Mining News about New R1.7bn mining venture

A new R1.7 billion black-owned mine that will create 500 jobs in a remote corner of the country has to be a good thing.

In the uncertain world of South African mining a new mine that starts out with its development costs paid up front and customers already lining up to buy its output is a very good thing.

The Tshipi Borwa mine launched near Hotazel in the Northern Cape last week is expected to begin shipping out high grade manganese ore in June next year.

What could possibly be wrong with this picture?

And why were there dark mutterings of “its only half a loaf” in the background at the red carpet launch event where the local community development trust thanked the mine’s developers for the 15 percent stake they had been given in the project.

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The Tshipi Borwa opencast mine, the first mine set up by Tshipi é Ntle Manganese Mining, is a success story for the big names who made it happen, Saki Macozoma and Brian Gilbertson, but it also brings into sharp focus the issues and obstacles that stand in the way of South Africa maximising the potential of its vast mineral resources.

For a start, Tshipi Borwa will mine on a small part of a huge manganese resource that accounts for 80 percent of the world’s reserves. But South African manganese accounts for only 20 percent of the world’s supply despite rising demand, particularly from China’s steel industry.

Manganese is a critical component in strengthening and hardening steel.

It took 10 years from the granting of prospecting rights to reach this week’s ground-breaking ceremony.

Delays at the Department of Mineral Resources included files and applications being lost between being lodged in Kimberley and being assessed in Pretoria.

Macozoma was diplomatically philosophical about the damage caused by “lost” files and would not entertain any suggestions that the difficulties could have been linked to his support for Cope in the party’s early stages.

Even though he is chairman of financial institutions Stanlib and Liberty Holdings and deputy chairman of Standard Bank of South Africa, a director of Volkswagen South Africa, the president of Business Leadership South Africa and chairman of the President’s Big Business Working Group, Macozoma freely admitted that raising South African funding for the mine had been an insurmountable obstacle.

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“We know the risk appetite for start-up projects is very low,” he said.

“As a society we are not encouraging to entrepreneurs.”

Enter Gilbertson, the former chairman of Gencor, Billiton and a creator of BHP-Billiton, who now chairs Australian-listed Jupiter Mines which leads the Pallinghurst Co-Investors who took a 49.9 percent of Tshipi é Ntle, with a $150 million (R1.1bn) payment that provided the start-up capital for the project.

That helpful intervention ruled out any plans there might have been to beneficiate in South Africa and add value to Tshipi Borwa’s output.

Less than certain electricity supplies may have also been a factor, although different directors tell different stories about Eskom’s willingness to commit to supplying energy-hungry manganese furnaces.

But Gilbertson also brought another strategic partner to the table in OM Holdings (OMH), an independent ASX-listed manganese producer that has a manganese mine in Australia, a sinter and alloy processing facility in China and a marketing arm in Singapore.

OMH will play a leading role in marketing the manganese ore that is mined at Tshipi Borwa, through a company called OMT.

“Our partnership has also ensured that Tshipi has a mine-to-market strategy that will ensure economic viability,” Gilbertson said.

Spoornet will carry Tshipi’s ore to PortElizabeth for export.

On the day of the mine’s opening, Spoornet chief executive Siyabonga Gama said the company wanted to expand capacity on the line up from 7 million tons annually now to 12 million tons and as much as 22 million tons after 2017.

Tshipi Borwa mine officials said the expected output of 2.4 million tons a year could be doubled if Spoornet increased the carrying capacity on the rail line.