Mining subsidising inefficient beneficiation beggars belief – chamber president – by Martin Creamer (MiningWeekly.com – September 5, 2013)

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JOHANNESBURG (miningweekly.com) – The possibility of the South African mining industry providing effective subsidies to underpin inefficient mineral beneficiation beggars belief in a modern country trying to assert its regional economic credentials.

That is the view of Chamber of Mines of South Africa president Mark Cutifani, who adds that it is critical that the economics of mining are clearly understood, along with the conditions required to invest in an uncertain outcome.

“In mining we know very little about the resources we mine and we have to make large capital decisions on limited knowledge. If we then have to be the supporter of downstream inefficiency, we are setting ourselves up for failure.

“The possibility that the mining industry will provide effective subsidies to support inefficient industries beggars belief in a modern country trying to assert its regional economic credentials.

“Let me be clear: it is not that the mining industry does not support beneficiation, but the laws of economics are simple and all-powerful.

“South Africa needs to compete where we have competitive advantage, and the most important thing legislators can do is create an environment that incentivises the massive investment needed – in the mining industry, first and foremost, but also in the downstream businesses that make economic sense,” the chamber president adds.

On Monday, African Rainbow Minerals (ARM) ferrous division CE Jan Steenkamp outlined the reasons why the JSE-listed ARM and its joint venture partner Assmang would be beneficiating South African-mined manganese in Malaysia and not South Africa.

Steenkamp said that an attractive 15-year electricity supply agreement, at a fixed 2.5% escalation clause, has been concluded in Malaysia, where the electricity is already 12% to 15% cheaper than in South Africa.

The 160 000 t/y, $328-million manganese alloy smelting project in Sarawak, Malaysia, which would be built in partnership with China Steel Corporation and Sumitomo Corporation, had also managed to clinch the last distribution capacity from the first phase of the new hydro power station.

The project would enable the South African companies to hold on to the advantage of integrated production know-how boosted by high-grade South African manganese while it continued to search for a longer-term South African beneficiation solution, possibly closer to the source of the manganese in the Northern Cape.

“Our commitment to local beneficiation continues,” ARM executive chairperson Patrice Motsepe said, on the basis of it being globally competitive and profitable.

Assmang, which has had to close some of its ferrochrome furnaces in South Africa, will supply South African manganese ore for the project in Sarawak; China Steel will buy an estimated 30 000 t/y of the manganese alloys produced; and Sumitomo Corporation will coordinate the project and sell manganese alloys in specific markets.

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