012. He joined Beacon Hill from Keaton Energy Limited, a Johannesburg-listed thermal coal producer. Prior to that, he was the Chief Project Development Officer at Optimum Coal Holdings, where he was responsible for the development and execution of Optimum Coal’s project pipeline. As a professional engineer, Karstel holds a Bachelor’s in Mining and Civil Engineering, an MSc in Mineral Economics, and an MBA. He began his career in deep gold mining, where he worked in South Africa and internationally in various capacities for BHP Billiton and Xstrata Coal. He has also been the Director of Business Development for Mmakau Coal.

What is the significance of your recent deals and what are your expectations for bulk transport in 2013? It is a turnaround for our company. The rail concession on the […]

What is the significance of your recent deals and what are your expectations for bulk transport in 2013?

It is a turnaround for our company. The rail concession on the Sena line is very important, which initially equates to an allocation of 500,000 tons. As the capacity of the line expands in the future, our capacity will also increase in proportion to our 7.7% allocation. The key challenge in Mozambique is transport; the only way to make money is to put your commodity on the rail. Logistics is by far the biggest component of costs in Tete. Secondly, road transport to Beira is not a sustainable solution since the road would be destroyed and massive costs would be needed to maintain it. For us, it was a big step forward to get a rail concession, but it was also very hard work. We had to negotiate the rolling stock, which took us about two months. We managed to finalize the process, but the only area we have not covered yet is the Export Credit Insurance Corporation of South Africa (ECIC) approval, which I am confident we will receive. The rail concession was the quantum leap this company needed. Now we can build on that with confidence and start employing people to enable the expansion of our Minas Moatize operation. We have a more positive message and the market can see that this team is achieving the milestones it said it would. We will now start building credibility with the market. Suddenly, many things changed—in 2012 it was a very, very tough market. I had to look at the company and formulate a new strategy, but we made good changes and slowly things are starting to come together.

How will your production plans be impacted by the recent increased estimate of resources?

Our resource base increased by 31% and it lifted our confidence levels. There are many fault lines in the geology, and the increased confidence levels help us develop more accurate mine planning. We are now waiting for the updated reserve statement that will be released in 2013.

What makes the environment in Mozambique unique?

The government is very supportive, more so than in South Africa. In South Africa, the mining industry and government sit at two different poles, and the government doesn’t go out of its way to help the mining companies. As far as challenges, there is a definite shortage of skills in Tete, as well as in the whole of Mozambique. We train people and put middle management on mentorship programs, but it takes time. Infrastructure is another huge constraint, but the government is starting to realize that it needs to take a more strategic stand. The next five years will be challenging in terms of infrastructure. Lastly, people have typically overestimated the percentage of coking coal yields in the Tete basin. It is in the order of about 20%, and that is if the location is close to the town Tete. In other areas, the coke yield decreases dramatically as you move away from the hub. I believe that we are fortunate to be in the sweet spot of the best-quality coking coal in the basin. A huge amount of R&D has gone into the fine coal circuits of our wash plant to maximize coke extraction.

“Our resource base increased by 31% and it lifted our confidence levels.”

What is your forecast for the Mozambican economy as a whole?

Mozambique is going to grow. Unfortunately, Tete will take a horizontal growth path until infrastructure is sorted, but considering the gas fields, there are massive expansions coming. Tourism is picking up as well. The general vibe in the country and attitude of the people is very friendly. Tourism will develop and I am very positive about Mozambique. It’s definitely the spot to be in for the coming years.

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