Jacob Mothomogolo: in the homestretch

Jacob Mothomogolo: in the homestretch

Jacob Mothomogolo has been at the helm of Wesizwe Platinum’s Bakubung Platinum Mine project since its inception, and in the process, has become an expert in dealing with contractors, writes Leon Louw.

Jacob, the Bakubung contract with shaft sinkers Aveng ended earlier than originally anticipated. Can you explain what has happened at the mine during the last three to five months?
Wesizwe and Aveng, our shaft sinking contractor, signed a voluntary termination of contract agreement late last year. This means that the contractor will leave site earlier than what we agreed initially. As a result, we have increased our labour head count from 70 to just about 200, as we did a management tale over through and absorbed some key personnel from Aveng to continue with some packages.

We negotiated an amendment to the Aveng contract in September 2016 in which we reduced the scope of works. However, the amendments require Aveng to only leave in 2017 after cold commissioning phase on the main shaft in June 2017 so they will only be on site for a few more months.

What did the amendments entail?
We moved the scope forward in two phases. The underground development and flat development portion ended in December. Aveng completed their work at one shaft (the ventilation shaft) but their team is still busy with work on the main shaft, which will be commissioned soon. After that Aveng will leave site.

Part of the amendment to the original contract to reduce the scope was that Wesizwe could purchase plant and equipment from Aveng. This included plant, material and equipment which was used for shaft sinking. We purchased all the kibbels, the stages and most of the shaft sinking equipment for a total of about R23-million. We paid Aveng this amount in November 2016.

What about the buildings and offices?
That will all stay here. The purchase included compressors, vent shafts, stores, buildings and offices. Such an arrangement makes it easier for both the mining company and the contractor. We still want to use the equipment while the contractor saves a lot on decommissioning costs.

In addition, we signed new contracts with previous suppliers of Aveng on the project for consumables like explosives, fuel, cement, aggregate for batching and so on to support the continued development through the services shaft and commissioning main shaft.

How intense was the negotiations to amend the original contract?
The negotiation process was quite extensive. We had to attend several EXCO and board meetings in six months leading up to the deal to present the negotiated offers seeking ratification. We settled on an agreement that benefitted both parties. The deal prevented the contractors to just leave site, and that minimised our risk as potential litigation which would have been lengthy and costly was averted.

So now we are in the main shaft doing headgear change over as part of commissioning the main shaft while doing development on the services shaft therefore our losses have been kept to a minimum.

Which aspects of these negotiations did you find most challenging?
It’s quite interesting. The entire negotiation process started as a legal battle. Some aspects even had to be adjudicated by a third party as per the dispute resolution procedure in our contract. However, both parties realised that we are going to spend a lot of time in adjudication and arbitration. We decided to rather sit around the table and terminate the contract. For me the big challenges were at adjudication and constant discussions with our company board. It takes a lot of time to prepare and you go in there with a 50/ 50 chance that the decision will not go your way. We had a good case and strong points and we got a good decision at adjudication but it remained open to arbitration. Despite its challenges, it was very exciting a life learning experience. I was of course supported by a very strong team.

In hindsight, what advice will you give a mining company that is negotiating a contract with engineering or mining contractors?
The relationship must be transparent and both parties must be prepared to form a partnership. Don’t adjudicate on price only and ask questions about the capability of the contractor, cash flow planning, etc. If there are gaps, ask what must be done to close those gaps. Do a critical review of a contractor schedule. Don’t take what the contractor gives you as the absolute truth, and work together to review the schedule and if you must, revise the contract early enough before doing anything else. Scrutinise the contractor’s industrial relations management policy and procedures also track record and systems and if there are gaps work together to close them, and manage this schedule and costs together for the benefit of both parties. The contractor must also be prepared to work with the owner to deliver on the requirements of the mining charter as well.

Did you go through this entire process when you originally appointed Aveng?
We have gone down the road with Aveng for four and a half years. The performance didn’t fulfil our expectations because we didn’t look at them critically in the beginning. If the contractor is not performing it means the value of the mining company is being destroyed. There comes a stage where both parties suffer and relations become strained the project value get destroyed even further and this is when an amicable separation then becomes a viable option.

