CONNECT 2019

CASE STUDY
 CONTENTS
1. Note from the facilitators  04
2. Letter from the Chairman  06
3. Blue Mine Group History (Our business at a glance) 08
3.1 History  08
4. Blue Mine Business Structure and Overview10
4.1 Overview, strategy and values  10
4.2 Marketplace Review  11
4.3 Business Unit Review  12
4.3.1 Diamonds – De Lagers  12
4.3.2 PGMs  19
4.3.3 Coal  25
4.4 Strategic Priorities  30
4.4.1 People  30
4.4.2 Portfolio  30
4.4.3 Innovation  30
5. Key Performance Indicators  32
6. SWOT analysis  33

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Connect Case Study 3
 1. NOTE
FROM THE
FACILITATORS
Things to consider while reading the business case study:

During the conference, you will take
on the role of the Group Management
Committee (GMC), in charge of a
simulated globally diversified mining
company named ‘Blue Mine Group’
(BMG) over a period of 3 years.
As a leader at Anglo American, you
are responsible for creating and
clearly communicating your vision
and strategy to guide your teams.
You will be required to set a clear
vision and execute upon it.
Experience has taught us that the
more prepared you are, the more
successful your team will be in the
simulation, and the more rewarding
the experience. While reading the
business case, keep the following
questions and topics in mind while
reflecting on the similarities and
differences between BMG and Anglo
American.

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Opportunities and threats
1. What macro-level opportunities
and threats do you foresee in
BMG’s business environment?
2. What similarities do you see
relating to real world trends?
3. How have these trends impacted
Anglo American in reality?
Strengths and weaknesses
1. What are the key strengths and
weaknesses of BMG, particularly
relating to the macro-industry
trends? Reflect on these
strengths and weaknesses with
relation to the reality at Anglo
American.
2. What are the strategic actions
that BMG need to take to realise
opportunities and mitigate risks?
Keeping a holistic
perspective
1. What are the key value drivers
in different business units and
how is value created across the
mining value chain?
2. How can you effectively manage
a diversified mining portfolio
through changing commodity
cycles? What are the short and
long-term trade-offs?
Strategy and execution
1. What is your specific strategy at
BMG with regards to portfolio
management, innovation, people
and capital allocation? How will
you execute your strategy on each
of these elements?
Leadership
1. What are the critical leadership
behaviours required to drive
future performance in both
individuals and teams?
Upon arrival at the connect
conference you will be given further
information about BMG which will
help you and your team create a
clear strategy and make informed
decisions.
LET’S GET DIGGING!
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 2. LETTER
FROM THE
CHAIRMAN
Dear colleagues,
Welcome to BMG Head Quarters. We, the board of BMG,
are looking forward to meeting and working with you in
the near future.
BMG is one of the great names in
mining. We pride ourselves on having a
portfolio of high quality assets, which
we are determined to see managed
responsibly in a productive and value
creating way. With a proud history
stretching back over a century, we have
weathered many commodity storms and
have grown our global reputation and
influence through an intense focus on
innovative and sustainable mining.
There are many changes occurring
globally which are impacting our
business and the mining industry as
a whole. Climate change, economic
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instability, the industrial powerhouse
nation, Yanjing’s, growth has slowed
and political volatility at both local
and national levels has placed us in a
position of uncertainty regarding the
future.
Additionally, the digital revolution,
Internet of Things (IoT) and Industry
4.0 are lowering the historically high
barriers to entry for our competitors,
while threatening the job security of
our workforce. All these challenges are
set against the backdrop of the recent
commodity downturn from which we have
only recently emerged. The inevitable
downswing of the cyclical commodity
markets are a reality in our industry, of
which we should always be aware.
Despite these formidable challenges,
BMG has not survived for over a
century by luck or shrinking back from
the realities of our changing industry.
Our continued emphasis on disciplined
capital allocation and mineral assets
of high growth and superior quality,
continues to be the foundation of our
business. Being customer centric
has always been a priority on paper,
however, we plan to make this a
reality through our renewed focus
on innovation and sustainability. This
should position us to thrive, not just
survive, in the years to come.
However, a strong past is not a
guarantee for a successful future.
We need to continue to strengthen
our portfolio while improving upon
our operations by producing greater
volumes from an optimised mix of
assets. With people representing the
heart and soul of our business, our
goal is to increase their effectiveness
through creating an inclusive and
diverse culture which will inspire
innovative thinking and promote high
performance. In this way, our people will
give us the competitive edge and help us
achieve our commercial ambitions.
As a member of the new GMC, you will
play a vital role in building the future of
BMG. The following pages provide more
detail and describe both the markets in
which we operate as well as an overview
of our portfolio and existing operations.
Once again, welcome to the GMC of BMG!
Chairman
Craig Henderson
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 3. BLUE MINING
GROUP HISTORY
(OUR BUSINESS AT A GLANCE)
3.1 History
BMG was originally founded in 1906
by Simon Fitzroy. Originally a small
time cattle farmer near the town of
Smithsfield, Fitzroy discovered the
first diamonds in the local Stosen
River while watering his cattle.
Unknown to Fitzroy at the time was
the fact that he had stumbled upon
one of the world’s richest diamond
deposits. Pre-empting the inevitable
“diamond fever”, Fitzroy bought
up much of the surrounding land
and started mining for diamonds in
earnest. The origins of the BMG’s
name are derived from the blue-hued
rock, called kimberlite, from within
which the diamonds were found.
Since these humble beginnings,
BMG has grown tremendously both
organically and inorganically, with
a large acquisition in 1935 of the
Platinum General Minerals Group and
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more recently the acquisition of Ndlovu
Coal in 1982. Originally only operating
in Emergia (an emerging economy),
BMG now owns and operates a number
of assets across a range of different
geographies. Whilst the majority of
BMG’s assets, operations and people
still residing in Emergia, BMG has
solidified itself as a global mining
brand which is known for its superior
quality commodities across the
markets within which it operates.
BMG is one of the top five largest
mining companies in the world and has
been a Global Fortune 100 company for
the past 27 years. As one of the largest
producers of the platinum group
metals (PGM’s) in the industry and
for consistently supplying high quality
diamonds for over a century, BMG is
now a familiar name associated with
quality and consistency.
BMG'S KEY ASSETS ACROSS THE GLOBE

