A Japanese company has shown it is prepared to pump billions of rand into the Northern Cape in pursuit of its target of controlling about 10% of the world’s 5Mt/year seaborne manganese trade. Manganese is used in making steel.
Asia Minerals Ltd (AML) was founded 19 years ago by Hirotaka Suzuki, a trader who was marketing manganese from BHP Billiton’s Mamatwan mine in the Northern Cape. Between 2000 and 2010 AML was marketing about 1,5Mt/year of manganese produced by Assmang’s Gloria mine to Chinese and Indian buyers. It stopped when it started its own mine.
AML is now a 49% shareholder in the Kudumane Manganese mine in the Northern Cape, which is close to and has high grades similar to both Gloria and Mamatwan. Two black empowerment entities, Dirleton Minerals Energy and Northern Cape Manganese, hold the other 51%. Zwelakhe Sisulu, who is chairman of Dirleton, is also chairman of Kudumane Manganese Resources, the holding company.
This shareholding structure was reached only after several years of conflict over who would have the majority shareholding, which ultimately required the intervention of minerals minister Susan Shabangu because it was paralysing progress.
Last week Shabangu hit the button for the first blast at Kudumane, which will be followed by a period of bulk sampling before full-scale open pit mining begins later this year.
The partners will invest R1,5bn in proportion to their shareholdings in the first phase of Kudumane to produce 1,5Mt/year of manganese ore. Suzuki says this will be 40% equity and 60% debt, through a loan from Standard Chartered Bank. In about another two years the partners will decide whether to invest another R1,5bn in a sintering plant to concentrate the manganese from 37,5% to 44%. More capital would be needed to make the transition from open pit to underground in about seven years’ time, when annual output would rise to 2,5Mt.
About 2,5Mt of manganese ore is required to produce 1Mt of manganese alloy. AML has two smelters in China which produce about 120000t/year of alloy and has an investment in a third in India which produces about 100000t. It is building a third in Sarawak, Malaysia, with other Japanese partners, to produce about 300000t.
Suzuki says about a third of the ore needed to feed the smelters will come from SA and the other two-thirds from other countries.
There are substantial resources on the six farms over which Kudumane holds mineral rights. On one farm, York, about 70% of the 100Mt resource is lower grade, so it would reduce logistical costs to build a smelter on site in future to beneficiate the low-grade ore, some for the local market but mostly for export. However, smelting is an energy- intensive process.
Though Shabangu reiterated at the opening ceremony government’s target of growing SA’s steel making capacity to replace imported steel in the infrastructure build programme, SA’s steel industry is at present far too small to absorb all the country’s production of iron ore, manganese and chrome. Neither steelmaking nor its downstream suppliers will be able to grow until government can provide sufficient, competitively priced electricity.
Another problem which Kudumane has had to tackle is getting its ore to port. In the first production phase it will truck the material to Durban. The capacity of the main export line to Port Elizabeth is about 5Mt/year, which is fully used by Billiton, Assmang and United Manganese of Kalahari. Their agreement with Transnet expires next year and from April a new contract will be signed in which Kudumane will participate, Suzuki says.
Transnet has committed to expand capacity on the line and at a new terminal at Coega to 16Mt/year so Kudumane is “confident” it will secure enough rail allocation to port, Suzuki says.
The challenges that AML has had to face as a foreign investor in SA have been intimidating. On top of the language differences and currency risks presented by any country, SA also has complex black empowerment laws and shortages of power and transport. SA’s mines need to offer sufficiently attractive profit margins to make it worth the effort.
Article source: http://www.fm.co.za/Article.aspx?id=171977
