Questionnaire for Turgut Abacioglu, CEO, Afrasia
Q1. Afrasia recently announced it has signed an MOU with DRA to join forces within the Afrasia operational footprint in Turkey and the wider region. How does this partnership strengthen both entities' service offerings?
AFRASIA Mining & Energy AS has South African roots. It was first established in Ankara in April 2007 under the name TWP Eurasia A.S. (TWPE) as a subsidiary of TWP Holdings (Pty) Ltd (TWP) based in Johannesburg, South Africa. The aim was to create a new base for business expansion and growth in Central Asia, the Middle East, and the Balkans by providing a full range of engineering, architectural, finance, and project management solutions for the mining and energy sectors in the target territories.
Upon the very successful IPO and listing of TWP on the Johannesburg Stock Exchange in November 2007, the old partners and the new Board lost their appetite for global expansion. In May 2008, Alan Clegg, the founder, chairman, and visionary behind the establishment of TWPE, made an MBO (management buy-out) of TWPE from TWP. The company's name was changed to one that better implies geographically focused markets and industries; the registered corporate name then became AFRASIA Mining & Energy Consulting and Engineering A. Ş.
Mr. Alan Clegg, Chairman of Afrasia, and I had complementary visions. Alan's bold and extraordinary visionary steps for initiatives never envisioned in Turkey, such as metal refinery projects, soon opened an enormous growth path for Afrasia. Besides mining, there are growth opportunities in energy and the environment; we needed additional resources, a desire for regional and international expansion in our geography, and business sense from our respective partners.
We found all these within DRA. DRA was seeking opportunities in our geography and discussing potential market entry strategies internally. During our talks, both sides' openness, willingness, and clear messages and ideas about their desires shortened the path to joining forces. We must recognize that Afrasia's South African roots also helped create synergy.
With DRA joining us, the partnership will be able to offer much more comprehensive services in more categories, raising the quality of services, having strong references to create trusted market influence, and having satisfied and localized marketing strategies for further growth. Further, the collective resources will be instrumental in successfully launching mega projects in our geography. The joint venture will find growth opportunities in the energy and environmental sectors.
Q2. As Afrasia has grown recently, what trends have you seen regarding your Turkish mining clients' growth and consulting needs?
The recent Soma coal mining accident opened the public's eyes to brewing health and safety issues in the mining sector and related regulatory changes.
Past local elections in March 2014, the coming presidential elections in August 2014, and the following general elections in Jun 2015 are causing an interim silence in the sector.
Another factor causing some concern is that Turkey's mining processing capacity needs to be improved. There are a limited number of metal, ferrochrome, and ferromanganese smelters and refineries nationwide. As a result, metals and alloy imports contribute to Turkey's growing current account deficit. Reversing the trend depends on increasing processing capacity and making more capital investments.
Licensing issues are also impacting the industry. In combination, globally declining mineral prices, rising mining business costs, and dwindling margins are challenging the industry.
Thus, services concerning health and safety are high on the sector's agenda, in addition to growth in mineral and metallurgical processing capacity, which will expand in Turkey in the next few years. Afrasia is driving one of the projects. The slow increase in exploration needs is another area; current exploration investment almost stopped. After next year's general elections, I expect a surge in support services for investors, such as feasibility studies and corporate valuation concerning M&A and FDI in mining. Nevertheless, all depended on upholding licensing issues within the hands of the Government, hoping they would be resolved soon.
Q3. Amid weak capital markets and falling metal prices, how can Afrasia help its mining clients minimize CAPEX and OPEX?
The mining sector has long investment periods and a risk-carrying nature that naturally requires robust strategic planning and patience.
Today is the time for companies to examine their internal operations and identify the need to streamline them to be ready for the next move.
Afrasia works with the Jamieson Group in Australia. Their partnership can help prospective clients improve and change their operations and organizations. The services focus on developing and executing business risk assessments and reducing risk, improving operations and organizational effectiveness, productivity and performance improvement, cost control and reduction, business performance analysis and diagnostics, business integration and valuation, and M&A.
Q4. What advice do you have for foreign exploration companies considering Turkey as a destination for exploration projects?
Research the market's internal dynamics, regulatory environment, and business culture. It is crucial to determine what might best work in this culture, alone or in partnership, and what commodities they consider investing in before devising a market entry strategy and positioning the company accordingly for the next move.
Additionally, the existing significant projects and information about how decisions are made, how bureaucracy works, how projects will proceed, and supply chains and contract methods are critical issues for a company considering entering the Turkish market.