DIAMONDS PGM COAL

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 4. BLUE MINE
BUSINESS
STRUCTURE
AND OVERVIEW
4.1 Overview, strategy
and values
BMG’s purpose is simple. Re-
imagining mining to improve people’s
lives. BMG aims to make a lasting
contribution to society through
providing the raw materials on which
both developing and maturing nations
depend. An intense focus on smart
innovation allows BMG to be more
precise when extracting minerals
which in turn minimises the impact
on the environment through reducing
energy usage, water consumption and
carbon emissions.
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While having an engaging purpose
is vital, it needs to be supported by a
clear strategic plan. BMG’s strategy
is aimed at strengthening their asset
portfolio through allocating capital
in a value-focused approach. This is
done across three strategic priorities:
portfolio, innovation and people.
Both the purpose and strategy will
only be achieved by sticking to BMG’s
values. The company values look to
guide everything BMG do by providing
a strategic ‘compass’ when difficult
choices need to be made.
They are safety, care & respect,
integrity, accountability, collaboration
and innovation.
Billions of people rely on BMG’s
products every day. BMG’s aim is
to continue to provide these raw
materials to help nations develop
to ultimately improve people’s lives
across the globe.
4.2 Marketplace Review
A Cautious Recovery
Almost a decade after the global
financial crisis, the world economy has
continued its gradual recovery. Amidst
this backdrop, the mining industry is only
just beginning to emerge from a recent
downturn in the commodity cycle. This
recent commodity crash forced many of
the big mining houses to aggressively
divest their non-essential assets in
order to strengthen their balance sheets
and improve overall productivity levels.
Average market prices across the
respective commodities have started
to rise with the exception of diamonds
which has experienced a slight decline
due to changing consumer trends.
Yanjing Returns to Growth
While Yanjing is no longer experiencing
the incredible double-digit growth
seen in recent years, it continues to
develop and consume a substantial
amount of the world’s minerals and
raw materials. This demand for
minerals is predominantly driven by
the expansion of national transport
links such as airports, ports and
rail networks while the increased
population growth in Yanjing’s smaller
cities is requiring a substantial
amount of residential and commercial
construction. Growth has picked
up again slightly this year and is
forecasted to remain steady around
6.5% over the next 5 years.
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 4.3 Business Unit Review
To be successful you will need to manage your portfolio, innovation and people
across the value chain. The following sections outlines the key details that will set
you up for success.

