Soma mine operator praised lucrative cost reductions in previous interview

ISTANBUL/MANISA

Soma Holding, which is one of biggest coal producers of Turkey with 5.5 million tons of annual production. AA Photo

The owner of Soma Holding, which controls the Turkish coal mine where an explosion killed at least 245 workers, had said they managed to significantly reduce costs after acquiring the mine from the state, speaking in an interview two years ago.

Alp Gürkan, the owner of the Aegean conglomerate Soma Holding, had told Hürriyet columnist Vahap Munyar that his company managed to reduce the cost of mining coal from $130-140 to $23.8 per ton “thanks to the operation methods of the private sector,” in an interview that was published on Sept. 30, 2012 by daily Hürriyet.   

Soma Holding, which is today one of biggest coal producers of Turkey with 5.5 million tons of annual production, has been operating the coal mine in the western province of Manisa’s Soma district since 1984. Gürkan said the company had particularly started to grow after the Turkish government’s decision to give all the rights of the coal mines to companies, instead of charging for coal.

The Energy Ministry developed a model of obtaining royalties from electric production instead of charging for coal, as it had previously done for 30 years through the state-run Turkish Coal Enterprises (TKİ). Tenders for the coal mines were therefore opened in 2005.

Gürkan says in the interview that the process made the coal mining business more lucrative and helped the TKİ record profits after years of losses.

His holding entered the tender for the coal mine and pledged to mine coal for $23.8 per ton, including a royalty rent share of 15 percent for the TKİ, which is far below the previous cost of business.

'Workers didn't come from space'

When asked about if this model earned the holding company money as well, Gürkan said “neither us nor other private companies would enter this business if it didn’t.”

“Our engineers and workers didn’t come from space. Planning business well and the operation method of the private sector only came into play,” he added.

According to the new model, the company sells its production, which has a monthly average of around 250,000 tons, to the TKİ to be put into the market for industrial and heating purposes.

Gürkan is a geology engineer, who has had several businesses in the Aegean mining sector since the 1970s.

He first entered the business by operating a lead-zinc mine in the Bayındır district of İzmir. After shutting down this company due to oil shortages suffered during the end of the 1970s and challenges in machine imports, Gürkan started to operate a Koç Holding-owned mine in Tirebolu as a subcontractor.

With the money he earned with the Tirebolu mine business, Gürkan then established his own company, Soma Holding, to enter the coal mine business in 1984.

In addition to Manisa, the company now has businesses in the Black Sea provinces of Zonguldak and Amasya, as well as in the southern province of Mersin.  

In 2011, the company won the operational rights of a coal field in Zonguldak that was put for tender, according to Turkey’s Mineral Research and Exploration (MTA) institution figures that claimed to show the presence of hard coal reserves in the region. However, the holding reportedly suspended operations after failing to reach the promised reserves.

The company, which has a chrome-production business in Mersin, also acquired a coal field in the Merzifon district of Amasya, where it is constructing a 405-megawatt (MW) coal-fired power plant.