Q5. Can you provide an example of a recent successful project to which Afrasia contributed its expertise?
Here are some projects.
Afrasia implements a DEDEMAN MINING VALUATION PROJECT for an entire company asset valuation study to SAMVAL standards as a basis for selling the business or partially selling some of its assets to third parties. The study was undertaken with additional support from Coffey Mining of Australia.
Another was an EPC project called "The Slurry Pipeline for Khouribga Mine in Jorf Lasfar" in Morocco. The top EPC contractor, TEKFEN, subcontracted the project to a group that included Afrasia and Paterson & Cooke of South Africa. The project is in the commissioning phase and is expected to be finalized in the fall of 2014.
Another project of the few is a mine planning, technical, and operational review for a joint venture of Dogan Holding and Kurmel Mining operations. Afrasia and Jamieson Group conducted the project. The consultants from both companies are specialists in all end-to-end activities described under the project and operation spectrum of the mining business value chain. The project included services such as productivity improvement, business process re-engineering, project management, attitudinal and behavioral change, and multidisciplinary competencies from underground mining to process design, engineering, and support.
Q6. In light of the Soma mining tragedy, how can the industry make positive steps toward improving its approach to health and safety practices?
The Soma mining tragedy shocked Turkey and all of us. We all want to believe this has severely detrimental and far-reaching consequences on the industry and political front and should not be forgotten after a few months.
After our mourning, we need to sit down and consider our options. We may look at the issues from the most profound economic and social perspectives, such as whether Turkey's sustained economic growth efforts lack dimensions such as human and workplace security, health and safety, human welfare, and environmental sustainability. As we all know, Turkey must still sign the Safety and Health in Mines Convention of the International Labor Organization (ILO). Our efforts may start first with signing it.
Adhering to established international safety standards and taking immediate action to ensure trusted and absolute workplace safety would be the first steps to ensuring the health and safety of miners.
Q7. What is your outlook for the potential of the Turkish mining sector, considering its advantages and challenges as a mining investment destination?
Turkey is ranked 10th in mineral variety and 28th in underground resource production out of 132 countries. 77 out of 90 globally traded minerals exist in Turkey.
Turkey has an underdeveloped and underexplored mining capacity, with its contribution to GDP being a mere 1.4%. South Africa (18%), Russia (33%), Australia (10%), Canada (8%), and Ukraine (6%) have among the highest mining capacities within their GDP globally.
Turkey needs to improve its mining processing capacity. Metals and alloy imports contribute to Turkey's growing current account deficit. Reversing the trend depends on increasing processing capacity and making more capital investments.
Nevertheless, with its steady growth over the last decade, the Turkish economy has shown notable performance. The economy has attracted USD 135 billion in FDI in the past ten years. In 2013, it became the 16th largest economy globally and the 6th largest compared with EU countries (GDP at PPP, IMF-WEO). An average 5.1% GDP growth over the previous ten years, which increased to USD 820 billion in 2013 from USD 305 billion in 2003, has been a crucial driver of the economy.
Turkey has untapped, highly prospective geology, hence the growth potential in metal ore mining, quarrying, and processing.
The combination of a robust economy, fast-developing infrastructure, a reformed mining code, and affluent prospects has the potential to be a winning recipe for success in Turkey's mining industry.
However, the sector's current dormant status is mainly related to the government's withholding of licensing and permits, and communities have yet to determine the outcome.
Q8. Can you give our readers a final message about Afrasia and your future role in the Turkish mining industry?
Mining is a complex business that requires comprehensive planning and patience. Experience, technical knowledge, technology use, and sector-specific strategies are crucial in a typical mining company.
Consultants like us offer their customers "economies of knowledge." Consultants only exist when clients have service requirements from experts. Each party needs an incentive to behave and contribute in a way that supports the collective effort, not self-interest.
For Afrasia, we insist on meeting the high expectations of our customers and try to exceed them. We have a high ethical and professional view of the work we do. Focus on innovation, collaboration, and commercial viability in addition to focusing on results.
To me, every business lives in an ecosystem that has a social and environmental impact; therefore, the 'bottom line' in our business is the integrity, the impact you may have on your community, environment, and the world around you, and the only amount of profit that complements it.
There are issues to address in the Turkish mining sector, but we see signs of hope for the industry's future.
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INVESTMENT IN METAL SMELTER REFINERY BUSINESS IN TURKEY, Dec 27–2013, Afrasia White Paper: https://lnkd.in/d2z_-Ekw
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