Mining & Metals
Several companies are investing in new coal projects and a new gold mine near Barberton may prove profitable.
• The Industrial Development Corporation approved funding to the value of R2-billion in the mining sector.
• Mpumalanga is the third-largest coal-exporting region in the world.
The mining sector started to recover in 2010, with total South African mining production up by 5.8% in February compared to the same month’s figures in 2009. Platinum group metals was the biggest contributor to this trend. With output having fallen by 7% in 2008 and nearly 8% in 2009, this was a significant turnaround.
With global demand for resources starting to rise as the recession eased, many mining companies were preparing to increase production volumes.
The Industrial Development Corporation believes that the time is right for investment in the mining sector, and backed this up by approving funding to the value of R2-billion in South Africa in the year to 31 March 2010.
Mpumalanga accounts for 83% of South Africa’s coal production and is the third-largest coal-exporting region in the world. The coalfields of the province feed a number of power stations situated nearby.
The vexed question of acid mine drainage is being addressed, with Optimum Coal building a R600-million water treatment plant at its Middelburg colliery. Anglo Coal set the trend at Emalahleni and BHP Billiton will follow suit at their Middelburg facility.
Cement
Sephaku Cement is building a 1.2-million-ton cement-milling plant in the Delmas area. This development is, in part, a response to increased activity in the power sector (Eskom’s build programme) but the company is also very upbeat about the country’s housing sector and the national government’s infrastructure programme. In 2009 the company finished the commissioning of a 1.2-million-ton fly-ash beneficiation plant at the Kendal power plant.
Coal
Some of the world’s biggest coal extraction and exporting companies operate in Mpumalanga. With South Africa’s energy requirements increasing tremendously – and national coal production fairly static at 240 million tons per annum – many new developments are required. Although the Waterberg in Limpopo is seen as the most likely source of new coal, a number of projects are being undertaken in Mpumalanga.
China’s demand for coal is another factor driving production: the country uses about three billion tons of coal every year.
BHP Billiton Energy Coal South Africa (Becsa) completed the US$400-million Klipspruit Project in 2009. It will produce 1.8 million tons of coal for export and 2.1 million tons for domestic use.
One of the company’s four collieries is the subject of the Douglas-Middelburg Optimisation (DMO) Project. This entails using reserves across the coal mines and developing new low-strip-ratio coal-mining areas to feed a new 14-million-tons-per-annum coal-processing plant. This plant replaces the less efficient washing plant at Douglas.
Becsa is also a partner in the development of a washing plant to service its Klipspruit colliery. The other partner is Anglo Inyosi Coal (AIC) which will supply coal from its Zibulo (formerly Zondagsfontein) colliery. Black empowerment vehicle Inyosi, which holds a 27% share in AIC, includes among its assets the colliery at Kriel. Zibulo is expected to produce three million tons of thermal export coal and three million tons of domestic coal annually over a period of 20 years.
Another major project being undertaken by Anglo Coal is the New Largo mine which is expected to supply Eskom’s Kusile power station with 14 million tons of coal per year.
Anglo Coal is in a joint venture with black empowerment company Exxaro to run the Mafube Colliery east of Middelburg. Coal is sold to the nearby Arnot power station and the mine has a production target of six million tons.
Sasol Mining produces coal for its own facilities, currently about 40 million tons per year. With the yield from Twistdraai mine declining, the company is developing Thubelisha, a new mine at Secunda. Capacity will be about 10 million tons per annum. The mine is expected to come on stream in 2012.
Coal of Africa Limited (CoAL) is developing a project at Mooiplaats, in the Ermelo coalfields in the eastern Highveld, which will serve the Eskom power facility at Camden. Production is currently at 30 000 tons per month and is expected to reach 3.2 million tons per annum by 2014.
ArmCoal is a black-owned coal company that arose out of a deal between Xstrata Coal SA and African Rainbow Minerals Limited. Goedgevonden Coal Project is 51% owned by ArmCoal and 49% owned by Xstrata. Full production on this project is expected in 2011.
ArmCoal was the vehicle used in the creation of the large open-cut thermal coal mine at Goedgevonden. Production targets are 3.1 million tons of export thermal coal and 3.6 millon tons of domestic thermal-generation coal. The project successfully bid for an export allocation of 3.2 million tons per annum at Richards Bay Coal Terminal in KwaZulu-Natal.
Exxaro has six coal mines in Mpumalanga and the company produces 45.2 million tons per annum of power station, steam and coking coal. Grootegeluk is the world’s largest coal-beneficiation complex. The company announced in 2009 that it would focus on coal rather than mineral sands and other minerals.
Gold
Many years ago Barberton experienced a gold rush. That is not going to happen again soon, but there is considerable interest in the development of the old Agnes mine by developers who think that technology will allow them to get hold of gold stored in the area’s Greenstone Belt. The mine, renamed Galaxy after the company that purchased it for R16-million in 2008, and the Golden Hill mine currently produce 18 000 tons of ore every month and 20 000 ounces of gold per year. The trick is to get the gold out of the sulphide minerals in which it is embedded. Galaxy Gold was set to list on the JSE in the third quarter of 2010.
