INDUSTRIAL METALS / MINERALS

South Africa gets new US$190m manganese mine

Backed by Hong Kong interests, Kudumane Manganese Resources kicks off new US$190m mine in South Africa's Northern Cape province

JOHANNESBURG - 

Kudumane Manganese Resources (KMR) launched its new mine just outside Hotazel today with an inaugural blast in the explosive and ceremonial sense.

The first open pit phase of the R1.5bn manganese mine is tipped to produce 1.5mt of ore by the end of 2013. Production is expected to peak within seven years as it moves underground with the miner targeting 2.5mtpa output. The life of mine is estimated at 30 years.

KMR is co-owned 50% each by black owned entities, Northern Cape Manganese Company and Dirleton Minerals and Energy and each in turn is owned 49% by the Hong Kong based Asia Minerals Ltd (AML). AML was represented at the launch by its chairman, Hirotaka Suzuki.

The average grade of 37.5% manganese content and a manganese/iron ratio of 7.5 is considered by the company to be of standard fare.

Suzuki considers the planned output to be the exact same product from the same seam as that produced at BHP Billiton's Mamatwan mine and Assmang's Gloria mine in the area.

With limited rail capacity of approximately 5mt already contracted between Transnet and the other big manganese miners in the area (BHP, Assmang and UMK), KMR will have to truck its ore to the Durban port for export said Suzuki.

This contractual arrangement with Transnet is due to expire next year March said Suzuki and, although the exact amount is unclear, Suzuki is positive that they will participate in the new contract with Transnet to share in the 5mt rail capacity and the capacity expansions planned for the area.

KMR said that once the Coega industrial development zone and deep water port opens outside of Port Elizabeth then this will be the preferred export point.

The second phase for KMR is to build a 1mt sinter plant at the cost of an additional R1.5bn to process the ore to a high grade 44% manganese content. Suzuki said that this will happen within three years.

As far as power supply goes, CEO, Sechaba Letaba, himself a former senior general manager from Assmang's Black Rock operations, said that Eskom is on board and has provided a guarantee that power will be available as the power utility increases capacity in the area to meet rising demand.

Suzuki also said that the potential for the smelting of low grade material on site is an option should the current power supply shortage be resolved. Of a 100mt resource identified on one of the KMR farms, Suzuki said that 30mt was higher grade material and that 70mt was lower grade that may not make economic sense to transport.

Suzuki said that local steel producers would not be enough to absorb this if it should happen and that the residual manganese alloy would have to be exported.

Shareholders are expected to invest in the deal in proportion to their shareholding and Standard Chartered Bank is involved in what Suzuki said would be a 60% debt and 40% equity funded venture.

AML is the technical partner in the mine and will also be responsible for selling the manganese ore, some of which will be used in its own manganese smelters abroad.

AML was founded in 1993 and were the marketing agents for Assmang from 2000 to 2010 to sell approximately 1.5mt into the Chinese and Indian markets said Suzuki but had given this up in order to start up the KMR operation.

With manganese, like platinum, being a strategic resource for South Africa as the Northern Cape holds approximately 80% of the world's commercial manganese ore reserves, Mineral Resources Minister, Susan Shabangu, was in attendance.

Besides congratulating the parties involved, the Minister also issued a stern warning to the CEO to ensure that local procurement was meaningful, real and that it included all elements of the mining value chain.

The Minister said that the investment was timeous given the country's massive, planned infrastructure spend and the need to use more locally manufactured steel.

Shabangu appealed to the Japanese investors to educate and upskill our people by taking them to Japan and training them so that they could change their lives and contribute to future industries.

The mine intends to employ up to 500 people during the construction phase and 300 full time employees thereafter.

Manganese is used in, amongst others, the manufacture of steel, aluminium and batteries.