4.3.1 Diamonds – De Lagers

BMG operates and influences the entire diamond value chain. It is critical
to understand the different parts of this value chain in order to optimise
production, maximise value generation and outcompete the competition.

MINING OF DIAMONDS AND ROUGH DIAMOND SALES

Recovery & Purchase of

On-Mine Processing Cleaning, 3rd party rough
Extraction & Sorting and diamonds
Production Valuing

Discovery &
Resource Rough
Evaluation Diamond Sales
(sightholder
& auction sales)

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SOURCING AND SALE OF POLISHED DIAMONDS

Polished diamond sourcing

(Purchase of polished
diamonds)

3rd Party Jewellery

Cutting and Sales (Retail
Polishing stores and
online)

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 OVERVIEW OF MINES
BMG owns and operates 3 main
diamond mines across Emergia, as
well as a collection of smaller diamond
mines which supplements the supply
of diamonds from the 3 main mines.

Kukhanya Mine Perryson Mine

Life of mine (years) 17 Life of mine (years) 22

Estimated reserves Estimated reserves

82 96
(Mt) (Mt)

Grade (cpht) 88 Grade (cpht) 64

Price ($/ct) 157 Price ($/ct) 149

Diamonds extracted Diamonds extracted

13.1 8.8
(Mct) (Mct)

Kukhanya Mine is the original diamond Perryson Mine is a mid-sized diamond

mine of BMG’s diamond portfolio which
has been in operation since the company’s
inception in the early 1900’s. Kukhanya
has consistently produced the highest
grade kimberlite ore out of any diamond
mine in Emergia over the last century.
Cost of extracting the diamond ore has
continued to climb in recent years asore is
extracted from deeper in the mine . compared with BMG’s other mines in
mine which has historically provided
high volumes of low carat diamonds.
While a couple of large diamonds have
been found, typically the diamonds are
small and evenly dispersed throughout
the kimberlite pipe. This mine is still
relatively young and so the cost for
extracting the diamond ore is still low
operation.

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Sityebi Mine
Life of mine (years) 28
Estimated reserves (Mt) 110
Grade (cpht) 57
Price ($/ct) 180
Diamonds extracted
3.5
(Mct)
Sityebi Mine is the youngest mine that
BMG operates and hence has been
estimated to have the longest life-span.
Although the overall grade is the lowest
out of BMG’s mines, large diamonds have
consistently been found on the site which
provides the hope that more large stones
will continue to be uncovered. However,
the Sityebi kimberlite pipe is particularly
narrow which makes it more difficult and
expensive to extract the diamond ore.
Mines and Production
Of the 3 larger diamond mines BMG
owns and operates across Emergia,
the original diamond mine, Kukhanya,
has been in production for almost a
century since the first diamonds were
found and Fitzroy’s sons formally started
Blue Mine Group. While the mining and
diamond extraction process remains
virtually the same, the mines themselves
are very different and possess varying
grades, production rates and life-spans.
It is crucial that the value of each mine
is optimised given the mine’s current
life-span, grade and production output.
Whilst the total movement of earth
increased slightly, the total production
of carats achieved remained constant
compared to last year.
Dense Medium Separation (DMS) is
the most commonly used recovery
method throughout BMG’s mines,
whereby a large centrifuge separates
out the heavy diamond concentrate
from the lighter waste materials. This
diamond concentrate still contains a
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 lot of rock and waste material which
needs to be removed before diamonds
are recovered. Diamonds possess the
physical properties of being hydrophobic
(water repellent) and shine under UV
light (fluoresce) which allows for further
recovery using black light sorters and
grease tables. The black light sorters
shine UV rays on the concentrate to
expose most of the diamonds and grease
tables remove the rest of the waste
material while leaving the smallest
diamonds behind, stuck to the grease.
Even with all these processes it is near
impossible to achieve 100% recovery.
The closer each mine gets to achieving
100% recovery, the more value that mine
is deriving for every tonne of ore that is
processed.