In 2009, Pan African took full control of Barberton Mines, increasing its annual gold output to 100 000 ounces.
Harmony Gold runs Evander Kinross Gold Mines near Secunda.
South Africa’s first new gold mine in three decades is due to come on stream in 2010 at a large site near Balfour when Great Basin Gold Limited rolls out its R2.6-billion Burnstone project.
The shaft reached its final depth of 487m in early May and progress is good on the metallurgical plant (which will have a capacity of 175 000 tons of ore per month). The company projects that it will produce 254 000 ounces of gold per year for 19 years.
Platinum group metals (PGMs)
South Africa produces about 75% of the world’s platinum, with much of that being found across the Bushveld Igneous Complex in the North West, Limpopo and Mpumalanga provinces.
The Two Rivers Platinum Mine is located near where platinum was first discovered in South Africa in the 1920s. African Rainbow Minerals (ARM), South Africa’s biggest black-empowered mineral resources company, has a 55% share in the project with Impala Platinum Holdings (Implats) holding the balance.
In 2009, the mine’s first financial year at full capacity, it produced 246 295 tons of PGMs in concentrate, a 19% increase over 2008.
A severe drop in the price of platinum in 2009 had an effect on profitability (Anglo Platinum’s headline earnings fell 95%), on production (the same company produced 2.45 million ounces) and employment (Anglo Platinum shed more than 18 000 jobs between late 2008 and early 2010). Impala Platinum’s headline earnings fell by 51% for the year ended June 2009 and Lonmin recorded a R1.9-billion loss to September 2009.
Improved vehicle sales figures in the United States and China helped create more optimistic forecasts about the demand for metals used in vehicle manufacturing, including platinum. Demand for commercial cars in China grew by 45% in 2009.
Another driver of demand for PGMs comes in the form of the Chinese jewellery market. In 2009, 1.75 million ounces of platinum jewellery was sold to China, twice as much as the year before.
Aquarius South Africa acquired the Blue Ridge platinum group metals project south-east of Groblersdal in the course of 2009, soon after the mine started producing its first concentrate. Part of the additional funding to keep the project on track was provided by the Industrial Development Corporation, to the tune of R136-million. The concentrator built nearby by Batemen Engineering is trucking between 27 and 32 tons of platinum concentrate to Impala Platinum’s refinery.
The Booysendal project near Lydenburg, owned by Northam, is regarded as one of the best PGM properties, with a mine life-expectancy of 50 years.
Ferrous metals
Assmang, the joint venture between ARM Ferrous and the JSE-listed Assore, operates a chrome mine (Dwarsrivier) and a ferrochrome plant where chrome alloys are made (Machadodorp) in Mpumalanga. The mine was converted in 2009 from an operation run by a contractor to an owner-operator mine. Reduced demand for stainless steel in 2008 and 2009 meant that some of thefurnaces at Machadodorp had to shut down.
The Manganese MetalCompany (MMC) in Nelspruit is the largest producer of pure electrolytic manganese in the world. MMC is owned by Samancor (51%) with Bilston Investments owning the balance.
Nickel
ARM reported a 12% increase in production of contained nickel at its Nkomati operation in 2009 but a 53% reduction in the dollar price of nickel negatively affected profitability. Off-take agreements were successfully entered into with Xstrata and Norilsk Nickel in the course of 2009.
Diamonds
A joint venture between the world’s biggest diamond mining company, the De Beers Group, and BEE company Mvelaphanda Resources is exploring diamond deposits in Mpumalanga. The joint venture is called Ndowana Exploration. Some kimberlites have already been discovered but it is the proximity of the province to the fruitful diamond fields of Limpopo, to the north, that is driving the latest round of exploration.
Social investment
The Anglo American group spent R288-million on social investment across South Africa in 2009, with the Chairman’s Fund responsible for more than R71-million. This included a sum of R400 000 invested in the White Rose Hospice in Witbank, which the fund has supported since it was established.
Children at many primary schools in the province receive new school shoes as a result of BHP Billiton’s School Shoes are the Railway to Life Campaign. The same company assists in the maintenance of the public roads used by its trucks and has sponsored vehicles for the use of the provincial traffic law enforcement agency. BHP Billiton Energy Coal South Africa has invested R4-million in the first phase of the establishment of a Science School in Kwa-Guqa.
African Rainbow Minerals sponsored a group of matric pupils to attend a winter school in Lydenburg for classes in mathematics, science, accounting and English. A Badplaas skills centre also received an upgrade in 2009. Altogether the group supported 283 bursaries and spent R19.3-million on social upliftment.
Online resources
Chamber of Mines South Africa: www.bullion.org.za
Geological Society of South Africa: www.gssa.org.za
Mining Qualifications Authority: www.mqa.org.za
National Department of Mineral Resources: www.dme.gov.za
South African Mining Development Association: www.samda.co.za
