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TWP unscathed by mining sector turmoil
Allan Seccombe
Posted: Thu, 20 Nov 2008

[miningmx.com] -- TWP Holdings, the South African mining engineering and projects group, has seen a doubling in the size of its order book and reckons it is escaping the brunt of the global financial meltdown because it has long-term work for major mining firms.

At the end of the 2008 financial year, TWP had an order book of R70bn that has since swollen to R140bn, with parts of the pipeline pushing beyond 2016, said CEO Nigel Townshend.

“Our order book stands at R140bn now. To date we have only had a few smaller projects delayed but have immediately been able to redeploy staff,” he said in an e-mailed response to questions.
larger companies seem to be looking through the current bad times
Despite the good news, TWP shares have fallen hard, along with most counters on the JSE. It is currently trading at about R10.45, off its year low of R8.21, but well off its 12-month high of R26.90.

“One reason we are not being that badly affected is the fact that most of our work is firstly long-term and secondly for blue chip majors who have internal funding. The problem at the moment for juniors is access to funds,” Townshend said.

“The larger companies seem to be looking through the current bad times, although they are being more selective. Many of our projects have a five-year plus timeline, however, and current prices may not be used as a go/no go decision,” he said.

“Nobody will want to give up a good project.”

This is a spot of good news in an otherwise gloomy commodities market, where platinum companies like Lonmin, the world’s third-largest platinum producer, and Eastern Platinum are mothballing projects and growth plans.

The most commonly used term in the sector at the moment for major and junior companies is “review of projects”.

This doesn’t necessarily mean growth projects are all being put on hold, but there is a growing emphasis within companies to conserve their cash in the prevailing market. Metal prices are low, in some cases so much so as to render large swathes of certain sectors unprofitable, and capital markets are in distress and unwilling to extend debt finance.

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Again, the platinum sector is one of those particularly hard hit, with the platinum price more than halving to about $800/ounce from $2,200 in March.

Norilsk Nickel, the world’s largest nickel company, is looking at cutting production at non-Russian projects because of slowing demand for the metal, with the first casualty being its Cawse plant in Australia, chief executive Vladimir Strzhalkovsky told a Russian business newspaper.

Central African Mining and Exploration Company (CAMEC) said on Wednesday it had suspended its copper and cobalt mines in the Democratic Republic of Congo (DRC) because of a sudden drop in Chinese demand for cobalt and falling copper prices.

Astonishingly for the current environment, TWP is still signing up new business.

“At the moment we have no plans to let anybody go and are still securing new commissions,” Townshend said. “I was in the DRC only yesterday signing a new contract for First Quantum’s shaft at Frontier Mine.”

“Also consider that a lot of our work is upfront feasibility work that can precede construction by two years or more,” he said.

“This type of work is fairly robust as the funds required are small relative to execution and necessary to position companies to take advantage of future upturns,” he said, pointing out that a number of firms had lost out in commodity boom times because they didn’t invest when times weren’t as good.

TWP is one of three consultancies Anglo Platinum said on Thursday it had struck “alliance agreements” with, to target best practice for project delivery and allow the companies to plane their workloads and resources over the next three years. Anglo Platinum is another one of those undergoing a review of all its projects.

“The major advantage to Anglo Platinum is the continuity of qualified and experienced people being deployed into projects,” Anglo Platinum said.

TWP is involved in Anglo Platinum’s Paardekraal 2 Shaft Project, Waterval UG2 Phase 2 Project and the Rustenburg Platinum Mine Chemical Division (RPMCD) Rehabilitation Project.