Sorting, Valuing & Sales

The recovered diamonds must then be
collected before being sold as rough
diamonds to different customer groups
which can range from industrial buyers
to cutting and polishing houses. All
diamonds are sold as rough diamonds
while the purchasing of polished stones
occurs as a separate venture to supply

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De Lagers Jewellers with quality
diamonds for their retail stores. De
Lagers Jewellers only has a small global
retail presence within the diamond
jewellery market. They purchase polished
stones directly from third parties before
selling these stones in their retail stores.
Sales (Commodity review)
The global demand for diamonds has
remained steady compared to previous
years. However, this hides the fact that
De Lagers’ market share has been
dropping steadily for the past 20 years.
Predominantly this has been caused
by more diamond players entering the
market. Additionally, there are changes
occurring in the sale of both polished
and rough diamonds.
Rough (Trading)
The sale of rough diamonds occurs
across two main channels, Global
Sightholder Sales (GSS) and auction
sales. De Lagers sells over 90%
of its rough diamonds by value
through GSS which allows accredited
diamond buying companies, known
as sightholders, to visit Emergia and
purchase rough diamond allocations
once they have inspected them. The
current list of sightholders is less
than 100 companies with the list of
sightholders is updated on an annual
basis with there being between 8
and 12 sight visits planned every
year. Additional rough diamonds can
be purchased from third parties, to
optimise the overall product mix,
and then resold to customers if sales
targets are higher than inhouse
production.
Auction sales account for the remaining
10% of rough diamond sales by value
but perform the important task of
defining the markets appetite for
De Lagers rough diamonds and the
relevant price point. These auction
sales therefore play a large role in
‘price discovery’ of diamonds on the
market. The majority of these sales now
occur online with registered customers
able to purchase rough diamonds at
competitive auction prices. The ability
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 to sell third party rough diamonds via
De Lagers’ online auction platform is an
idea that is being proposed and tested.
Polished (Sourcing)
Sales in diamond jewellery have declined
year-on-year in Western markets
predominantly caused by reduced
spending on luxury items. In particular,
millennials do not value diamond
engagement rings as much as their
parents or grand-parents’ generation and
are spending their discretionary income
on experiences over luxury assets. Of
the sales generated through diamond
jewellery, greater portions of sales have
come from lower carat jewellery and less
expensive luxury pieces which suggests
consumers are less willing to pay for
larger polished stones.
Diamond jewellery, and bridal jewellery
in particular, have historically been
associated with love and commitment
but are now suffering a decline. Diamond
retailers will need to focus their
marketing efforts and reinvent the buying
experience to be more fun, inclusive
and self-gratifying in order to appeal
to the growing number of women who
are purchasing diamond jewellery for
themselves. This will mean an increased
focused on the number, location and
layout of jewellery stores as well as the
marketing efforts surrounding them. De
Lagers spent more on marketing this
year than previous years but will need
to ensure that these marketing efforts
are focused on the right areas. A simple
example would be to focus on women
aged between 35 to 55 across all markets
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who consistently purchase the highest
volumes of diamond jewellery.
Changing consumer trends are a cause
for concern, but of equal importance are
the rise of synthetic diamonds infiltrating
the market. Although only accounting
for 1% - 2% of global rough diamond
sales, their share is expected to expand
to between 10% and 15% over the next
five years. Of even greater concern is
the rise of synthetics being found in
natural diamond jewellery. While De
Lagers has not suffered any public
issues around the legitimacy of their
diamonds, ethics and money conscious
millennials are questioning the overall
integrity of natural diamonds not wanting
to support so-called “conflict diamonds”.
Competitors have even started marketing
the lab-grown gems as “created and
clean diamonds” in order to appeal to
this demographic. De Lagers relies
heavily upon its brand of high quality,
natural diamonds which is being placed
increasingly at risk as more synthetic
stones enter the market.
Huge investments have been made in
innovations to detect synthetic diamonds
both in the markets of rough and polished
diamonds. From machines used to detect
small synthetics weighing less than 0.5
carats through to developing a digital
platform to tag diamonds via blockchain
technology. This will provide a secure
and transparent record of all-natural
diamonds and will reduce the risk of
synthetics being passed off as natural.
 4.3.2 PGMs
BMG operates across the entire PGMs value chain. It is crucial that value is
driven by balancing several important factors across the entire value chain.
Overall ore grade, which includes both 4E metals (platinum, palladium,
rhodium and gold) and base metals, recovery and capital expenditure need to
be considered across a bottlenecked value chain.

