et to increase local production levels
But investment in SA bound by rail capacity
“On a worldwide basis steel production is still expected to grow, largely through the growth of China”
— TOM SCHUTTE
SA holds the world’s largest resource of manganese. And mining giant BHP Billiton is keen to develop this over the next half century by investing millions and employing thousands.
BHP Billiton already operates two mines in the Northern Cape, where it has a sinter plant. At Meyerton, to the south of Johannesburg, it has three furnaces and is building another.
However, BHP Billiton Manganese president Tom Schutte says investment in SA is curtailed by the limited rail capacity.
SA has 80% of the world’s manganese reserves, yet only 27% is actually extracted locally. A major reason for this is the limited rail capacity from the Kalahari — where the ore is mined — to ports. However, these issues are being addressed by all the major stakeholders.
“BHP Billiton is the world’s leading producer of manganese. It’s a business where BHP Billiton owns and operates the world’s largest assets, such as our manganese mine in Northern Australia, as well as some significant mines in SA. The unit also operates the second-largest manganese smelter in the world,” says Schutte.
BHP Billiton describes its manganese mines as “tier 1” assets that fit the group’s strategy of owning and operating large, long life, cost competitive assets.
“We are expanding the manganese business and our Australian mine in particular. The Manganese business is about 1%-3% of BHP Billiton’s total asset base and, like the company as a whole, is geographically diverse with operations spread across the globe.”
In SA, where BHP Billiton has many long-standing ties, Schutte says the company has two expansion projects. “One is at the mine in Wessels near Hotazel, where a ventilation shaft is being constructed. Though we have plans to produce more at Mamatwan and would like to expand further, lack of rail capacity constrains the SA industry,” he says.
From a beneficiation perspective, Schutte says the business is building a new furnace in Meyerton at the Metalloys alloy facility. This will be a large facility called M14, and will increase the total ore beneficiated to about 30% of the mine’s output.
He says BHP Billiton’s manganese business is similar in many ways to other commodity businesses. “Safety is fundamental and the key is to remain in the lower end of the worldwide cost curve,” he says. “The fact that the manganese business is a cyclical industry is not something that will go away. If you set your cost base up to run in a stable manner in the bottom end of the cost curve, you should be able to ride the cycles.”
The challenge for SA is to become the base load supplier of manganese ore to the global market. Business strategy aside, there are sometimes instances where companies are affected by events beyond their control. The debt crisis in the eurozone is an example.
“Manganese is a product driven totally by demand for steel — 90% is used in the production of steel and 10% in smaller areas such as aluminium and electronics,” says Schutte. To make a ton of steel you need about 10kg of manganese, though this can differ depending on the grade of steel. From the BHP Billiton point of view one aspect that will underpin demand for the metal is that it is not recyclable.
“Obviously, any slowdown in the steel market will have an effect on our business,” he says.
However, in the medium to longer term the demand fundamentals for manganese are sound.
“On a worldwide basis steel production is still expected to grow. Scrap and recycling rates do not have an effect on the manganese industry. For every ton of steel, you need fresh manganese,” he says.
The demand side prospects for manganese are sound, he says. But he notes that in the longer term there will be more manganese coming into the market. “The big difference for manganese may be on the supply side. There are more producers coming into play,” he says.
