British-Jamaican miner bets on Malawian coal

Lincoln Bailey, a miner with Jamaican roots doing business in Malawi, is suggesting that the use of low-grade coal available on the international market along with clean-coal technology could significantly reduce power-generation costs in Jamaica.

Bailey, along with partner Rafik Gafffar, co-owns Mchenga mine - described as the second-largest coal mine in Malawi.

The miner, who studied at Leeds University in the United Kingdom, began his career as an economist before love took him to the African continent. He has lived there now for 32 years.

In an interview with Sunday Business, last Tuesday, Bailey said he is keen to find out what opportunities might exist in Jamaica for investment.

"I am very surprised that Jamaica is using fuel oil for electricity generation. Compared to coal, it is very costly. You need only a low-grade coal which is available in abundance on the international market for power generation."

Clean-coal technology, he says, can deal effectively with most environmental concerns over the use of the mineral.

controversial

Clean coal remains controversial among environmentalists. Jamaica has considered coal as a source of fuel to replace some of the oil it consumes but has largely decided to go with liquefied gas.

Bailey's bet on coal, however, has worked out for him.

In 1999, Bailey and Gaffar purchased the Mchenga mine in a competitive bidding process when the operation - a loss maker - was divested by the Malawian government.

Capital for the mine, then valued at US$2 million, he said, was secured through a loan from industries with payback in the mineral supplies over a two-year period. "At the time I acquired the mine, interest rates in Malawi were 55 to 60 per cent. The country was going through a major economic crunch. I did not go to the money market. I went to the major coal users for financing. We fixed the price of coal for two years," said Bailey reflecting on the deal.

Some US$2.5 million was raised, with US$500,000 invested in refurbishing infrastructure. The mine now does annual sales of US$6 million and has been profitable for some time now, Bailey said.

"When we started, production was 40,000 tonnes annually. We have doubled that to 80,000 tonnes annually," he said.

The company has also been investing US$1.5 million annually in research and development with a view to developing new sources of coal and also establishing a power plant using the mineral.

Coal is used as industrial fuel by tobacco producers, textile mills, and cement plants, among others. Some coal is also exported.

the way out

Bailey was born to Jamaican parents but grew up in Brixton, south London, in the United Kingdom, from age eight. He said he attended schools where not much was expected of students, but he saw education as a way out. However, on completing his master's in economics at Leeds in 1979, there were no jobs to be had in a time of recession.

He chose to travel to Africa with a Kenyan friend who was to become his wife, secured a job in the country's Ministry of Mining and Energy, and then moved on to work with the World Bank.

"The government (in Kenya) sent me abroad to the United States to do courses in energy at Stonybrook and also in Italy," he said.

After four years, Bailey switched to working with the World Bank's Energy Assessments & Strategy Program, or ESMAP, which re-views energy-assimilation use in 77 developing countries.

ESMAP has launched various strategies and initiatives in response o global financial crises and volatile oil prices.

Bailey worked in several African nations for the World Bank and then as consultant with the United Nations and other agencies before he decided to go into business for himself.

Today, after 12 years, Mchenga, with its mining licence for 54 square kilometres, now employs 550 workers. Its production is said to satisfy 85 per cent of the market.

The quality of the coal, Bailey said, has been instrumental in beating back competition from neighbouring states whose products are in some cases closer to the capital Lilongwe.

Mchenga is "now a profitable operation where it was not before", he said.

"Before, the mine was being run as part of the civil service, with people being employed for not what they could contribute, but because of who they knew. Productivity was very low. The management knew that whether they made a profit or not, the government would bail them out."

Now all of that has been reversed.

Bailey is also owner of Guardian Insurance Brokers in Malawi. The company bears no relation to similarly named operations in the Caribbean. Bailey's Guardian Insurance did approximately US$1.2 million in underwriting business and enjoys growth of about 25 per cent annually, he told Sunday Business.

But he expects better performance from coal.

According to one policy document published by Malawi, only 10 per cent of industrial demand for energy is met by electricity. Most fuel demand is met by biomass, including wood and dry plant material.

Coal is only used, to any significant extent, in the industrial subsector. Bailey hopes to contribute to improving demand for the mineral by opening a coal -based power-generation plant. As to the mine itself, there are 20 years of reserves remaining, with more being discovered every year, he said.

business@gleanerjm.com