PLATINUM GROUP METALS

Purchase of
Concentrate
Sale of Base
(POC)
Metals
On-Mine
On-Mine Concentration
Excavation Smelting
(open-pit and
underground)
Refining
Discovery
and
Resource Sale of platinum,
Evaluation
palladium and
other 4E metals

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 BMG is one of the leading primary
producers of platinum group metals
(PGMs). BMG owns and operates
3 large platinum mines whose
high-level details are displayed
in the tables below. BMG also
operates a collection of smaller
platinum mines which supplements
the supply of platinum, other 4E
metals and base metals from the
3 main mines. BMG extracts and
processes a large amount of newly
mined platinum globally. In addition
to the extraction and production
of platinum, BMG also produces a
significant portion of the world’s Edmondton Mine
‘4E’ metals, which typically occur
alongside platinum in the ore
deposits. Life of mine (years) 26

BMG owns and operates its Estimated reserves

collection of platinum mines which
all reside in the remote area of
North West Emergia. Each of
these mines operates at different
production rates. It is crucial that
the value of each mine is optimised
given the mine’s current life,
grade and production output. For
each mine, BMG has the option to
increase, maintain or decrease
production. It will be important to
keep the current commodity prices
and macro-economic trends in mind
when planning the production of
each mine.
17.6
(4E Moz)
Grade (4E metal g/t) 4.8
Platinum extracted
520
(koz)
Edmundton Mine is BMG’s core platinum
mine which has been in operation for over
two decades. It has consistently provided
high grades of platinum, palladium and
other 4E metals during this time and is
expected to continue to be a core part of
BMG’s platinum operations going forward.

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 Clarkson Mine Ubuninzi Mine

Life of mine (years) 18 Life of mine (years) 32

Estimated reserves Estimated reserves

25.2 21.8
(4E Moz) (4E Moz)

Grade
Grade (4E metal g/t) 5.6 6.3
(4E metal g/t)

Platinum extracted Platinum extracted

490 450
(koz) (koz)

Clarkson Mine is located closest to the
smelting and refining plant. Although not
producing volumes of platinum as high
as Edmundton, it produces a high overall
grade of 4E metals. Clarkson Mine has
also made significant gains in reducing
its energy and water usage. It is the
ambition to be BMG’s first mines
to achieve the title of being a fully
waterless mine.
Ubuninzi Mine was acquired only a few
years ago from a rival mining company
during the commodity downturn and is
the smallest of BMG’s 3 platinum mines.
It currently produces the highest grade
of 4E metals and has the longest life-
span based on current reserve estimates.
Ubuninzi Mine actually produces the
lowest amount of pure platinum per
tonne compared to BMG’s other mines
but its output of palladium, rhodium,
gold and base metals is higher than the
other mines.

