I’m a big coal bull: Rowan Karstel

Buffalo Coal CEO Rowan Karstel is a fixer.

With more than two decades of cross-commodity mining experience, he has performed at the senior management level in mining companies throughout South Africa and Mozambique.

A mining and civil engineer, Rowan has worked for the likes of RSV ENCO, BHP Billiton’s Energy Coal division and Xstrata Coal.

“I like to play in the space where companies are in distress and turn them around. I’ve worked for all the major mining houses, including a couple of juniors like Mmakau Mining, Optimum Coal, Keaton Energy and Beacon Hill Resources,” he says.

“I’ve been fortunate in my career to have gained experience in every aspect of the value chain, particularly operations, technical, projects, and business development.”

“I like to play in the space where companies are in distress and I turn them around.”

Under Rowan’s stewardship since 2016, South African anthracite and bituminous coalmine Buffalo Coal has been working hard to come back from a financial nightmare, with around R200 million still owed to specialist banker and asset management firm Investec.

With operations in Kwa-Zulu Natal, the company’s Magdalena and Aviemore mines supply thermal coal, anthracite and calcine to both domestic and export markets.

Rowan has been charged with the task of putting the company back on solid ground.

“When I joined Buffalo, there were a lot of things that weren’t in place.”

We had significant debt issues, we were dealing with a claim against mining rights at Aviemore coalmine, we were in the red with the Department of Mineral Resources, and we faced difficulties with the communities surrounding the mines.”

“I worked hard and fast to resolve these issues and spent a lot of time in the community to improve the relationship,” explains Rowan.

“In terms of safety, our injury frequency rate was far too high until I introduced visible felt leadership. We focused on lead indicators and appointed an ex-BHP Billiton Vice-President of Health and Safety to transform our safety procedures.”

While these issues were resolved fairly quickly, Rowan says it was thanks to strong coal prices that the company’s margin was boosted during this time.

“This uptick allowed us to sell off some old stock and form a stronger relationship with Investec and rebuild our credibility.”

In addition to financial setbacks, Buffalo is also faced with technical concerns created by Kwa-Zulu Natal’s challenging geology.

“We are always trying to optimise our operations by improving our mine planning and focusing on technical excellence.”

“We are looking at reserve statements for our two operations, which will give us an improved yield and less contamination, and we have an in-seam horizontal drill to help us predict the faults and dykes,” says Rowan.

“At the new North adit of our Aviemore mine, we’ve doubled our underground sections going forward. This will lift production and reduce the fixed cost, having a big impact on our overall NPV value.”

“We have also identified spare capacity in our two wash plants. We’re now focused on buying coal to reduce the fixed cost and increase our margin.”

Buffalo prides itself on a diversified marketing strategy.

“We supply coal inland and to the export market by rail and road. We sell the coal in South African Rand on a freight-on-road basis, which de-risks us from rail and port risks, demurrage costs, and fluctuating exchange rates.”

“We sell through traders like Glencore, which gives Buffalo a diversified port strategy that differentiates us from competitors,” Rowan says.

“We’re at an advantage because we are one of the few anthracite mines left in South Africa, and the demand for anthracite and coal looks promising.”

“I’m a big coal bull and I believe the coal market will be in an up-cycle for the next couple of years.”

According to Rowan, the outlook for Buffalo is positive, following a rebound in the price of thermal coal and a robust demand for anthracite.

“I’ll be focusing on our health and safety, environment, and community procedures. We still have a way to go, but we’ve already seen great improvements in our performance,” he remarks.

“On the financial side of things, we are creating a bankable feasibility study for the Aviemore mine to extend its life from three to 15 years,” explains Rowan.

“Over the next two years, we’ll begin to repay Investec while continuing to add value to our major shareholder, Resource Capital Fund.”

“There’s been a lot of challenges at Buffalo – never a dull moment – but we’re definitely moving in the right direction.”

“We’re also looking to buy opportunities from neighbouring mines to keep our wash plants full and improve our margins.”

“There’s been a lot of challenges at Buffalo – never a dull moment – but we’re definitely moving in the right direction. As the saying goes, you have to soar with the eagles instead of hanging out with the chickens.”