Australia Minerva Coal Mine Project

Sojitz increased interest to 96%, and self-manage / operates the mine

April, 2012

*Affiliations and titles are current as of the time of the posting of this article.

Eighteen years ago, in 1994, Sojitz acquired a 30% interest in the Minerva Coal Mine located in Queensland, Australia. In November 2005, the company started production of high-quality coal for fuel. In August 2006, it increased its interest to 45%, and acquired an additional 51% interest in December 2010. This issue looks at strategies for strengthening the production and sales foundation of Sojitz’s Minerva coal business. We asked five members who have been involved in this project about its history, from the beginnings to the present.

[News Release]Sojitz becomes a coal mine operator by increasing its interest in the Minerva Coal Mine
[Video Introduction to Sojitz]Minerva Coal Mine Project

Overriding natural disaster

Sojitz’s ownership increased to 96% with an additional purchase in December 2010, making Sojitz the only Japanese trading company that directly owns, operates, and manages a coal mine.

Toshiharu Chichibu, the Coal Dept., Project Investment & Development Sect. Manager, looked back on the time when the company decided to increase its ownership stake in the mine: ”The style-a shosha tie-up with coal suppliers and taking care of marketing from the position of a minority interest owner-was the mainstream until that time. However, the practice of shosha participating in such investment projects as a minority shareholder is expected to gradually fade out. Thus, we came to see the goal of operating and managing the mine by ourselves as the same as coal suppliers steering toward future growth.”

In this case, it is difficult to conduct coal mine management and marketing by a shosha alone. The most essential point in the operation was ”What kind of personnel should we hire?” Thus, we decided to scout managers who have experience in coal mine management and live in Australia. Sojitz Coal Mining Pty. Ltd. (SCM) MD & CEO Cameron Vorias was one of them.

In December 2010, flooding occurred in eastern Queensland three days after we increased our stake. Part of the railway used to transport coal suffered damage, and the transport route to the loading port was completely closed.

There was also water in the mine, so we suddenly faced issues such as countermeasures against discharging water.
Where the Minerva Coal Mine is located is a remote, drought-stricken region. We learned that it would take three months, or even six months, to restore the railway after the sudden flood.

MD & CEO Vorias, who was stationed on the site, said, ”My first thought was to secure the safety of employees and their families.” Upon that, ”We held discussions with the government on easing of water discharging regulations and made a detailed plan to address delays in transport, in order to catch up with stagnated production after recovery from the disaster.”

He visited the Queensland Rail company and negotiated with them to increase the number of freight cars to transport coal as soon as the railroad was restored. We could not ship coal for a month and a half after that, but his quick negotiations paid off and we restarted transport in February. Furthermore, we can now transport a larger volume than before the flooding. We achieved production of 2.85 million tons in 10 months, compared to the estimated 2.8 million tons during fiscal 2011.

Sojitz Group branding strategies

The key for coal mine operation is the employees who work there. Those who used to be employees of another company become Sojitz Group employees when it purchased the stake. What we focused on is ”Sojitz branding strategies.” The total number of employees in the field is 250. Since Sojitz had originally participated in the coal mine business as a minority shareholder, we were not completely unknown. But then we heard no more than a few anxious comments, such as, ”Can they really manage and operate the mine as the majority shareholder?”

In addition, Sojitz is the third corporate owner for Minerva Coal Mine employees. So we needed them to feel unified and close to Sojitz.

MD & CEO Vorias explained the change of the operating company, Sojitz’s business, and our concerns for safety in the field and for the welfare of the workers’ families, on and off the job. In addition, we posted the Sojitz logo mark on employees’ T-shirts, vehicles, stationery, business cards, and everywhere in the coal mine.

At the SCM opening ceremony, then-President Yutaka Kase and other executives from the Head Office in Japan visited the mine, and enjoyed a barbecue dinner party with SCM and SCR employees.

Gradually we began to hear comments from local employees like, ”We can actually feel that this coal mine development project is a higher priority for Sojitz, and our efforts are recognized.” Atsuhiro Horibe of the Coal Dept. Project Investment and Development Sect. said, ”They are maintaining high motivation as part of the Sojitz Group. We want to support them as much as possible to further increase their motivation in the field.”

Growing passion for the future

Finally, we asked the members about their enthusiasm for the project.

Manager Toshiharu Chichibu: What I feel from being involved in this project is ”I have a sense of fulfillment.” I have a sense of fulfillment in all aspects from the start of the project, to setting up the company, to its operation, so I feel challenged and rewarded for thinking about daily management from the beginning. The life of the Minerva Coal Mine is limited, but I want to utilize what I have learned at Minerva for the next project.

MD & CEO Cameron Vorias: I have worked in the Australian coal mining industry for 25 years, but Sojitz’s passion and challenging spirit are outstanding and I felt fascinated to play a part in that. This is the motivation for my involvement in this project. My goal is to grow our company to a renowned coal mine operator in Australia. I look to the future rather than looking back at the past. There are always opportunities in the future.

Kei Yoshioka (Coal Dept., Project Investment and Development Sect.): What is significant is the way we utilize know-how and knowledge we gained from the project, which is in smooth operation. With the consciousness that we are standing at the starting line with this project, I want to build on this experience to create future growth.

Myoungkil Choi (Coal Dept., Project Investment and Development Sect.): The local site took full responsibility for risk management during the emergency situation following the flooding. I want to continue my involvement in this project and devote myself, personally and as a member of the company, department, and section, to its smooth operation.

Atsuhiro Horibe: The coal mine operation project has a big impact on the company, too. I will be eagerly engaged in daily operations such as profit analysis.

Manager Chichibu declared, ”We cannot rapidly increase the production volume due to issues in securing freight cars, our facilities, and the coal mine’s geological conditions, but we aim at constant sales of 2.9 million tons after 2013.”

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