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 Processing
Concentration
The concentration process occurs
on-mine and involves the crushing and
milling of the primary ore followed
by a process known as flotation to
achieve a standard PGM grade known
as ‘concentrate’. During the flotation
process, tailings are separated from
the valuable minerals and are stored in
large tailing dams near the processing
site. In recent years, an effort has
been made to reduce the amount of
water used during this process and
achieve the desired result of having
‘dry’ tailings dams. So far, these
efforts have achieved minimal success,
with the traditional water-intensive
tailings dams still being used. There
are concerns over the environmental
impact of these tailings dams as
well as the risk of contaminating
downstream water sources. Large
recovery gains can be made during
this stage of the value chain. However,
poor performance and production
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inefficiencies can result in these
potential recovery gains being lost.
To supplement primary production,
purchase of concentrate (POC) from
associates or third-party suppliers is
used to achieve the overall production
targets. A minimum amount of POC
is required by the local government
in order maintain a healthy mining
industry and to avoid anti-competitive
behaviour. Above this minimum amount,
mining companies are permitted
to purchase additional concentrate
at their own discretion. BMG’s POC
increased moderately from last year
in order to meet the required demand
of total concentrate to be sent to the
smelter. This was due to an unforeseen
production issue which has since been
resolved.
Smelting
The concentrate is transported and
stockpiled at the main smelting
and refining plant. This is the main
bottleneck in the process and in
recent years, growing inflows of
concentrate have resulted in a surplus
being stockpiled at the plant. The
stockpiled concentrate now sits above
the current processing capacity of
the plant. To remove the bottleneck
constraint, plant managers have
expressed the need increase the
capacity of the plant through capital
expenditure. While having too large
a stockpile of concentrate is not
efficient, there is always the risk
that an unexpected closure of one
the mines could suddenly cause the
inflow of concentrate to drop, resulting
in underutilisation of the smelter.
Optimisation of this plant will be a key
differentiator between BMG and its
competition.
The concentrate goes through a
series of smelting phases such as the
Converting Process (CP) in order to
produce matte. Processes such as the
Slag Cleaning Process (SCP) remove
much of the waste material.
Refining
The Magnetic Converter Process
(MCP) separates the Base Metals from
the precious metals (PGMs, gold and
silver). Base Metal Refining (BMR)
is then used for further refinement,
whereby the base metals (nickel
and copper) are separated from one
another. Although platinum, palladium
and other PGMs are the elements in
focus, the base metal by products are
still valuable and are sold to respective
buyers at market spot prices.
By the end of this process, pure
platinum at a grade of over 99.99%
is achieved. This refining process
has stayed relatively the same at
BMG for many years and there is a
growing opinion of plant managers
that additional capital could be used
to help improve the recovery rates and
efficiency of the current process.
Sales (Commodity review)
TThis pure platinum is now ready
to be sold to customers in the
market. This either occurs through
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 fixed contract sales or through
spot pricing. Fixed contracts allow
for greater certainty of how much
production needs to occur. Spot
pricing or ‘trading’ is inherently
riskier, but has the potential for
higher profit margins if prices rise. A
mix of both types of sales is critical to
achieving high profits and managing
risk amidst the changing market
conditions and pricing landscape.
PGMs have three main uses and
customer segments which include:
1. catalytic convertors in automobiles
2. industrial applications in
electronics, chemicals and
petroleum companies
3. jewellery
The current market share for each
of these is 60%, 22% and 18%
respectively.

PGM sales by customer segment

Automotive
60%

The consistent sale of diesel and petroleum fuelled motor vehicles forms the
foundation of the demand for PGMs. While this demand for PGMs from the
automotive sector has remained strong, climate change, increasingly strict
emissions legislation and the rise of electric vehicles pose new threats to this
demand. However, there is still uncertainty as to how big a threat these are as
global automotive platinum demand has continued to increase year on year.

Industrial applications and platinum jewellery make up the remainder of the

platinum demand which are predicted to remain stable. The chemical sector
is leading the consumption of platinum while electrical applications form the
basis of demand for palladium. Steady growth of platinum jewellery in emerging
markets has helped maintain the positive momentum in this segment.

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 4.3.3 Coal
BMG operates across the entire coal value chain from extraction through to
sale. It is critical to understand how the different parts of this value chain,
global trends and changing customer preferences influence productivity and
final sales.