What did you get right? How many positives can you take and say, “this we have done well?”
The best thing you can do is to be honest in your dealings. To be honest with people, and people include your own team, contractors and everybody else. If you don’t have a relationship of trust and respect you never get anything done. Look at what is happening in our country. If you are in a leadership people must trust you.

You must have been under extreme pressure; how do you handle all the pressure?
It is important that you keep every single stakeholder informed. Don’t hide any information or facts, otherwise you will continue making false promises. Always be open to perspectives and review all and look at causalities to arrive at decisions. Always seek opinion from specialists before you make a final decision. Be prepared to live with the decision that you have taken.

Is there a danger that the contractor’s performance will now even be worse than before?
Not at all. We have agreed that they complete the main shaft and the work has improved over the past few months. Aveng is doing well towards the end of its contract. In fact, they are on target to finish the last portion of work two or three weeks earlier than what we expected.

Are the workers that you will retain from the local communities?
There is a combination. We will retain most Category B workers, which are those that did flat development on the services shaft. Most of these workers are from the local community. We will continue using them in the future. The contract termination really didn’t have so much of an impact in terms of job losses.

Mining will start very soon, is Wesizwe planning to appoint new contractors?
The original Wesizwe model was owner operated. However, our definition of owner operated meant that the EPCM contractor would manage the project, the process plant and the mine. We would also contract out the shaft sinking and development, including flat development for production build-up.

Wesizwe would then bleed in our resources during the production build up phase, when we reach full production the mine would have then been owner operated full, so that was our definition of owner operator – in fact most projects follow the same route. Production build up is normally outsourced. It is a very difficult phase but extremely schedule sensitive, so you then do invite contractors.

At what stage is the project now?
We are currently out on inquiry to appoint a flat development contractor to commence production build up once the main shaft is commissioned. One of the lessons we learned with the Aveng scope is to never issue a longer duration contract. Our contract with Aveng was for five years initially. Things started falling apart after three years. We are currently going to place a three-year renewable option contract with the contractor. The flat development contract will be awarded in July as the main shaft will then have been commissioned the actual start date will be later after site establishment by the contractor.

Will Wesizwe be using traditional drill and blast methods?
In the flat development to reef our operation is mechanised. We are currently using drill rigs underground, and we will put in trucks and conveyor belts underground. We have a mix of mechanisation and traditional mining. Mainly because our reef width is 1m by 1.4m, we are limited with mechanisation so we must do conventional drilling and blasting.

What are the timelines for the project?
We are commissioning the shaft in June 2017 the service shaft previously vent shaft will continue to be used with shaft sinking system to access lower level mining on 81 and 82 levels. That is 820m on the main shaft and 810m on the services shaft. The ventilation shaft will be raise-bored by December this year. It will be a six-diameter hole 720m deep. We converted the original ventilation shaft into a services shaft, so we need an up-cast vent shaft specifically, that is going to be raise bored. That project hasn’t started yet, the contractor has also not been appointed at this stage.

We are hoping to appoint a flat development contractor and a process plant contractors in July. The plant contractor will start the front-end engineering ordering of items to prepare for construction in January 2018. We have commissioned power and water bulk services in December last year and got underway with the housing programme in September last year. By the end of this year we would have finished 801 units with an additional 1 300 houses to come.

When will you start stockpiling?
We started stockpiling at the beginning of this year and we are more than confident that we will start bringing the first ore tonnes to the surface by June or July this year. So, we will start building stock piles from this year to 2019. We plan to have about 1 million tonnes by 2019. That is about three months of full feed to the processing plant which is enough for us to commission the facility. From 2019 we start opening the stoping and we’ll get more tonnes again. Full production is in 2021.
We have all levels open, 69, 72, 77, 81 and 82. All levels are opening. People are mining.

We are busy with waste development coming out of the shaft, By June we will be on the reef. So we are going to start reef development in June basically. In June 2018 the initial stoping gets underway and full production will be in May/June 2021. Everything is on target.

Click below to read the June 2017 issue of Mining Mirror.

MM June2017

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