COAL

Purchase of 3rd
On-Mine Rail Transportation party coal
Extraction to Port
(Mix of high and
low quality coal) Stockpile at
Port

Sale and
Discovery
Distribution to
and Resource
Markets
Evaluation
(Product mix)

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 OVERVIEW OF MINES

BMG owns and operates 3 main

coal mines whose high-level details
are displayed in the tables below.
BMG also operates a collection
of smaller coal mines which
supplements the supply of coal
from the 3 main mines.

Ngwevu Mine Wilston Mine

Life of mine (years) 15 Life of mine (years) 21

Estimated reserves Estimated reserves

64 78
(Mt) (Mt)

Quality (kcal/kg) 4500 Quality (kcal/kg) 5620

Coal extracted (Mt) 4.2 Coal extracted (Mt) 3.8

Ngwevu Mine is the heart of BMG’s coal
mining operations and has been its
primary coal mine since the acquisition
of Ndlovu Coal in the early 1980’s. The
quality of coal is slightly lower than
BMG’s other coal mines but the close
proximity to the local train station, the
open cut structure of the mine and
steady output of coal over the years has
made it a core asset in BMG’s portfolio.
Wilston Mine produces a high quality of
thermal coal in comparison to BMG’s
other mines. The physical structure of
the mine means that extensive longwall
mining is required to extract the coal
which increases cost. Past safety
incidents have resulted on an increased
focus on innovation to improve safety
and production.

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Amandla Mine
Life of mine (years) 17
Estimated reserves
58
(Mt)
Quality (kcal/kg) 5400
Coal extracted (Mt) 3.4
Amandla Mine is BMG’s smallest coal
mine based on reserve estimates and
annual coal extraction. It currently
produces a high-quality mix of coal
but an increasing percentage of lower
quality of coal has been extracted over
the last couple of years. Amandla Mine
is the forefront of BMG’s coal mines in
reducing harmful particulate matter
and carbon emissions. Considerable
progress has been made in minimising
the amount of dust and ash emitted
during extraction and production.
Mines and Production
BMG obtained its coal mines through the
acquisition of Ndlovu coal in the early
1980’s. While these mines all have varying
life-spans and reserve estimates, current
estimates of saleable reserves are above
300 million tonnes. All these mines
are run to service two main markets,
Atlantica and Pacifica, which each have
specific mix of high and low-quality coal
that they look to purchase from BMG
and other coal producers. While there
is a broad range of thermal output for
coal, it can be classed into one of the two
categories. High quality coal has a higher
level of thermal output per unit volume
and emits lower levels of carbon dioxide,
ash and particulate matter when burned.
Low quality coal on the other hand has
a lower energy density and emits more
pollutants when burned.
Each of BMG’s mines has a different
grade profile. Currently, the combined
output of all these mines contains more
high-quality coal than low quality. In
the day-to-day running of the mines,
prioritising where time is spent between
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 reducing operating costs, boosting coal
production and optimising value is key.

Sales and Distribution

(Commodity review)
The rail network connecting BMG’s
mines to the main port on the
East coast of Emergia is the main
bottleneck across the coal value chain.
The rail network is nationalised and
BMG pay a significant monthly fee
to the government of Emergia for a
set capacity. BMG have the option to
purchase additional rail capacity if it is
believed that the demand for coal and
price is expected to increase.
Coal is predominantly used by large
power utilities companies to produce
electricity and hence the reliable the warehouse space is leased from
timing of coal deliveries is critical. the port officials and due to the
With the timing of coal delivery being space being limited, it can become
a crucial element of the sale price, very expensive if too much coal is
transporting the large amounts of stockpiled.
coal to the port at the rights times
is crucial. However, the cost of The global demand for coal is largely
purchasing additional rail capacity is dictated by the seasons with more
fixed regardless of how much coal is energy required by the northern
actually transported. hemisphere during winter months to
power and heat buildings. Unforeseen
The coal is transported across weather can cause spikes in the
the country to the port where it is demand for coal which may make it
stockpiled in giant coal warehouses viable for BMG to purchase additional
before being shipped across to coal from 3rd parties at the port. There
Atlantica or Pacifica on tankers. These is thus a fine balance between storing
tankers leave at regular intervals to large amounts of coal and paying
both markets from this port. Currently

28 Connect Case Study

an increasing storage fee versus
purchasing coal from 3rd parties at
the port.
Atlantica and Pacifica are the two
predominant markets that import
BMG’s thermal coal. Pacifica is
currently driving the majority of this
demand. Although a composition
of high and low-quality coal is sold
to both markets, Atlantica has
historically demanded higher quality.
Atlantica is a highly regulated market
which has strict laws around carbon
emissions, ash and other particulate
matter released when burning coal.
However, during times of crises,
such as a very long winter, Atlantica
in the past has relaxed its stringent
environmental regulations.
Pacifica is a more developing,
deregulated market where maintaining
high volumes of coal at affordable
prices is their chief concern. Pacifica
does not have strict regulations in
place regarding carbon emissions
as its primary focus is to increase
industrial development and providing
a continuous supply of electricity to its
growing cities.
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 4.4 Strategic Priorities
BMG has a set of strategic priorities
that fit under three broad pillars:
Portfolio, Innovation and People.
While each of these three pillars has
a specific focus across all of BMG’s
business units and individual mines,
there are some corporate wide
mandates that have an impact across
the business as a whole.
An exploration and discovery budget is
set at the beginning of each year which
determines how much of a focus BMG
is placing on driving the discovery of
new mining sites as well as expanding
the reserves of existing mine sites. This
spend can be focused across the three
business units depending on the new
GMC’s strategy.
4.4.1 Portfolio
BMG’s portfolio of high quality,
diversified assets is the foundation of
its business. Maintaining and operating
a diverse and healthy number of these
assets allows BMG to focus on the
long-term value creation in the face
of the short term macro-economic
environment and commodity cycles.
BMG has recently reduced the size of its
portfolio off the back of the commodity
downturn and is now in a position to
grow. Throughout your tenure as the
new management team, you will have
the opportunity to influence the size and
composition of BMG’s portfolio.
4.4.2 Innovation
An intense focus on innovation has
been the prominent reason for BMG’s
success and evolution over the past
century. The rapid pace of change
30 Connect Case Study
occurring both locally and globally
means that innovation is now more
critical than ever before. Achieving a
‘Zero Harm’ safety record, water and
carbon neutral mining and decreasing
capital and operational costs are
goals that will only occur through
opportunities delivered by innovation.
Innovation is an iterative process. This
will mean that co-creating solutions
alongside different stakeholders will
be critical in delivering value across
the entire mining value chain.
4.4.3 People
People are at the centre of BMG’s
business. Creating a safe working
environment is the number one
priority as every employee should
have the guarantee of returning home
safely at the end of the day. Employee
development is of critical importance to
the sustainability of BMG. The amount
of time spent acquiring and retaining
top talent is vital and this time will
need to be prioritised across different
areas of the business. Creating and
promoting an inclusive and diverse
culture will allow people to speak up
and voice their opinions while helping
to breakdown silos. Ensuring the right
people are in the right roles will help
drive efficiency as everyone does
value-adding work. Finally, people also
include BMG’s external commitments
to local communities, government
and society at large. An open and
transparent approach is critical while
partnering with local communities and
governments to ensure mutual benefit
across all our operations.
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 5. KEY
PERFORMANCE
INDICATORS
There are many metrics that need to be tracked to ensure operational success at
both a BU and corporate level. The diagram below shows the key metrics that will be
used to calculate the ‘share price’.

- SHARE PRICE -

Free Cash Net Debt Change in

ROCE Dividend Brand Score
Flow Ratio Production

Engagement

Sustainability
Index

Safety

32 Connect Case Study

6. SWOT
ANALYSIS
Using the information provided, conduct a SWOT analysis on BMG in order to
gauge the present state of the company. By understanding the key internal
strengths and weaknesses as well as the main external opportunities and threats,
you are in a better position to define your strategy.

Strength Weaknesses

Opportunities Threats

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